State Farm Indemnity Company v. National Liability & Fire Insurance Company

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5972-13T1
STATE FARM INDEMNITY
APPROVED FOR PUBLICATION
COMPANY,
March 4, 2015
Plaintiff-Respondent,
APPELLATE DIVISION
v.
NATIONAL LIABILITY & FIRE
INSURANCE COMPANY,
Defendant-Appellant.
_____________________________
Argued February 10, 2015 – Decided March 4, 2015
Before Judges Reisner, Haas and Higbee.
On appeal from Superior Court of New Jersey,
Law Division, Camden County, Docket No. L-
1846-14.
Michael Eatroff argued the cause for
appellant (Methfessel & Werbel, attorneys;
Mr. Eatroff, on the brief).
Suzanne E. Mayer argued the cause for
respondent (Newman & Andriuzzi, attorneys;
Ann Dee Lieberman and Ms. Mayer, on the
brief).
The opinion of the court was delivered by
REISNER, P.J.A.D.
This appeal concerns the interpretation of N.J.S.A. 39:6A-
11, which governs disputes between insurance companies over
contribution for personal injury protection (PIP) benefits.
Defendant National Liability & Fire Insurance Company (National)
appeals from a July 25, 2014 order compelling arbitration of a
contribution claim by plaintiff State Farm Indemnity Company
(State Farm). National contends that the trial court should
have determined whether it owed coverage to the accident victim,
before requiring that it proceed to arbitration over State
Farm's claim for contribution for PIP benefits State Farm paid
to the victim. Interpreting the statute in light of the clear
legislative purpose favoring arbitration of PIP disputes, and in
light of settled precedent, we affirm the trial court's ruling
that the entire dispute should be submitted to arbitration. We
also conclude that State Farm properly sought to enforce this
arbitration demand by filing an order to show cause pursuant to
Rule 4:67-1(a).
N.J.S.A. 39:6A-11 caps the total amount of PIP benefits
payable if multiple insurers owe PIP coverage to the same
accident victim, and it defines the method by which an insurer
that has paid the victim all of the PIP benefits due may recover
a pro-rata share from the other covering insurers. In one very
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long sentence, which we have slightly truncated to remove
irrelevant text, the statute reads as follows:
If two or more insurers are liable to pay
[PIP] benefits . . . for the same bodily
injury, or death, of any one person, the
maximum amount payable shall be as specified
in [N.J.S.A. 39:6A-4 and 39:6A-10],
[N.J.S.A. 39:6A-3.1] and [N.J.S.A. 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.]
To put the dispute over this provision in context, William
Jean was struck by a car while riding a bicycle. William1 had no
auto insurance, but would be entitled to PIP coverage under the
policy of a family member with whom he resided.2 See N.J.S.A.
39:6A-4, -4.2. According to State Farm, William was a resident
relative of both his father, Hertelou Jean, who had a policy
with State Farm, and his cousin, Andre Beldor, who had a policy
with National. State Farm paid the PIP benefits due to William,
and then sought contribution from National. After National
1
Since William and his father have the same last name, we refer
to William by his first name.
2
The parties agree with that legal proposition which, therefore,
requires no further discussion.
3 A-5972-13T1
refused to contribute, State Farm filed a summary action in the
Law Division to compel arbitration under N.J.S.A. 39:6A-11.
National denied that William and his cousin lived in the
same household at the time of the accident, and argued that the
trial court should resolve that factual issue, which would
determine coverage, before sending the contribution dispute to
arbitration. The trial court disagreed, concluding that the
arbitrator should decide all issues pertinent to the
contribution dispute, including whether William was covered for
PIP benefits under the National policy.
On this appeal, National repeats its argument that the
issue of coverage must be decided by the court. Parsing the
language of the statute as though the two halves of the sentence
were essentially unrelated, National contends that arbitration
is only required "if two or more insurers are liable to pay
benefits." N.J.S.A. 39:6A-11. Hence, National argues, the
determination of coverage is a prerequisite to the obligation to
arbitrate, and must be decided by the court. Relying on
O'Connell v. New Jersey Manufacturers Insurance Co., 306 N.J.
Super. 166, 172-73 (App. Div. 1997), appeal dismissed, 157 N.J.
537 (1998), National argues that, as a general principle, courts
should decide coverage issues before submitting other insurance-
related disputes to arbitration. National further urges that
4 A-5972-13T1
"residency" can be a complex legal and factual issue that
arbitrators are not qualified to decide.
State Farm responds that O'Connell is not on point because
it involved construction of an insurance contract, not a
statute. State Farm relies on State Farm Insurance Co. v.
Sabato, 337 N.J. Super. 393, 394 (App. Div. 2001), where the
court, construing the no-fault statute, N.J.S.A. 39:6A-1.1 to
-35, held that coverage was to be decided by the arbitrator.
State Farm also contends that an arbitrator can readily decide
the "resident relative" issue, and that arbitration of all
issues is consistent with the purpose of N.J.S.A. 39:6A-11. See
State Farm Mut. Auto. Ins. Co. v. Molino, 289 N.J. Super. 406,
411 (App. Div. 1996). We find State Farm's arguments
persuasive.
Our courts have acknowledged that "transactional
efficiency" is the "legislative grail" of our State's no-fault
auto insurance system. Rutgers Cas. Ins. Co. v. Ohio Cas. Ins.
Co., 299 N.J. Super. 249, 263 (App. Div. 1997), aff'd o.b., 153
N.J. 205 (1998); see also Coalition for Quality Health Care v.
N.J. Dep't of Banking & Ins., 348 N.J. Super. 272, 311 (App.
Div.), certif. denied, 174 N.J. 194 (2002). To that end,
arbitration requirements in the statute are broadly construed in
favor of the submission of all issues to arbitration rather than
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in favor of bifurcating issues between the courts and
arbitration. See Molino, supra, 289 N.J. Super. at 409-11.
In Ideal Mutual Insurance Co. v. Royal Globe Insurance Co.,
211 N.J. Super. 336, 338 (App. Div. 1986), this court addressed
a dispute between two insurers over whether a claim for inter-
company arbitration was barred by the statute of limitations.
We pointedly observed that that dispute itself belonged in
arbitration:
Overlooked by plaintiff is the fact that
this enactment [N.J.S.A. 39:6A-11]
specifically provides that the right to
recovery of contribution may be enforced
"only by inter-company arbitration or inter-
company agreement. . . ." (Emphasis ours).
Where an act is plain and unambiguous
in its terms there is no room for judicial
construction since the language employed is
presumed to evince the legislative intent.
The purpose of a provision requiring inter-
company arbitration is "[t]o reduce the
burden of litigation in the courts. . . ."
In construing provisions of the New Jersey
Automobile Reparation Reform Act, N.J.S.A.
39:6A-1, et seq., our Supreme Court has
favorably noted "approaches which minimize
resort to the judicial process. . . ." That
New Jersey courts are precluded by statute
from determining liability among insurers
and that such issue must be resolved in this
State by arbitration or inter-company
agreement has been elsewhere noted.
[Id. at 339 (citations omitted).]
After noting that "the statute permits of no way to
determine whether plaintiff's right to relief is time-barred
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except in terms of equitable principles applicable to
arbitration," we decided the limitations issue only to avoid
"additional delay and expenditure of resources" in that case.
Id. at 340. However, the interpretation of N.J.S.A. 39:6A-11 in
Ideal Mutual is unmistakably clear. All disputes between
insurance companies arising under that provision are to be
decided by an arbitrator.
Moreover, in construing other arbitration provisions in the
same statute, our courts have clearly held that "coverage issues
are to be decided by the arbitrator in the same manner as issues
dealing with the extent of injury and the amount of recovery."
Sabato, supra, 337 N.J. Super. at 396-97 (citing Molino, supra,289 N.J. Super. at 410-11). We specifically disapproved efforts
by insurers "'to avoid arbitration simply by characterizing PIP
disputes as questions of . . . "coverage" and then seeking
judicial resolution of those issues.'" Id. at 397 (quoting
Molino, supra, 289 N.J. Super. at 411). We reach the same
conclusion here.
Defendant argues that "residency" is too complex an issue
for an arbitrator to decide. We disagree. The issue is no more
complex than the issues presented in Ideal Mutual or Sabato, and
may be as simple as deciding, factually, whether William and
Beldor lived under the same roof at the time of the accident.
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See Molino, supra, 289 N.J. Super. at 411. Defendant's
additional arguments on the arbitration issue are without
sufficient merit to warrant discussion in a written opinion. R.
2:11-3(e)(1)(E).
Defendant also argues that no rule or statute permitted
plaintiff to proceed summarily by order to show cause under Rule
4:67-1(a), which authorizes that procedure in "all actions in
which the court is permitted by rule or by statute to proceed in
a summary manner." We acknowledge that two other statutes
providing for arbitration — the Alternative Procedure for
Dispute Resolution Act (APDRA), N.J.S.A. 2A:23A-4, and the
Uniform Arbitration Act, N.J.S.A. 2A:23B-7 – specifically
authorize summary actions to enforce arbitration agreements.
See Kimba Med. Supply v. Allstate Ins Co. of N.J., 431 N.J.
Super. 463, 468 (App. Div. 2013) (noting, in another context,
that Department of Banking and Insurance regulations governing
PIP arbitrations "incorporated aspects of the APDRA"). However,
focusing on the no-fault auto insurance statute, with its
emphasis on the expeditious resolution of PIP disputes by
arbitration, we find that a summary action under Rule 4:67-1(a)
was also appropriate here. Because the only cognizable issue
before the court was whether defendant had refused plaintiff's
demand for inter-company arbitration, this dispute was ideally
8 A-5972-13T1
suited for summary treatment. See Ideal Mutual, supra, 211 N.J.
Super. at 339. While N.J.S.A. 39:6A-11 does not specifically
address the issue, we infer that a summary action is what the
Legislature would have intended.
By analogy with Rutgers Casualty Insurance Co. v. Vassos,
139 N.J. 163, 175 (1995), which held that Longworth3 disputes
with UIM insurers should be promptly resolved by order to show
cause, we conclude that refusals to arbitrate under N.J.S.A.
39:6A-11 should likewise be resolved by order to show cause.
Although N.J.S.A. 39:6A-11 does not specifically so provide, it
is implicit in the legislative purpose of the statute that an
action to enforce inter-company arbitration should be pursued by
3
Longworth v. Van Houten, 223 N.J. Super. 174 (App. Div. 1988),
sets forth the procedures to be followed when an accident victim
wishes to settle with an underinsured tortfeasor and still
maintain the right to pursue an underinsured motorist (UIM)
claim against the victim's own insurer. Approving that
procedure, Rutgers held: "If the insurer does not respond
within the time allotted for rejection of the award or
settlement offer, the insured victim may, consistent with
Longworth, supra, move for a declaratory ruling on order to show
cause concerning the parties' rights and responsibilities."
Rutgers, supra, 139 N.J. at 175. The Court approved that
procedure, although not specifically authorized by Rule 4:67-
1(a), because of the need for expeditious resolution of the
UIM/settlement issues. Ibid.9 A-5972-13T1
the most expeditious and efficient possible means, which in this
case is a summary action filed under Rule 4:67-1(a).4
Affirmed.
4
We emphasize that our holding is limited to the enforcement of
arbitration demands under N.J.S.A. 39:6A-11, and should not be
over-read to extend to disputes arising outside of the no-fault
statute.
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