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State Farm Mut. Auto. Ins. Co. v. Crocker

March 8, 1996


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

Approved for Publication March 8, 1996.

Before Judges Havey, D'Annunzio & Braithwaite. The opinion of the court was delivered by Havey, P.j.a.d.

The opinion of the court was delivered by: Havey

The opinion of the court was delivered by


The issue raised by this appeal is a narrow one. Is defendant, a nonresident insured under an out-of-state automobile policy, who was injured in a New Jersey accident, entitled to binding arbitration of a dispute over personal injury protection (PIP) benefits available to her by virtue of New Jersey's so-called "deemer" statute, N.J.S.A. 17:28-1.4? We conclude that she is entitled to arbitrate the dispute and accordingly affirm the dismissal of the declaratory judgment action instituted by plaintiff, State Farm Mutual Automobile Insurance Company (State Farm).

Defendant resided in Pennsylvania when she suffered personal injuries as a result of an automobile accident in New Jersey. Her Pennsylvania-registered vehicle was insured under a policy issued by State Farm in that state. The policy provides that defendant is entitled to up to $10,000 in "Medical Payments" coverage for "reasonable and necessary medical treatment and rehabilitation services" arising out of an automobile accident. In response to defendant's claim for benefits, State Farm paid most of the charges but refused payment on one $835 bill. Defendant thereupon demanded binding PIP arbitration in New Jersey.

State Farm filed the present declaratory judgment action to contest the arbitration procedure. The arbitration nevertheless took place while the case was pending. After reducing the charge to comport with the medical fee schedules, N.J.S.A. 39:6A-4.6, the arbitrator awarded defendant $408 for the medical bill in addition to counsel fees and costs. Defendant then moved in the Superior Court to dismiss State Farm's complaint. The motion Judge granted her application without explanation, except to say that State Farm had failed to state a claim upon which relief could be granted.

Neither Pennsylvania law nor State Farm's policy provides for arbitration of first-party disputes concerning the reasonableness or necessity of medical treatment arising from an automobile accident. Under Pennsylvania law, a disputed bill is considered by a "peer review organization," and if the insured is dissatisfied with the peer review decision, he or she may litigate the matter in court. See 75 Pa. Cons. Stat. Ann. § 1797(b) (Supp. 1995); Terminato v. Pennsylvania Nat'l Ins. Co., 645 A.2d 1287, 1288 (Pa. 1994). The thrust of State Farm's argument on appeal is that binding arbitration is unavailable to defendant because: (1) she failed to "exhaust" her Pennsylvania benefits and thus should pursue payment of the disputed bill according to Pennsylvania law; and (2) in any event, New Jersey's deemer statute does not expressly provide for binding arbitration of PIP disputes.

The issues involve the interplay between our statutory mandate that automobile insurers submit PIP disputes to binding arbitration at the election of claimants, N.J.S.A. 39:6A-5c, and our deemer statute, N.J.S.A. 17:28-1.4. N.J.S.A. 39:6A-5c provides, in pertinent part:

All automobile insurers shall provide any claimant with the option of submitting a dispute under this section to binding arbitration. Arbitration proceedings shall be administered and subject to procedures established by the American Arbitration Association.

The deemer statute provides:

Any insurer authorized to transact or transacting automobile or motor vehicle insurance business in this State, or controlling or controlled by, or under common control by, or with, an insurer authorized to transact or transacting insurance business in this State, which sells a policy providing automobile or motor vehicle liability insurance coverage, or any similar coverage, in any other state or in any province of Canada, shall include in each policy coverage to satisfy at least the liability insurance requirements of [N.J.S.A. 39:6B-1 or 39:6A-3], the uninsured motorist insurance requirements of subsection a. of [N.J.S.A. 17:28-1.1], and benefits coverage pursuant to [N.J.S.A. 39:6A-4 or 17:28-1.3], whenever the automobile or motor vehicle insured under the policy is used or operated in this State.

Any liability insurance policy subject to this section shall be construed as providing the coverage required herein, and any named insured, and any immediate family member as defined in [N.J.S.A. 39:6A-8.1], under that policy, shall be subject to the ...

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