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State Farm Mut. Auto. Ins. Co. v. Licensed Beverage Ins. Exchange

July 31, 1996


On certification to the Superior Court, Appellate Division.

The opinion of the Court was delivered by Coleman, J. Justices Handler, Pollock, O'hern, Garibaldi and Stein join in Justice COLEMAN's opinion.

The opinion of the court was delivered by: Coleman

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

State Farm Mutual Automobile Insurance Company v. Licensed Beverage Insurance Exchange (A-90-95)

Argued February 14, 1996 -- Decided July 31, 1996

COLEMAN, J., writing for a unanimous Court.

The issue on appeal is whether, pursuant to the reimbursement provision, N.J.S.A. 39:6A-9.1 of the New Jersey Automobile Reparation Reform Act, a tavern is a "tortfeasor" who is potentially responsible for reimbursing personal injury protection (PIP) benefits paid by a private passenger automobile carrier to one of its insureds because of the tavern's negligence.

On March 1, 1992, George Schrope and Peter Zoon were patrons of the Boulevard Pub in Hackensack, New Jersey. Both men were served alcoholic beverages while they were visibly intoxicated. Later that evening, Zoon drove with Schrope to their home in Hopatcong. Because Zoon was unable to maneuver his car into the garage, Schrope exited the vehicle, stood in front of it, and attempted to direct Zoon into the garage. Zoon drove the car directly into Schrope, pinning him between the car bumper and the garage entrance. Schrope suffered severe leg injuries.

As a result of the accident, State Farm Mutual Automobile Insurance Company (State Farm) paid $35,330.72 in PIP benefits on behalf of its insured, Schrope. State Farm instituted suit against the Licensed Beverage Insurance Exchange (LBIE), the reinsurer of the Boulevard Pub, to recover those payments pursuant to the PIP reimbursement provision.

On March 18, 1994, the trial court granted summary judgment in favor of State Farm, requiring LBIE to submit the reimbursement claim to arbitration, as required by the reimbursement provision. The court, relying on All State Insurance Co. v. Coven, reasoned that the provision applies to "any tortfeasor" who may be liable, without limitation.

The order requiring arbitration was appealed. LBIE argued that the "any and all tortfeasor" phrase applied only to those tortfeasors who owned commercial vehicles. State Farm countered that the language of the reimbursement provision was broad enough to encompass "any and all tortfeasors." The Appellate Division affirmed the decision of the lower court.

The Supreme Court granted certification.


The reimbursement right conferred by N.J.S.A. 39:6A-9.1 encompasses all tortfeasors that are not subject to the No-Fault Law.

1. Because the "any tortfeasor..." phrase is not unambiguous, the Court must consider other rules of statutory interpretation, including the determination of the Legislature's intent. (pp. 3-5).

2. The legislative intent behind the reimbursement provision was to alleviate the imbalance between automobile insurers and commercial-vehicle insurers by reducing the cost of insurance for automobile insurers and allowing automobile insurers to recover PIP payments through reimbursement. Since the enactment of the reimbursement provision, this Court, as well as others, have acknowledged that the reimbursement provision confers a primary reimbursement right on the injured party's insurer. That right may be exercised against: 1) the insurer of a tortfeasor who was not required to maintain PIP coverage; or 2) a tortfeasor who willfully fails to carry the requisite PIP coverage. LBIE is an insurer of the Boulevard Pub, a tortfeasor that is not required to carry PIP coverage. Therefore, it falls into one of the two classes of tortfeasors from which an automobile insurer may seek reimbursement. (pp. 5-12)

3. N.J.S.A. 17:28-1.3 (section 1.3), which requires commercial vehicles to provide PIP coverage for pedestrians injured in accidents, was enacted at the same time the reimbursement provision. Because section 1.3 and the reimbursement provision were enacted together as part of the same Act, they must be interpreted together. Both provisions were intended to remedy the problems discussed in Justice Sullivan's Dissent in Aetna Insurance Company v. Gilchrist Brothers, Inc.. The Legislature intended the phrase "any tortfeasor..." to have a broad meaning. The reimbursement provision was enacted to alleviate the imbalance between commercial insurers and private automobile insurers by reducing the cost of insurance for automobile owners and allowing automobile insurers to recover PIP through reimbursement. Thus, the "other than pedestrians" phrase used in the reimbursement provision was intended to ensure the inclusion of owners and operators of commercial vehicles under the statute, not to exclude all otherwise eligible tortfeasors. If the intent of the Legislature was otherwise, it would not have used language intended to ensure such a broad scope of coverage. (pp. 12-16)

4. The more expansive interpretation of the reimbursement provision accords with its legislative history and is consistent with the legislative objective of reducing insurance premiums for owners of private-passenger vehicles. Permitting PIP carriers to assert such reimbursement claims would not be inconsistent with the No-Fault Law's primary goal of providing quick compensation to injured motorists. Such reimbursement suits are generally resolved through arbitration, and are relatively rare; therefore, there is no threat of that courts will be overrun with litigation by insurance companies seeking PIP ...

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