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Allstate Insurance Co. v. Coven

Decided: April 29, 1993.

ALLSTATE INSURANCE CO. AND THE UNSATISFIED CLAIM AND JUDGMENT FUND, PLAINTIFFS-APPELLANTS,
v.
ROGER COVEN, M.D., VALLEY HOSPITAL, JOHN DOE, M.D., RICHARD ROE, M.D., JANE DOE, M.D., MARY ROE, M.D., ROBERT SMITH, M.D., JANE SMITH, R.N., KAREN BLACK, R.N., JANE DOE, R.N., MARY JONES, R.N. (ALL BEING FICTITIOUS NAMES), BETTY COYLE, AN INFANT BY HIS G/A/L, RICHARD COYLE, AND RICHARD COYLE, INDIVIDUALLY AND ARLENE COYLE, DEFENDANTS-RESPONDENTS



On appeal from the Superior Court of New Jersey, Law Division, Bergen County.

Dreier, Skillman, Villanueva. The opinion of the court was delivered by Dreier, J.A.D.

Dreier

Plaintiffs, Allstate Insurance Company and the Unsatisfied Claim and Judgment Fund, appeal from a July 6, 1992 judgment dismissing their claims for subrogation or for reimbursement of benefits paid or to be paid to or for the benefit of Arlene Coyle and Brett Coyle. In addition, Allstate filed a Morris County action on November 13, 1991, discussed infra. Arlene Coyle and Brett Coyle (through his guardian ad litem, Richard Coyle), earlier brought companion suits against defendants Roger Coven, M.D., and Valley Hospital alleging medical malpractice.

On October 7, 1987, Arlene Coyle was involved in a one-car automobile accident while eight and one-half months pregnant. When her car hit a flagpole, her abdomen was forced against the steering wheel. She was taken by ambulance to Valley Hospital in Ridgewood, New Jersey, where her son, Brett Coyle, was delivered by caesarean section. Brett was born with severe brain damage, requiring that he continue to receive constant medical and attendant care. As the insurer of Arlene Coyle's vehicle, Allstate Insurance Company has paid over $1,000,000*fn1 in medical expenses pursuant to personal injury protection ("PIP") coverage.

Count four of Brett's complaint, dated September 20, 1988, claimed medical expenses incurred as a result of the infant's injuries.*fn2 The parties in the malpractice case reached a tentative settlement for $1,200,000, $100,000 of which was to be paid by Allstate, a non-party to the action. We assume Allstate made

such payment in its capacity as liability carrier for Arlene Coyle, rather than as her PIP insurer.

During an October 18, 1991 appearance before Judge Sciuto to approve the overall settlement of $1,200,000, Allstate notified the court of its pursuit of its legal remedies in the Morris County action seeking subrogation to the Coyles' rights to collect PIP benefits. The court suggested that Allstate file a new complaint for declaratory relief to determine all of its rights. Allstate filed the complaint on November 13, 1991 also seeking arbitration against Dr. Coven and Valley Hospital. Judge Sciuto entered a conditional settlement order on December 1, 1991 which memorialized the agreement. On January 24, 1992, the Judge consolidated the Coyles' cases with Allstate's Morris County action. On cross motions for summary judgment, Judge Sciuto on July 6, 1992 ruled in favor of defendants Coven and Coyle in the declaratory judgment action, and dismissed plaintiffs' complaint.

In reaching his decision, the Judge concluded that Allstate and the UCJF possessed no subrogation rights. He further determined that Allstate had no direct rights of action against the malpractice tortfeasors. The latter Conclusion was premised upon three findings: First, plaintiffs' claim was time-barred by the two year limitation stated in N.J.S.A. 39:6A-9.1. Second, allowance of a direct action for reimbursement against the tortfeasors in this case would "substantially interrupt the settlement process" between malpractice insurers and victims and would have a ripple effect on all automobile accident/medical malpractice claims. Third, the bases for Allstate's payment of PIP benefits and the claims settled in the Coyles' medical malpractice settlement were factually distinguishable.

Initially, we agree with the trial Judge's assessment of Allstate's subrogation rights. In Aetna Ins. Co. v. Gilchrist Brothers, Inc., 85 N.J. 550, 428 A.2d 1254 (1981), the Supreme Court traced the history of a PIP carrier's right of subrogation. It ruled that N.J.S.A. 39:6A-12 precluded the possibility of any subrogation

action by a PIP benefits insurer against an insured tortfeasor. Id. at 562, 567, 428 A.2d 1254. The Court noted that N.J.S.A. 39:6A-12 (in its pre-1983 language) mandated the inadmissibility of evidence of losses collectible under personal injury protection coverage. The statute stated: "Evidence of the amounts collectible or paid pursuant to [PIP coverage] . . . to an injured person is inadmissible in a civil action for recovery of damages for bodily injury by such injured person." (emphasis added). Aetna thus reasoned that the absence of an insured's right to introduce such evidence in another New Jersey legal action precluded the existence of any right of subrogation with respect to such a New Jersey claim*fn3 because subrogation merely allows an insurer to step into the shoes of the insured. Aetna, 85 N.J. at 567, 428 A.2d 1254 ("Since the named insured had no right to which Aetna could be subrogated, its claim must be denied").

Subsequent to the Aetna decision, the Legislature enacted N.J.S.A. 39:6A-9.1, which conferred a statutory right of recovery for PIP ...


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