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Fernandez v. Nationwide Mutual Fire Insurance Co.

July 16, 2009

SEBASTIAN FERNANDEZ, PLAINTIFF-APPELLANT,
v.
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, DEFENDANT-RESPONDENT, AND PROFORMANCE INSURANCE COMPANY, DEFENDANT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 402 N.J. Super. 166 (2008).

SYLLABUS BY THE COURT

(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).

The issue in this appeal is whether a Personal Injury Protection (PIP) carrier's right to reimbursement for paid PIP benefits, pursuant to N.J.S.A. 39:6A-9.1, has priority over an insured's right to be made whole where the tortfeasor's insurance does not fully cover the insured's personal injury damages.

On February 2, 2004, Sebastian Fernandez (plaintiff) was the owner and operator of an automobile insured by Nationwide Mutual Fire Insurance Company when he was involved in an accident with a commercial vehicle owned by Go Pro Waste Services, Inc., and operated by Peter Garofalo (collectively, the tortfeasors). The tortfeasors' vehicle was insured by Proformance Insurance Company for personal injury liability coverage in the amount of $1,000,000. As a result of the accident, Fernandez suffered serious injuries and incurred medical expenses totaling $591,269.62. Nationwide paid Fernandez its PIP coverage limit of $250,000. On April 20, 2004, Fernandez filed a personal injury action against the tortfeasors. On July 14, 2004, Nationwide filed for inter-company arbitration against Proformance to recover the PIP benefits paid to Fernandez, together with interest, pursuant to N.J.S.A. 39:6A-9.1.

On September 20, 2005, Nationwide received an arbitration award against Proformance in the amount of $250,891.56. On November 3, 2005, Fernandez received a non-binding arbitration award against the tortfeasors in the amount of $1,841,269.62, which included excess medical expenses of $341,269.62. On February 23, 2006, Fernandez settled with the tortfeasors for $1,000,000, with Proformance paying Fernandez $749,108.44 and depositing the remaining $250,891.56, the amount awarded to Nationwide, into court, pending resolution of Fernandez's claim to those funds.

On May 30, 2009, Fernandez filed a declaratory judgment action against Nationwide and Proformance, seeking a declaration that "his claim to [the $250,891.56] takes priority over the Defendant Nationwide's arbitration award." On September 8, 2006, an order was entered granting leave to Proformance to deposit the amount of the arbitration award into court. Fernandez and Nationwide cross-moved for summary judgment. On April 13, 2007, the trial judge entered an order supported by an oral decision, granting Fernandez's motion and denying Nationwide's motion. In granting Fernandez summary judgment, the judge determined that he was entitled to be made whole for his injuries by receiving the full amount of Proformance's liability insurance proceeds before Nationwide was entitled to receive reimbursement.

On August 12, 2008, the Appellate Division reversed the trial court's decision in a published opinion. The panel held that a PIP carrier who has paid PIP benefits to an insured is entitled to reimbursement of those benefits from the insurance proceeds of the third-party tortfeasor, pursuant to N.J.S.A. 39:6A-9.1, even when the amount of the tortfeasor's insurance is insufficient to make the insured whole.

The Supreme Court granted plaintiff's petition for certification and amicus curiae status to the New Jersey State Bar Association.

HELD: The judgment of the Appellate Division is AFFIRMED substantially for the reasons expressed in Judge Gilroy's opinion.

1. The Appellate Division's decision correctly held that the insurer of the responsible party, and not the injured victim's insurer, was liable for the expense of PIP benefits for the victim. Simply because that conclusion diminishes the total amount available to the victim from the tortfeasor's policy of insurance does not produce an unjust result. Rather, that conclusion advances stability in the insurance marketplace by requiring that the ultimate cost of PIP benefits be borne by the insurer of the responsible party, not by the insurer of the victim. (Pp. 2-3)

JUSTICE LONG filed a separate, dissenting opinion, in which CHIEF JUSTICE RABNER and JUSTICE ALBIN join, stating that the Court's conclusion cannot be squared with the legislatively declared reparation goals of New Jersey's no-fault statutes, alters the fundamental nature of the insurance contract, and will have the cruel effect of impoverishing innocent accident victims.

JUSTICES LaVECCHIA, WALLACE, and RIVERA-SOTO join in the Court's opinion. JUSTICE LONG filed a separate, dissenting opinion, in which CHIEF JUSTICE RABNER and JUSTICE ALBIN join. JUSTICE HOENS did not participate.

Per curiam.

Argued April 27, 2009

The judgment of the Appellate Division is affirmed substantially for the reasons expressed in the thorough and thoughtful opinion by Judge Gilroy. Fernandez v. Nationwide Mut. Fire Ins. Co., 402 N.J. Super. 166 (App. Div. 2008). As the panel aptly concluded, this matter is governed by the principles previously set forth in Knox v. Lincoln General Insurance Co., 304 N.J. Super. 431 (App. Div. 1997), and reaffirmed in David v. Government Employees Insurance Co., 360 N.J. Super. 127 (App. Div.), certif. denied, 178 N.J. 251 (2003). Applying that precedent to the instant matter required ...


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