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Government Employees Insurance Co. v. Allstate Insurance Co.

March 25, 2003

GOVERNMENT EMPLOYEES INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
ALLSTATE INSURANCE COMPANY, DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-3762-00.

Before Judges Cuff, Lefelt and Winkelstein.

The opinion of the court was delivered by: Lefelt, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 22, 2003

The deemer statute, N.J.S.A. 17:28-1.4, mandates that some automobile insurance companies include within their out of-state issued policies certain New Jersey automobile insurance coverages. Government Employees Insurance Company (GEICO), a company not authorized to transact any insurance business in New Jersey, relying on a 1998 amendment to the deemer statute, contends that it is subject to the statute as an affiliate of an insurance company that is authorized to transact some forms of insurance business in New Jersey. If GEICO is subject to the deemer statute under the 1998 amendment and therefore must provide personal injury protection(PIP) coverage for its out-of-state insureds, then GEICO maintains that it need not reimburse Allstate Insurance Company, under N.J.S.A. 39:6A-9.1, for Allstate's payment of PIP benefits to its insureds for injuries sustained in New Jersey accidents with GEICO insured tortfeasors. GEICO appeals from Judge Pisansky's declaratory judgment, concluding that GEICO is not covered by the 1998 amendment to the deemer statute and not exempted from reimbursing Allstate under the PIP reimbursement statute. We agree with the trial judge's conclusion and therefore affirm the declaratory judgment.

I.

We begin by summarizing the pertinent facts and procedural history. While Allstate is authorized to underwrite all types of insurance in New Jersey, GEICO is a Maryland Corporation underwriting private-passenger automobile insurance in every state except New Jersey and Massachusetts. GEICO withdrew from the New Jersey automobile insurance market around 1976. In 1996, GEICO was acquired by Berkshire-Hathaway Corporation. Berkshire also owns stock in a number of other companies including 82% of Central States Indemnity Company of Omaha (Central States), which is authorized to transact certain limited forms of non-automobile and non-motor vehicle insurance in New Jersey, including accident, health, credit and economic security insurance. The record does not reflect whether Central States is authorized to write automobile insurance policies in any state, and there are no ties between GEICO and Central States except for the common ownership of stock in both companies by Berkshire.

In 1998 and 1999, three New Jersey accidents involving vehicles insured by Allstate were allegedly caused by GEICO out-of-state insureds. In each of these three accidents, Allstate paid PIP benefits to eligible persons under N.J.S.A. 39:6A-4. Allstate then sought reimbursement from GEICO under N.J.S.A. 39:6A-9.1. Allstate's reimbursement theory was that GEICO was not required to provide PIP coverage for its out-of state insureds and therefore was responsible to Allstate under the reimbursement statute. Allstate currently has over fifty pending claims of this type against GEICO.

GEICO contends that it is obligated to provide PIP benefits based on a 1998 amendment to the deemer statute and its affiliation with Central States and has, in fact, provided PIP benefits in accordance with the amendment since its effective date on January 19, 1998. Because all of the accidents for which Allstate seeks reimbursement occurred after the deemer statute amendment's effective date, GEICO refused to submit to arbitration.

Following a number of similar attempts by Allstate to obtain PIP benefit reimbursement, GEICO filed a declaratory judgment action seeking to establish its right not to reimburse Allstate. After GEICO moved for summary judgment, the motion judge denied the motion and interpreted the deemer statute to require"a company authorized to transact automobile insurance in this state or affiliated with such company writing policies of automobile insurance outside this state [to offer PIP benefits] when the automobile insured under the policy is used or operated in this State." Thus, according to the motion judge, GEICO was not required to maintain PIP coverage under the deemer statute and consequently was required to reimburse Allstate under N.J.S.A. 39:6A-9.1. After the judge certified the decision as final, under R. 2:2-3(a)(3), and stayed all present and future PIP reimbursement claims by Allstate against GEICO, GEICO appealed.

II.

We first turn to the knotty task of construing the 1998 amendment to the deemer statute. The deemer statute was originally enacted in 1985, P.L. 1985, c. 520' 18, and is part of this State's no fault automobile insurance plan."The legislation was in response to a growing number of cases where New Jersey residents were injured in accidents caused by out of-state drivers whose insurance coverage was less than New Jersey's statutory requirements" and was intended"to reduce the demands on the Unsatisfied Claim and Judgment Fund." Craig and Pomeroy, New Jersey Auto Insurance Law, comment 1:2-6 (2003).

The deemer statute requires some insurers to include in their out-of-state policies PIP and other New Jersey coverages to be available whenever the insured automobile is operated within this State. Insurers authorized to transact or transacting automobile insurance in this State must file with the Department of Banking and Insurance written certification of compliance with the statute. Policies subject to the statute that do not contain express provisions complying with the statute, however, are deemed to comply. Lusby By and Through Nichols v. Hitchner, 273 N.J. Super. 578, 583-84 (App. Div. 1994). And from this consequence, the law acquired the name by which it is commonly known, the deemer statute.

The purpose of the statute was to lower premiums, reduce litigation and make PIP benefits available to all. Watkins v. Davis, 259 N.J. Super. 482, 491 (Law Div. 1992), aff'd, 268 N.J. Super. 211 (App. Div. 1993). It sought to ensure that New Jersey-authorized insurance companies provide to their out-of-state insureds traveling in New Jersey the same protections required of in-state insured vehicles. Martin v. Home Ins. Co., 141 N.J. 279, 282 (1995).

The statute has been amended three times. The first amendment in 1989, L. 1988, c. 119,' 1, imposed the verbal threshold, N.J.S.A. 39:6A-8(b), on out-of-state drivers who have accidents in New Jersey. The third amendment, L. 1998, c. 21,' 72, effected only a minor change which does not bear on this matter. It is the second amendment, effective in January 1998, (the 1998 amendment) upon which GEICO bases its argument.

The underlined portions of the following quotation represent the 1998 amendment. The portion of the following quotation that is not underlined represents the law as it existed before the 1998 amendment:

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 personal injury protection benefits coverage pursuant to [ N.J.S.A. 39:6A-4] or [ N.J.S.A. 17:28-1.3] for any New Jersey resident who is not required to maintain personal injury protection coverage pursuant to [ N.J.S.A. 39:6A-4] and who is not otherwise eligible for such benefits, whenever the automobile or motor vehicle insured under the policy is used or operated in this State. In addition, 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 automobile or motor vehicle 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 [ N.J.S.A. 39:6A-3], the uninsured motorist insurance requirements of [N.J.S.A. 17: 28-1.1], and personal injury protection benefits coverage pursuant to [N.J.S.A. 39:6A-4] or of [ N.J.S.A. 17:28-1.3], whenever the automobile or motor vehicle insured under the policy is used or operated in this State. [N.J.S.A. 17:28-1.4 ]

The first notable observation regarding the amendment at issue, the underlined text portions of the above quotation, is that the bulk of the amendment constitutes one rather long, complex, cumbersome sentence. The first sentence also repeats virtually verbatim the language contained in the second sentence, which is the statutory section almost exactly as it existed before the amendment.

After carefully reading the text of the amendment, we have concluded that the text is ambiguous and its accurate meaning difficult to discern. In fact, the amendment has been characterized as"extraordinarily sloppy." Craig & Pomeroy, supra, Comment 1:2-11. We decline to utilize such pejorative language in describing the amendment, but it suffices to note that the language of the amendment bears at least two possible meanings. Before we analyze these meanings, we identify those parts of the text the meaning of which is agreed upon by the parties and is relatively self-evident.

The parties agree that the deemer statute applies to policies that are issued outside the territorial borders of New Jersey. The statute requires that certain New Jersey insurance coverages be included within some out-of-state and Canadian automobile insurance policies. It is also agreed that insurers authorized to transact automobile insurance business in this State must include in any of their out-of state or Canadian automobile policies the several specified ...


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