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Jugan v. State Farm Insurance Co.

Decided: June 21, 1993.

DEBORAH JUGAN, PLAINTIFF,
v.
STATE FARM INSURANCE CO. AND UFCW LOCAL # 1245 HEALTH FUND, DEFENDANTS



Travis L. Francis, J.s.c.

Francis

OPINION

I

On May 18, 1992, plaintiff Deborah Jugan was injured in an automobile accident. At the time of the accident, she had insurance policies with both defendants: an automobile insurance policy with defendant State Farm Insurance Company (hereinafter State Farm) and a general health insurance policy with defendant UFCW Local # 1245 Health Fund (hereinafter Health Fund). Pursuant to N.J.S.A. 39:6A-4.3, plaintiff elected the Health Fund

as her primary insurer for medical expenses that arose out of an automobile accident. By making this election, plaintiff received a 25% reduction in her automobile insurance premium from State Farm. Apparently, at the time she made this election, plaintiff was unaware that Article V of the Plan of Benefits for the Health Fund, specifically, Section 5.1, subparagraph (KK), contained an explicit policy coverage exclusion, for "[c]harges incurred by a Covered Person as a result of a motor vehicle accident."

On September 14, 1992, plaintiff filed a claim with the Health Fund for coverage of medical expenses incurred as a result of her May 1992 car accident. (Prior to this, plaintiff had filed a PIP benefits claim with State Farm, but State Farm denied her claim because she had chosen the Health Fund as her primary insurer.) Soon thereafter, the Health Fund's administrator advised plaintiff that motor vehicle related injuries were not covered by the Health Fund, and in a letter to plaintiff's attorney dated December 30, 1992, the Health Fund formally denied plaintiff's claim for coverage. The primary basis of the denial of coverage was the Health Fund Benefit Plan's exclusion for "[c]harges incurred by a Covered Person as a result of a motor vehicle accident." In this same letter, the Health Fund advised plaintiff that an administrative appellate procedure was available through which she could seek a review of the decision denying her claim, but that she needed to file an appeal within sixty days of the date of the formal denial of her claim.

Plaintiff did not file an appeal with the administrative review process. Instead, on February 26, 1993, she filed an order to show cause in Superior Court of New Jersey requiring the Health Fund and State Farm to show cause why one of them should not be required to pay plaintiff's medical bills that resulted from her May 1992 motor vehicle accident. The issues raised in the order to show cause are addressed later in Part IV.

On April 28, 1993, the Health Fund filed the motion that is the subject of this opinion, seeking an order remanding this entire matter to the appropriate administrative body for resolution. In

the alternative, the Health Fund seeks an order dismissing the plaintiff's complaint against it pursuant to R. 4:6-2(e) for failure to exhaust administrative remedies, and declaratory judgment that the New Jersey Fair Automobile Insurance Reform (FAIR) Act, N.J.S.A. 17:33B-1-63, is pre-empted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001-1461, and thus is not applicable to any determination of plaintiff's claim for coverage against the Health Fund.

For the reasons provided in Part II of this opinion, this court concludes that section 11:3-37.3(d) of the New Jersey Administrative Code (N.J.A.C.) is preempted by section 514 of ERISA, 29 U.S.C. ยง 1144, as that section of the N.J.A.C. might otherwise apply to employee benefit plans governed by ERISA. Furthermore, for the reasons set forth in Part IV of this opinion, this court concludes ...


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