On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. OCN-L-981-02.
Before Judges Stern, Wecker and Graves.
The opinion of the court was delivered by: Stern, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Plaintiffs appeal from an order of February 5, 2004, granting defendant's motion for summary judgment, denying plaintiffs' motion to strike the affirmative defenses, and dismissing the complaint under the"deemer" statute, N.J.S.A. 17:28-1.4, for failure to satisfy the verbal threshold. The judgment was based, in part, on Judge Edward Oles' letter opinion of October 1, 2003, as orally amended on November 21, 2003, which held that plaintiff Richard Baduini*fn1 was subject to the verbal threshold for injuries he suffered as a result of an accident which occurred in New Jersey on September 6, 2001, while driving his 1995 GMC Jimmy which was insured under a Pennsylvania automobile insurance policy. Judge Oles held that the case is subject to the"deemer" statute, and that, therefore, plaintiff had to satisfy the verbal threshold, which he admittedly did not do. The judge subsequently ruled that"gross negligence" did not excuse application of the statute.
Plaintiff is a New Jersey resident who owns two vehicles. Both are registered in New Jersey and have New Jersey license plates. The 1998 Honda Accord was principally garaged in this state and insured in New Jersey under a United States Automobile Association (USAA) insurance policy in which he elected what he calls the"no tort threshold." The 1995 GMC Jimmy was also registered in New Jersey, but principally garaged at the plaintiff's vacation home in Pennsylvania and insured under a USAA policy issued in Pennsylvania with a"full tort option," the equivalent to the New Jersey"no tort threshold."*fn2 The Pennsylvania policy listed plaintiff's address as Point Pleasant, New Jersey, but noted that the vehicle was"principally garaged" at his Pennsylvania address. According to plaintiff,"USAA issued two insurance identification cards to me for my 1995 GMC Jimmy. One card was for Pennsylvania and the other for New Jersey." The"Pennsylvania Financial Responsibility Identification Card" in the record noted Point Pleasant, New Jersey, as plaintiff's address. There is no suggestion of fraud.*fn3 However, the Pennsylvania policy did not provide for the minimum personal injury protection (PIP) benefits, as required by N.J.S.A. 39:6A-4; see also N.J.S.A. 39:6A-10. To the contrary, the total"medical expense" covered by the Pennsylvania policy benefit was only $10,000.
Plaintiff argues that he need not satisfy the verbal threshold, N.J.S.A. 39:6A-8(a), because he is not subject to the deemer statute, N.J.S.A. 17:28-1.4, as a result of his personal injury protection (PIP) coverage and"no tort threshold" election made under the New Jersey policy issued on the Honda. New Jersey residents have two policy options, a verbal or"limitation on lawsuit" threshold, that bars a plaintiff's suit for non-economic damages if his or her injuries do not satisfy one of the categories set forth in N.J.S.A. 39:6A-8(a), or the so-called"zero" or"no limitation on lawsuit" threshold under which an injured plaintiff can sue for non-economic damages without limitation. N.J.S.A. 39:6A-8(b). The deemer statute extends PIP benefits for accidents occurring in New Jersey to persons injured while riding in out-of-state vehicles insured by carriers who are authorized to write motor vehicle coverage in New Jersey. N.J.S.A. 17:28-1.4.*fn4 This coverage is provided in exchange for requiring an injured plaintiff to satisfy the verbal threshold before seeking non-economic damages."If defendant's insurer is authorized to transact or transacts insurance business in New Jersey, by operation of N.J.S. 17:28-1.4, defendant is'deemed' to be covered by N.J.S. 39:6A-4 [providing PIP benefits] and thus may benefit from the exemption requiring plaintiff to meet the verbal threshold." Craig & Pomeroy, New Jersey Auto Insurance Law (Gann 2005) § 15:3-3(b).
In Whitaker v. Devilla, 147 N.J. 341, 344 (1997), the Supreme Court held that N.J.S.A. 17:28-1.4"deems New Jersey's'verbal threshold'... to apply to the policies of out-of state residents using their automobiles in New Jersey if their insurers are authorized to do business in New Jersey." The Court further held that such vehicle owners, if insured by an insurance company authorized to do business in New Jersey, were subject to the verbal threshold regardless of their choice of coverage and that the statute does not violate the equal protection clause. The Court quoted from the Third Circuit:
There is also a clear rational basis to support the Legislature's determination that out-of-state residents who operate autos in New Jersey should be precluded from recovering for non-economic loss unless the verbal threshold is satisfied. Inherent in the no-fault system is a statutory right to recover damages without the need to satisfy a threshold. The cost of such recovery must be paid out of the auto insurance system. Appellants, and those who would fall into their category, are not New Jersey insured. As such, they are not in a position to finance the cost of non-threshold coverage. Given this situation and the Legislature's desire to reduce or contain the cost of auto insurance, the legislative judgment was rationally consistent with the purpose of the statute. Furthermore, if the broadest coverage (no threshold) was provided to persons who did not pay for it, then the added cost to the insurer would have to be borne by others, namely consumers who purchase auto insurance. The Legislature reasonably concluded that such a situation would not foster reduced auto insurance premiums.
[Whitaker, supra, 147 N.J. at 355 (quoting Dyszel v. Marks, 6 F.3d 116, 127 (3d Cir. 1993).]
After Whitaker was decided, the Legislature added a provision to the deemer statute which also requires
[a]ny insurer authorized to transact or transacting automobile or motor vehicle insurance business in this State... [to] include in each [out-of-state] 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 ...