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Pratts v. Hulme


December 20, 2007


On appeal from the Superior Court of New Jersey, Law Division, Civil Part, Middlesex County, L-8931-03.

Per curiam.


Argued: October 29, 2007

Before Judges C.S. Fisher and C.L. Miniman.

Defendant American International Insurance Company of New Jersey (American),*fn1 appeals from a summary judgment in favor of defendant, Providence Washington Insurance Company (Providence) dismissing American's cross-claim for reimbursement of personal injury protection (PIP) benefits it erroneously paid to the third-party defendants for medical treatment they provided to plaintiff Feliciano Pratts and his wife Isaura Collado.*fn2 Because American's cross-claim is not governed by the two-year statute of limitations provision, N.J.S.A. 39:6A-13.1, found in the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 to -35 (the Act), and because American has a viable equitable claim for unjust enrichment, which it may vindicate through arbitration pursuant to N.J.S.A. 39:6A-11, we reverse the order denying declaratory relief in favor of American and granting summary judgment to Providence and remand for proceedings consistent with this opinion.

The facts are not in dispute. Pratts and Collado were involved in a motor vehicle accident on January 1, 2002, in Perth Amboy while Pratts was driving a car he borrowed from Jorge Tapia, which was registered in New Jersey and insured by Providence. Pratts and Collado were residents of Florida and their Florida-registered vehicle was insured by American. Pratts and Collado were both injured, Pratts severely.

Pratts and his healthcare providers made claims for PIP benefits against American, which over time paid $182,353 in PIP benefits for Pratts under the mistaken belief that New Jersey's "deemer statute," N.J.S.A. 17:28-1.4,*fn3 required it to do so.

American also incurred $2282 in claims processing expenses. Collado and her chiropractor initially made a claim against Providence for PIP benefits, which Providence paid in the amount of $3334.90 with the last payment having been made on June 17, 2002. Thereafter, they made claims against American, which paid $12,923 in PIP benefits and incurred $925 for claims processing expenses.

The American policy issued to Pratts provided out-of-state PIP coverage only when the named insured was occupying the insured vehicle and was involved in an out-of-state accident. Because Pratts and Collado were not occupying their Florida vehicle at the time of the New Jersey accident, American was not obligated to provide PIP benefits under its policy at all.

Pratts filed a complaint against Christine Hulme, the driver of the other vehicle, and Mary Wilson, its owner, on December 3, 2003. Because not all PIP claims were paid, Pratts amended his complaint on July 5, 2005, to assert PIP claims against American and Providence. Before answering the amended complaint, American filed PIP Arbitration Petitions against Providence on March 13, 2006.*fn4 American was then permitted to file a late answer to the amended complaint on April 19, 2006, at which point it cross-claimed against Providence, seeking a declaration that Providence was obligated to reimburse it for the PIP benefits it paid in error, which would permit the arbitration to proceed. After Pratts settled his claims against Hulme and Wilson, and American voluntarily dismissed its claims against the third-party defendants, American filed a declaratory-judgment motion on July 25, 2006, and Providence filed a cross-motion for summary judgment on August 25, 2006.

The motion judge issued a written decision in which he concluded that "[American] cannot recover the PIP payments from Providence to reimburse [American], particularly when the applicable Statute of Limitations has expired." The judge acknowledged that had American not paid any benefits, Providence would have been fully responsible to pay all of the PIP claims. Nonetheless, the judge concluded that "nothing permits [American] to recover from Providence those PIP benefits payments it made erroneously on behalf of its insured after the statute of limitations has run." He noted that the Act did not provide a remedy to an insurer that pays PIP benefits mistakenly. Rather, the Act only addressed pro rata sharing of the obligation to pay PIP benefits when more than one carrier was liable to provide PIP benefits, citing N.J.S.A. 39:6A-11. He concluded that this provision did not apply and he also concluded that the Act's two-year statute-of-limitations provision, N.J.S.A. 39:6A-13.1, barred any relief to American because Pratts never filed a claim against Providence until his July 5, 2005, amended complaint, which was filed more than two years after the accident. The judge found no basis for tolling the statute of limitations and noted that American should have identified its error in making PIP payments before the statute of limitations expired. An order denying American's motion and granting Providence's motion was entered on January 3, 2007. This appeal followed.

Because the issues before us are purely questions of law, our review is de novo. Manalapan Realty, L.P. v. Township Comm. of Manalapan, 140 N.J. 366, 378 (1995) ("A trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.").

American argues that equitable principles require Providence to reimburse it for the PIP payments it made in error because Providence was the PIP carrier that was obligated to pay benefits on behalf of Pratts and Collado. Where one party, acting under a mistake of fact or law, has conferred a benefit upon another party, the recipient of the benefit may be compelled under the doctrine of unjust enrichment to pay the conferring party for the benefit received. Messner v. County of Union, 34 N.J. 233, 235-36 (1961) (recognizing that where payment of money has been made under a mistake of law it may be recovered if another party will be unjustly enriched); Great American Ins. Co. v. Yellen, 58 N.J. Super. 240, 244 (App. Div. 1959).

The doctrine of unjust enrichment rests on the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another. Callano v. Oakwood Park Homes Corp., 91 N.J. Super. 105, 108 (App. Div. 1966). "The key words are enrich and unjustly . . . ." Id. at 109. [Assocs. Commercial Corp. v. Wallia, 211 N.J. Super. 231, 243 (App. Div. 1986).]

"To establish unjust enrichment, a plaintiff must show both that defendant received a benefit and that retention of that benefit without payment would be unjust." VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994); see also, Weichert Co. Realtors v. Ryan, 128 N.J. 427, 437 (1992).

It is undisputed that Providence received a benefit when American paid the PIP benefits Providence was obligated by its policy of insurance to pay. American is not required to prove that it was a victim of fraud in order to recover an erroneous payment. Yellen, supra, 58 N.J. Super. at 244; see also, 28 Richard A. Lord, Williston on Contracts, § 70:199 (4th ed. 2007). In Yellen the insurance company mistakenly paid a fire damage claim due to a clerical error. Yellen, supra, 58 N.J. Super. at 242. We noted that "the rule of restitution . . . is generally available to insurance companies making payments on policies." Id. at 245 (citing Annotation, 167 A.L.R. 470, 471 (1947)). While there are exceptions to the rule, for example "where the insurance company deliberately elects to make payment of a claim on a policy although it is conscious that it does not know all the facts material to its liability to the payee," they did not apply in Yellen and do not apply here. Ibid. (citing DeCaro v. DeCaro, 13 N.J. 36, 43 (1953); Dobbs v. New Amsterdam Cas. Co., 101 N.J.L. 176 (E. & A. 1925); Gen. Accident Fire and Life Assurance Corp., Ltd. v. Batterson, 14 N.J. Super. 436 (Ch. Div. 1951); Worcester Loom Co. v. Heald, 78 N.J.L. 172 (Sup. Ct. 1909); see also Villanueva v. Amica Mut. Ins. Co., 374 N.J. Super. 283, 285 (App. Div. 2005)). Allowing Providence to benefit from American's mistake of law would clearly be unjust.

The common law rule of unjust enrichment permits restitution under the facts of this case.

Providence contends, however, that American's claim is merely one for subrogation and is not available because N.J.S.A. 39:6A-11 is the sole remedy for recovery of PIP benefits. It argues that only insurers liable to pay PIP benefits may seek relief under the Act and American had no such liability. The statute in question provides:

If two or more insurers are liable to pay benefits under sections 4 and 10 of P.L. 1972, c. 70 (C. 39:6A-4 and 39:6A-10) under a standard automobile insurance policy for the same bodily injury, or death, of any one person, the maximum amount payable shall be as specified in those sections 4 and 10 of P.L. 1972, c. 70 (C. 39:6A-4 and 39:6A-10), section 4 of P.L. 1998, c. 21 (C. 39:6A-3.1) and section 45 of P.L. 2003, c. 89 (C. 39:6A-3.3), respectively, if additional first party coverage applies and any insurer paying the benefits shall be entitled to recover from each of the other insurers, only by inter-company arbitration or inter-company agreement, an equitable pro-rata share of the benefits paid. [N.J.S.A. 39:6A-11.]

Certain principles of statutory construction guide our interpretation of this provision. The "overriding goal has consistently been to determine the Legislature's intent." Roig v. Kelsey, 135 N.J. 500, 515 (1994); accord Lesniak v. Budzash, 133 N.J. 1, 8 (1993).

It is a well settled rule of statutory construction that a statute in derogation of common law is ordinarily strictly construed. Statutes are to be construed with reference to the common law, and a statute which is claimed to impose a duty or to establish a right which was not recognized by the common law will be strictly interpreted to avoid such change. To effectuate a change in the common law, the legislative intent to do so must be clearly and plainly expressed. [Fivehouse v. Passaic Valley Water Commission, 127 N.J. Super. 451, 456 (App. Div.), certif. denied, 65 N.J. 565 (1974) (citations omitted).]

We examine the statutory language because that is generally the best barometer of the Legislature's intent. Frugis v. Bracigliano, 177 N.J. 250, 280 (2003). Here, the evident intent of the Legislature was to relieve the burden on the courts of deciding claims for an equitable pro rata sharing of PIP payments by two or more carriers by mandating resort to intercompany arbitration or agreement. See, e.g., Rutgers Cas. Ins. Co. v. Ohio Cas. Ins. Co., 299 N.J. Super. 249, 253 (App. Div. 1997), aff'd, 153 N.J. 205 (1998) (holding that the purpose of the Act is to settle claims in an "expeditious and least costly manner, and to ease the burden and congestion of the state's courts" (quoting N.J.S.A. 39:6A-24)). We find no "clearly and plainly expressed" legislative intent to foreclose the common law equitable remedy for unjust enrichment where one insurance company pays PIP benefits in error. Fivehouse, supra, 127 N.J. Super. at 456.

That conclusion is not the end of our inquiry because here American sought to exercise a right to arbitrate its dispute with Providence. Thus, we must determine whether American has a right under N.J.S.A. 39:6A-11 to demand arbitration of its claim when it was not an insurer liable to pay PIP benefits under any of the statutory provisions enumerated in N.J.S.A. 39:6A-11. The statute does not expressly confer a right to arbitrate in the circumstances presented here. Once again, we must resort to principles of statutory construction.

[W]here it is clear that the drafters of a statute did not consider or even contemplate a specific situation, this Court has adopted as an established rule of statutory construction the policy of interpreting the statute "consonant with the probable intent of the draftsman 'had he anticipated the situation at hand.'" Such an interpretation will not "turn on literalisms, technisms or the so-called rules of interpretation; [rather] it will justly turn on the breadth of the objectives of the legislation and the commonsense of the situation." [AMN, Inc. of N.J. v. South Brunswick Rent Leveling Bd., 93 N.J. 518, 525 (1983) (quotations omitted).]

See also Twp. of Stafford v. Stafford Twp. Zoning Bd. of Adjustment, 154 N.J. 62, 71-72 (1998); In re E.D., 288 N.J. Super. 166, 169 (App. Div. 1996); Matlack v. Burlington County Bd. of Chosen Freeholders, 194 N.J. Super. 359, 361-62 (App. Div.), certif. denied, 99 N.J. 191 (1984).

Several other canons of statutory construction also inform our decision. Where the Legislature's intent is remedial, a court should construe a statute liberally. . . . Furthermore, a court should avoid a literal interpretation of individual statutory terms or provisions that would be inconsistent with the overall purpose of the statute. [Young v. Schering Corp., 141 N.J. 16, 25 (1995).]

It seems clear that the drafter of N.J.S.A. 39:6A-11 did not contemplate the possibility of a PIP carrier paying benefits totally in error when the statute was crafted, although the drafter was clearly concerned about one carrier paying more than its equitable pro rata share. In such a case, "the doctrine of probable legislative intent [is] a more reliable guide than [an] overly literal reading." Ibid. Here, American mistakenly made PIP payments under the belief that it was required by New Jersey's "deemer statute," N.J.S.A. 17:28-1.4. Had such a circumstance been contemplated by the drafter of N.J.S.A. 39:6A-11, the Legislature would probably have intended to mandate intercompany arbitration or agreement to resolve the dispute between the involved insurers because the Legislature when enacting N.J.S.A. 39:6A-11 sought to keep intercompany disputes out of the courts. As a consequence, we are satisfied that Providence is required to arbitrate the quantum of reimbursement to which American is entitled.*fn5

The limitations provision of the Act, which requires timely presentation of claims to a PIP carrier, simply does not apply because it addresses the time during which an insured may seek benefits from a PIP carrier.*fn6 Here we have an action between PIP carriers. We have held that N.J.S.A. 39:6A-13.1(a) does not apply to claims pursuant to N.J.S.A. 39:6A-11 for pro rata contribution among PIP carriers which are responsible for payment of PIP benefits. Ideal Mut. Ins. Co. v. Royal Globe Ins. Co., 211 N.J. Super. 336, 340 (App. Div. 1986).

[T]he statute permits of no way to determine whether plaintiff's right to relief is time-barred except in terms of equitable principles applicable to arbitration. In this context neither the two year nor the six year statute governs. Although the Act itself is silent thereon, the rule is settled that absent waiver or laches "the cause of action for breach of the obligation to arbitrate does not accrue until the plaintiff requests arbitration and the defendant refuses to comply. [T]he period of limitation [does] not begin to run until then." Such action does not appear to have yet been taken. Furthermore, where there is no express time limitation within which the arbitrators must act, a reasonable time is implied. [Ibid. (citations omitted).]

As a consequence, there is no time-bar to American's claim for reimbursement. Because there is no factual dispute about whether American and Providence are both members of intercompany arbitration, which is the appropriate venue for resolution of American's claims, we remand this matter to the trial court for entry of an order compelling arbitration.

Reversed and remanded for proceedings consistent with this opinion.

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