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Boyd v. Plymouth Rock Assurance Corp.

Superior Court of New Jersey, Appellate Division

May 28, 2013

JACOB BOYD, Individually and on behalf of a Class Similarly Situated, Plaintiff-Respondent,


Submitted May 14, 2013

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9959-11.

Skadden, Arps, Slate, Meagher & Flom, L.L.P., attorneys for appellants (Robert J. Del Tufo, of counsel and on the brief).

Nagel and Rice, L.L.P., attorneys for respondents (Bruce H. Nagel, of counsel and on the brief; Randee M. Matloff, on the brief).

Before Judges Reisner and Hoffman.


Defendant High Point Preferred Insurance Company (High Point)[1] appeals from a trial court order dated June 12, 2012, denying its motion to dismiss plaintiff Jacob Boyd's complaint and permitting Boyd to file an amended complaint, and from a September 28, 2012 order denying its motion for reconsideration.[2] For the reasons that follow, we reverse the orders on appeal and remand this matter to the Law Division for the limited purpose of entering an order enforcing arbitration.


Boyd filed a Class Action Complaint and Jury Demand against High Point, contending that the insurer had improperly reduced the available amount of his personal injury protection (PIP) benefits. Specifically, Boyd asserted that High Point improperly characterized as PIP benefits the administrative expenses that it paid to claims administrators, although those charges were not "medical expenses" as defined by N.J.S.A. 39:6A-2(e). Boyd claimed that, in his case, High Point had applied about $6600 in administrative costs against the "PIP ledger, " leading to the premature exhaustion of his PIP benefits. Boyd claimed that High Point's practice violated N.J.S.A. 39:6A-2(e), N.J.A.C. 11:3-28.6(a), and his insurance contract with High Point. He also sought to represent a class of insured persons who were or could in the future be affected by High Point's allegedly unlawful practice.

High Point filed a motion to dismiss the complaint pursuant to Rule 4:6-2(e). In support of the motion, High Point submitted a certification from its claims director attesting that Boyd had not exhausted the $250, 000 limits on his PIP benefits. High Point also submitted an authenticated copy of Boyd's insurance policy, which contained an arbitration clause.[3] The clause read as follows:

If we and any person seeking personal injury protection coverage . . . do not agree as to the recovery of personal injury protection coverage under this coverage, either party may submit the matter to dispute resolution in accordance with New Jersey Law or regulations.

The contract clause reflected the requirements of the Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1.1 to -35, which likewise provides for arbitration of PIP claims:

Any dispute regarding the recovery of medical expense benefits or other benefits provided under personal injury protection coverage . . . arising out of the operation, ownership, maintenance or use of an automobile may be submitted to dispute resolution on the initiative of any party to the dispute, as hereinafter provided.
[N.J.S.A. 39:6A-5.1(a); see also N.J.A.C. 11:3-5.6(a).]

In an oral opinion issued on June 12, 2012, the trial judge construed the word "may" in the contract and the statute as permitting, not requiring, arbitration. She interpreted the contract as providing "that either party may choose to arbitrate or go to Superior Court." She further stated:

The language of the contract is not mandatory. And the plaintiff has chosen to pursue a remedy in Superior Court for breach of contract. The contract permits it. Arbitration is not the exclusive remedy for resolution of PIP disputes that the law allows according to the statute and the insurance contract.

On July 12, 2012, plaintiff filed an amended complaint asserting that High Point had falsely advised Boyd that his PIP benefits were exhausted, when they were not. He contended that, as a result, he "interrupted his [medical] treatment" because he had no other health insurance. Boyd asserted that High Point had prematurely advised him that his PIP benefits were exhausted, when one of his medical providers filed an arbitration claim seeking payment of a bill for about $80, 000. He asserted that under N.J.S.A. 39:6A-4(a), the PIP limit could only be exhausted by High Point's actual payment of medical expense claims and not by the existence of claims that were pending but not yet paid. Boyd sought damages, counsel fees, and declaratory and injunctive relief.

High Point filed a motion for reconsideration, again asserting its right to arbitration of Boyd's claims and arguing that Boyd lacked standing because his PIP limits were not exhausted. The motion was denied. This appeal followed.


"[T]he interpretation of an insurance contract is a question of law which we decide independent of the trial court's conclusions." Simonetti v. Selective Ins. Co., 372 N.J.Super. 421, 428 (App. Div. 2004). Likewise, a trial court's interpretation of a statute is "not entitled to any special deference." See Manalapan Realty, L.P. v. Twp. Comm., 140 N.J. 366, 378 (1995). Therefore, because the trial court's decision was based on its construction of the arbitration clause contained in the insurance contract and its interpretation of an analogous section of AICRA, our review is de novo.

We conclude that the trial court's decision was erroneous, for several reasons. First, the trial court misconstrued the relevant section of AICRA, which provides that "[a]ny dispute regarding the recovery of medical expense benefits or other benefits provided under [PIP] coverage . . . may be submitted to dispute resolution on the initiative of any party to the dispute." N.J.S.A. 39:6A-5.1(a) (emphasis added). We interpreted that section in a seminal decision construing the then-recently enacted AICRA. Coal. for Quality Health Care v. N.J. Dep't of Banking & Ins., 348 N.J.Super. 272 (App. Div.), certif. denied, 174 N.J. 194 (2002).

In our decision, we began by reviewing the Legislature's previous unsuccessful efforts to reduce automobile insurance costs, including AICRA's predecessor, the Fair Automobile Insurance Reform Act (FAIRA), N.J.S.A. 17:33B-1 to -63. We recognized that AICRA represented the Legislature's most recent effort to reduce the cost of automobile insurance. In adopting AICRA, the Legislature "made further comprehensive changes to the no-fault automobile insurance laws in an effort to 'preserve the no-fault system, while at the same time reducing unnecessary costs' which had resulted in increased premiums." Id. at 283 (quoting N.J.S.A. 39:6A-1.1b). Part of that comprehensive revision included substantial revisions to "the process for resolving disputed PIP claims." Id. at 284. Thus, while FAIRA only gave the insured the right to demand arbitration of a PIP claim, AICRA extended that right to insurers as well.[4]

Against that historical backdrop, we concluded that the word "may" in N.J.S.A. 39:6A-5.1(a) was intended to give either party an absolute right to require that a PIP dispute be submitted to arbitration.

[T]he AICRA scheme permits not only the claimant, but any party to a PIP dispute to choose dispute resolution rather than a traditional Superior Court action. . . . Under the pre-AICRA scheme, a claimant's option to submit a PIP dispute to arbitration did not establish an immutable guarantee to be permitted to submit it instead to court. Insurers were merely precluded from depriving claimants of their arbitration option. That option remains in effect with the adoption of AICRA, but as part of the AICRA reforms a similar option is now extended to all parties to a PIP dispute. Just as an insurer was bound by the exercise pre-AICRA of a claimant, so too is a claimant now bound by the exercise of the option by an insurer. If neither party chooses to submit the dispute to dispute resolution, it may proceed in court.

[Coal. for Quality Health Care, supra, 348 N.J.Super. at 310-11 (emphasis added).]

Thus, contrary to the trial court's interpretation, the word "may" in N.J.S.A. 39:6A-5.1(a) does not imply that either party can require litigation of a PIP claim in court merely by winning the proverbial race to the courthouse. Rather, even if one party files a PIP complaint in Superior Court, the other party has a statutory right, under AICRA, to remove the matter to binding arbitration.

In two subsequent decisions, we recognized that arbitration is available upon the election of either the insured or the insurer, and we confirmed the breadth of the PIP-related issues that are appropriate for decision by the arbitrator. See State Farm Ins. Co. v. Sabato, 337 N.J.Super. 393, 396-97 (App. Div. 2001); Allstate Ins. Co. v. Sabato, 380 N.J.Super. 463, 469-70 (App. Div. 2005). Accordingly, we conclude that High Point had a statutory right to demand arbitration of Boyd's PIP complaint, and that right trumped Boyd's decision to file his complaint in Superior Court.

We also conclude that arbitration was required under the insurance contract. The contract language reflects the provisions of AICRA and should be construed, consistent with the statute, to give either party the right to demand arbitration of PIP disputes. Such an interpretation is also required by the Federal Arbitration Act (FAA), 9 U.S.C.A. §§ 1-16, which mandates the broad construction of contractual arbitration clauses.

Courts of Appeals have . . . consistently concluded that questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration. We agree. The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.

[Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765, 785 (1983).]

New Jersey law recognizes the same strong presumption in favor of arbitration. Curtis v. Cellco P'ship, 413 N.J.Super. 26, 34 (App. Div.), certif. denied, 203 N.J. 94 (2010).

Embracing the federal policy, New Jersey courts have recognized a "strong public policy favors 'arbitration as a means of dispute resolution' and requires 'liberal construction of contracts in favor of arbitration.'" "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay or a like defense to arbitrability." In determining whether a dispute falls within the scope of an arbitration clause, courts operate under a "'presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.'"
[EPIX Holdings Corp. v. Marsh & McLennan Companies, Inc., 410 N.J.Super. 453, 471 (App. Div. 2009) (citations omitted).]

We therefore conclude that the complaint should be dismissed and the matter submitted to binding arbitration.

Boyd's remaining appellate arguments are without sufficient merit to warrant discussion here. See R. 2:11-3(e)(1)(E). We add only the following comment. Boyd contends that he seeks to redress widespread problems, which can best be addressed by the courts through a class action. We are not persuaded. Boyd is bound by the arbitration clause in his insurance contract and, therefore, he cannot act as a class representative in Superior Court litigation on those issues. Further, none of the cases he cites support his right to circumvent the procedures set forth in the PIP statute by filing a class action lawsuit. See Open MRI & Imaging of Rochelle Park v. Mercury Ins. Group, 421 N.J.Super. 160, 167-68 (App. Div. 2011). On the other hand, nothing precludes Boyd or his attorneys from asking the Commissioner of Banking and Insurance to investigate their allegations concerning High Point's allegedly illegal practices. See Medical Soc'y of N.J. v. Amerihealth HMO, Inc., 376 N.J.Super. 48, 59 (App. Div. 2005) (noting that the Medical Society could request the Department to investigate asserted illegal conduct by an insurer).[5]

Reversed and remanded.

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