On certification to the Superior Court, Appellate Division.
(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).
In this appeal, the Court must determine whether its decision in Weinberg v. Dinger, 106 N.J. 469 (1987), applies to all regulated utilities and whether Weinberg's bar against insurance companies' subrogation claims should be altered.
In September 1999, Hurricane Floyd struck New Jersey, bringing with it widespread interruptions in electricity service from September 15 to 21, including interruptions to customers of Jersey Central Power & Light Company. As a result of the power interruption, Belcher's Village Market in Branchville, New Jersey, submitted a claim to its insurer, Franklin Mutual Insurance Company, for the cost of spoiled food. Under its policy, Franklin Mutual paid Belcher's $6,255.78 for its losses and filed a subrogation action (asserting the rights of the insured) against JCP&L.
The trial court and the Appellate Division held that Weinberg's bar against insurers' subrogation claims is not limited to water companies and dismissed Franklin Mutual's subrogation claim against JCP&L. The Supreme Court granted certification and invited the Insurance Council of New Jersey, the Property Casualty Insurers Association of America and the National Association of Mutual Insurance Companies to participate as amici curiae.
HELD: Weinberg's bar against insurance companies' subrogation claims against utility companies is not altered and applies to all regulated utilities in service interruption cases.
1. In Weinberg, the Court held that a utility has a duty to act with reasonable care in the provision of services to foreseeable users. However, the Court allowed only uninsured and underinsured property owners to sue a water company for damages resulting from service interruptions. The Court barred subrogation claims by insurers. The Court reasoned that allowing subrogation claims against a water company would be contrary to public policy because it would result in shifting the risk of loss from the insurance company to the water company and, ultimately, to the consumer in the form of increased water rates. The result would be that the consumer would pay twice--first for property insurance premiums and then in the form of the higher water rates. In Weinberg, the Court left open the possibility of reconsidering the subrogation carve-out rule if a case were presented in which it was proven that any increase in water rates resulting from the water company's liability for subrogation claims would be substantially offset by reductions in property insurance premiums. (pp. 1-4)
2. Weinberg's subrogation carve-out applies to all regulated utilities in service interruption cases. The carve-out was based on the status of the water company as a regulated utility and is rooted in the protection of the members of the rate-paying public who would ultimately bear the burden of subrogation recoveries through the payment of increased water rates. Those considerations apply equally where other regulated utilities are concerned. (pp. 5-6)
3. The Court declines to alter the subrogation carve-out rule at this time for several reasons. First, under the Weinberg rule, the innocent victim is made whole through insurance or in a direct action against the utility, thus satisfying the compensatory principle of tort law. In the case of a utility that can pass losses on through rate increases, the classic "just deserts" purpose of tort law loses some of its currency. Second, the Weinberg rule has been in effect for almost 20 years and the Legislature has not acted to change the rule. Third, in this case the Court has not been offered proof that any increase in utility rates resulting from liability for subrogation claims would be substantially offset by reductions in insurance premiums. The Court continues to be concerned over the public paying twice, through insurance premiums and increased utility rates. The Court will not alter the subrogation rule until it is satisfied that the public will not suffer that disadvantage. (pp. 6-8)
The judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, ALBIN, WALLACE and RIVERA-SOTO join in the PER CURIAM opinion.
In Weinberg v. Dinger, 106 N.J. 469, 495 (1987), we held, in accordance with modern principles of tort liability, that a utility has a duty to act with reasonable care in the provision of service to foreseeable users, rejecting a line of cases that was based solely on the then-current tort law notion that a defendant owed no duty of care to a third party with whom no privity of contract existed. See, e.g., Reimann v. Monmouth Consol. Water Co., 9 N.J. 134, 137-38 (1952) (water company not liable to third parties for negligent provision of service); Cochran v. Public Serv. Elec. Co., 97 N.J.L. 480, 481 (E. & A. 1922) (electric company not liable to third parties for ...