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Timothy Oravsky, On Behalf of Himself and All Others Similar Situated v. Encompass Insurance Company

April 28, 2011

TIMOTHY ORAVSKY, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILAR SITUATED PLAINTIFF,
v.
ENCOMPASS INSURANCE COMPANY, ET AL.
DEFENDANT.



The opinion of the court was delivered by: Pisano, District Judge.

OPINION

Plaintiff Timothy Oravsky brings this putative class action against Encompass Insurance Company and Encompass Insurance Company of New Jersey (together "Encompass" or "Defendant") alleging that Encompass sold automobile insurance policies in New Jersey with reduced personal injury protection medical expense benefits ("PIP") without providing certain statutorily-prescribed disclosures and without obtaining required written waivers. The Court has diversity jurisdiction over this matter pursuant to 28 U.S.C. § 1332 as Plaintiff is a citizen of New Jersey and Defendants are Illinois corporations with their principal place of business in Illinois. Presently before the Court is a motion by Defendant to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and to dismiss/strike Plaintiff's class action allegations. For the reasons below, Defendant's motion to dismiss will be granted as to Plaintiff's claim for the breach of the covenant of good faith and fair dealing, and it will be denied in all other respects. Defendant's motion to dismiss/strike Plaintiff's class allegations will be denied.

I. Background*fn1

A. Facts Alleged

On or about July 18, 2004, Plaintiff filled out an application on the internet and was issued "a standard automobile insurance policy a/k/a a 'Classic Automobile Policy'" from non-party Continental Insurance Company of New Jersey ("Continental Insurance"). Compl. ¶ 26. The application Plaintiff completed had preselected $15,000 as the amount of medical expense PIP benefits coverage and that is the level of coverage Plaintiff received. In 2005, Plaintiff's policy was transferred to and subsequently underwritten Encompass. Plaintiff's level of medical expense benefits remained unchanged. In 2006, Plaintiff renewed his policy with Encompass, and again, the policy contained a $15,000 PIP medical expense limitation.

On or about March 3, 2007, Plaintiff was involved in an automobile accident in the insured automobile. His medical bills for the treatment of the injuries he sustained exceeded $15,000. Encompass has refused to pay for any medical bills in excess of the $15,000 policy limitation.

Plaintiff filed the present action seeking declaratory and/or injunctive relief, reformation of his policy to include a maximum PIP medical expense benefit of $250,000, and payment of his medical expenses up to that amount. Plaintiff's claims rest on assertions that Encompass sold automobile insurance to Plaintiff with a PIP medical expense coverage amount of less than $250,000 without obtaining an executed "coverage selection form" containing statutorily-required disclosures and waivers. In particular, Plaintiff asserts that he did not affirmatively choose the lesser amount in writing, as is required by law when PIP coverage of less than $250,000 is provided. See N.J.S.A. 39:6A-4.3 ("If none of the [lesser available amounts of] medical expense benefits options is affirmatively chosen in writing, the policy shall provide $250,000 medical expense benefits coverage.") Plaintiff alleges Defendant violated N.J.S.A. 39:6A-4, which mandates PIP benefits in all "standard automobile liability policies," and the requirements of N.J.S.A. 39:6A-4.3 and 23, which apply to an insured election of coverage limits.

B. New Jersey's No-Fault Insurance and Applicable Statutory Provisions

Pursuant to what are known as New Jersey's "No-Fault" statutes, automobile insurance policies in New Jersey are required to have personal injury protection ("PIP") benefits for persons who sustain bodily injury as a result of an automobile accident regardless of negligence, liability or fault. N.J.S.A. 39:6A-4. The amount of such benefits may not exceed $250,000, and, in a change from what was previously required, may be offered in lesser amounts of $15,000, $50,000, $75,000 and $150,000 per person per accident. N.J.S.A. 39:6A-4.3. However, if the policy offers PIP benefits of less than $250,000, New Jersey law requires the insurer to provide the insured with a coverage selection form ("CSF") containing "a statement, clearly readable and in 12-point bold type, in a form approved by the commissioner, that election of any of the [lesser PIP] benefits options results in less coverage than the $250,000 medical expense benefits coverage mandated" by prior law. N.J.S.A. 39:6A-4.3.

N.J.S.A. 39:6A-4 provides in the relevant part as follows:

Except as provided by [N.J.S.A. 39:6A-3.3] [N.J.S.A. 39:6A-3.1], every standard automobile liability insurance policyissued or renewed . shall contain personal injury protection benefits for the payment of benefits without regard to negligence, liability or fault of any kind, to the named insured and members of his family residing in his household who sustain bodily injury as a result of an accident while occupying, entering into, alighting from or using an automobile, or as a pedestrian, caused by an automobile or by an object propelled by or from an automobile, and to other persons sustaining bodily injury while occupying, entering into, alighting from or using the automobile of the named insured, with permission of the named insured. "Personal injury protection coverage" means and includes:

a. Payment of medical expense benefits in accordance with a benefit plan provided in the policy and approved by the commissioner, for reasonable, necessary, and appropriate treatment and provision of services to persons sustaining bodily injury, in an amount not to exceed $250,000 per person per accident. . 39:6A-4.3 provides in the relevant part as follows:

With respect to personal injury protection coverage provided on an automobile in accordance with [N.J.S.A. 39:6A-4], the automobile insurer shall provide the following coverage options: ***

e. Medical expense benefits in amounts of $150,000, $75,000, $50,000 or $15,000 per person per accident; except that, medical expense benefits shall be paid in an amount not to exceed $250,000 for all medically necessary treatment of permanent or significant brain injury, spinal cord injury or disfigurement or for medically necessary treatment of other permanent or significant injuries rendered at a trauma center or acute care hospital immediately following the accident and until the patient is stable, no longer requires critical care and can be safely discharged or transferred to another facility in the judgment of the attending physician. The coverage election form shall contain a statement, clearly readable and in 12-point bold type, in a form approved by the commissioner, that election of any of the aforesaid medical expense benefits options results in less coverage than the $250,000 medical expense benefits coverage mandated prior to the effective date of P.L.1998, c. 21.

If none of the aforesaid medical expense benefits options is affirmatively chosen in writing, the policy shall provide $250,000 medical expense benefits coverage . .

The requirements of a CSF as well as certain other written notices are found in N.J.S.A. 39:6A-23. This statute requires that all policy applications be accompanied by a "buyer's guide," which must briefly describe all available policy coverages and benefits limits, identify which coverages are mandatory and optional under state law, identify the options offered by the insurer, and discuss the possible coordination of other health benefits coverages with the PIP coverage options. N.J.S.A. 39:6A-23. It also requires that the insurance application contain a CSF specifying the premium rate differences between the various coverages. Id. On the CSF the applicant is to indicate the options selected, then sign and return the CSF to the insurer. Id. N.J.S.A 39:6A-23 provides in the relevant part:

a. No new automobile insurance policy shall be issued . unless the application for the policy is accompanied by a written notice identifying and containing a buyer's guide and coverage selection form. The buyer's guide shall contain a brief description of all available policy coverages and benefit limits, and shall identify which coverages are mandatory and which are optional under State law, as well as all options offered by the insurer.

The buyer's guide shall also contain a statement on the possible coordination of other health benefits coverages with the personal injury protection coverage options, the form and contents of which shall be prescribed by the Commissioner of Insurance.

The coverage selection form shall identify the range of premium rate credit or dollar savings, or both, and shall provide any other information required by the commissioner by regulation.

The applicant shall indicate the options elected on the coverage selection form which shall be signed and returned to the insurer. ***

e. A properly completed and executed coverage selection form shall be prima facie evidence of the named insured's knowing ...


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