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Selective Insurance Co. v. National Continental Insurance Co.

April 27, 2006


On appeal from the Superior Court of New Jersey, Law Division, Ocean County, L-24-05. Robert P. Clark argued the cause for appellant (Clark & DiStefano, attorneys; Mr. Clark, on the brief). John M. Palm argued the cause for respondent (Garrigle and Palm, attorneys; Mr. Palm, on the brief).

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



Argued April 3, 2006

Before Judges Lintner, Holston, Jr. and Gilroy.

This appeal involves a dispute between two insurance companies. Plaintiff, Selective Insurance Company (Selective), filed a complaint and order to show cause (OTSC) seeking to confirm an arbitration award in the amount of $77,219.84 entered against defendant, National Continental Insurance Company (National), for reimbursement of Personal Injury Protection (PIP) benefits that Selective paid to its insured Kathryn Kniesler. Following oral argument on Selective's summary application in the Law Division, the judge confirmed $28,365.40 of the award and entered an order modifying the arbitration award accordingly. Selective appeals and we reverse and remand for entry of an order confirming the entire arbitration award against National.

The facts are substantially undisputed. On September 25, 2001, Kniesler was injured when her vehicle was involved in an intersection collision with a dump truck operated by National's insured Jorge Posso, the operator of a commercial vehicle, which was not required to have PIP coverage. National's policy had liability limits of $500,000. On June 4, 2002, National paid Selective $21,634.60 on Selective's property damage subrogation claim. Kniesler and her husband, Christopher, filed a complaint seeking damages resulting from her personal injuries in the Law Division sometime in 2002.*fn1

Selective filed its arbitration claim for PIP benefits against National pursuant to N.J.S.A. 39:6A-9.1 on September 22, 2003. At the time, both National and Selective were signatories to Arbitration Forums, Inc.'s (the Forum) binding Personal Injury Protection Subrogation Forum. On October 15, 2003, National filed its response, admitting coverage and liability.*fn2

National's response also indicated there was a companion suit pending and requested a deferment and notice of a hearing. Paragraph 11 of the Forum's rules and regulations governing personal injury protection arbitration provides in pertinent part:

Arbitration of a controversy may be deferred until all companion claims or suits not subject to arbitration have been disposed of by settlement or otherwise, all parties to the arbitration may agree to waive deferment. . . .

One year from the date of filing with [a Forum's] field office, a deferred case shall be set [for] a hearing and heard unless continuance of the deferment is requested. If a request for a continued deferment is made, the adverse party may challenge the reason for the request. If a challenge is made, a hearing will be held to determine the reason for the deferment. If the panel determines the reason for the deferment is for good cause, the case will be continued on the [Forum's] docket in a deferred status for one year. After the year, it will be placed on the active hearing docket and heard unless the administrator receives a written request for continuance of the deferment for another year.

On October 16, 2003, National's Division Claims Manager, Douglas Bright, wrote a letter to the Forum notifying it of National's intent "to withdraw from the Personal Injury Arbitration Forum in New Jersey." The letter acknowledged that "[i]n accordance with the terms of the Agreement, this withdrawal will be effective sixty (60) days from the date of this correspondence." Bright also expressed that National had "serious concerns" over the "adjudication" of New Jersey PIP cases respecting the need for deferments and the Forum's refusal to provide the necessary relief. Accordingly, Bright requested that "any case now pending, or that should be filed within the next sixty days, and in which [National] has requested a deferment due to a companion claim or suit pending, be stayed until we can reach an acceptable resolution to our concerns . . . ."

The Forum did not respond to Bright's request for a stay. On October 27, 2004, an arbitrator entered the award in favor of Selective.*fn3 National refused to pay the award and Selective filed its OTSC on December 30, 2004. Meanwhile, on December 13, 2004, National entered into a settlement in the amount of $450,000 with the Knieslers on behalf of its insured. The Knieslers received payment on the settlement from National on December 30.

At oral argument on the OTSC, National asserted that it was not properly before the arbitrator because it had withdrawn from the arbitration agreement with the Forum and was under the presumption that a stay had been granted pursuant to its October 16 request. National also argued that N.J.S.A. 39:6A-9.1 limits Selective's recovery to $28,365.40, the available amount remaining in its policy limits. The judge rejected National's argument that it was not properly before the arbitrator, pointing out that the withdrawal request was not effective until sixty days after the October 16 notice and National had received the one-year deferment pursuant to the Forum's rules, which it had requested in its initial response to Selective's notice to arbitrate. Relying on IFA Insurance Co. v. ...

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