This is a basic primer on New Jersey law as pertaining to
recovery of no-fault
(AKA "PIP") payments. It by no means covers all the intricacies of
New Jersey law, and therefore should be used as reference only. Some
issues of law may be
mentioned more than once on this page, where we felt the issue belongs
under more than one heading. This document is provided as a reference guide only and is provided subject
to this disclaimer. This page is current as of December 27, 2018. If you have been here before and want to look for newly added information please see the update log below.
Click on individual terms to see how they are defined in New Jersey PIP
Law or to access further discussion of a particular issue (note that
many of the definitions and discussions will come up in the frame at the
bottom of the page). The best way to view this guide is to browse
the table of contents in the top frame. Click on the subject of
interest, and you will see the discussion in the bottom frame.CLICK HERE IF YOU DO NOT SEE THE BOTTOM FRAME Note that some terms are left undefined,
either because the definitions are intuitive, or because they are beyond the scope of this guide.
OVERVIEW (see "Contents" below for links to each topic and their subtopics):
N.J.S.A. 39:6A-9.1: Recovery of PIP from certain torfeasors, statute of limitations, arbitration requirement.
RECENT DEVELOPMENTS IN NEW JERSEY PIP LAW AND OTHER INSURANCE/SUBROGATION LAWS OF INTEREST
Updated April 8, 2019: New Jersey Supreme Court decided in Haines v. Taft that an injured party who carries a PIP policy covering less than $250,000 in medical expenses cannot sue for medical expenses that are not covered by the lower PIP limit, although its ruling may only apply to an injured party who is subject to and doesn't meet verbal threshold. The Haines case is discussed here.
Updated December 12, 2018: New Jersey Superior Court Appellate Division holds that worker's compensation carriers paying benefits in a motor vehicle accident are not subject to any limitations on subrogation based on the no-fault law, including the verbal threshold or statutory restrictions on recovering amounts that could have been coverd by no-fault (PIP)benefits. See disccussion here.
Updated November 20, 2018: New Jersey Superior Court Appellate Division holds (in an unpublished decision) that an ATV is not an "automobile" and therefore a person injured on on an ATV is not entilted to PIP benefits (this also means that the operator of an ATV will be subject to PIP reimbursement claims). See discussion at the bottom of our discussion on the definition of an automobile.
Updated June 25, 2018: New Jersey Legislature considers bill that would specify that Plaintiffs who have PIP policies with less than $250,000 in coverage can sue for medical bills that exceed the injured party's lesser coverage. See discussion here.
Updated February 7, 2018: New Jersey Supreme Court granted certification (i.e. will hear an appeal on) Haines v. Taft, which is discussed here.
Updated July 7, 2017: Appellate Division rules in the published opinion of Haines v. Taft that an injured party with a $15,000 standard PIP policy may sue for medical bills in excess of that PIP coverage. Discussion here.
Added April 15, 2016: NJPLIGA phasing out its coverage of PIP for pedestrians struck by non-automobiles, leaving that coverage to the non-automobile's carrier. See discussion here.
Added April 14, 2016: Appellate Division (unpublished opinion) holds that where the insured submitted a generic PIP application and then, some time later, filed the specific PIP application form requested by the insurer, it is the latter form that triggers the SOL for PIP reimbursement. See discussion below here and further discussion including a link to the court's decision here.
Added March 4, 2016: Appellate Division (unpublished opinion) holds that receipt of the PIP application triggers the statute of limitations for PIP reimbursement even where the insurer did not request the application but requested other documentation for the PIP claim. See discussion below here and further discussion including a link to the court's decision here.
Added March 31, 2015: Appellate Division finds that coverage questions related to pro-rata claims under N.J.S.A. 39:6A-11 are subject to arbitration. See discussion below.
Added December 27, 2017: Added reference in the discussion on the "Deemer" statute regarding GEICO v. Allstate Ins. Co., 358 N.J.Super. 555 (App. Div. 2003) indicating that if an insurer is not authorized to transact any insurance in New Jersey it is not subject to "deemer" even if it is related another insurer that writes issurance (even automobile insurance) in New Jersey.
Added December 27, 2017: Added reference to AAA Midatlantic v. Prudential to Discussion of when certain legal disputes between insurance carriers related to recovery rights under N.J.S.A. 39:6A-9.1 (at-fault recovery) and N.J.S.A. 39:6A-11 (pro-rata recovery) may be litigated despite the arbitration requirements of those statutes.
Added December 26, 2018: Discussion of arguments in favor of subrogation of Medpay benefits to the section discussing subrogation of Medpay.
Added December 12, 2018: Discussion of New Jersey Transit Corp v. Sanchez wherein the New Jersey Superior Court Appellate Division held that worker's compensation carriers paying benefits in a motor vehicle accident are not subject to any limitations on subrogation based on the no-fault law, including the verbal threshold or statutory restrictions on recovering amounts that could have been coverd by no-fault (PIP)benefits. See See full article on this subject here and general discussion of verbal threshold below.
Added November 21, 2018: Brief note regarding the possibility of choice of law overriding New Jersey's collateral source rule to allow certain subrogation by e.g. health care and occupational accident policies. See discussion here.
Added November 20, 2018: Discssion of ATVs and dune buggies not being "automobiles," so that a person injured in/on one of these vehicles is not entilted to PIP benefits and the operator of such vehicles will be subject to PIP reimbursement claims. See discussion at the bottom of our discussion on the definition of an automobile.
Updated October 9, 2018: Added a note to the discussion of out of state vehicles that although out of state vehicles that are not subject to the New Jersey "deemer" statute do not have recovery rights under N.J.S.A. 39:6A-9.1, they may be able to make subrogation claims for out-of-state PIP benefits based on choice of law analysis.
Added June 25, 2018: Discussion of New Jersey Legislature's consideration of a bill that would specify that Plaintiffs who have PIP policies with less than $250,000 in coverage can sue for medical bills that exceed the injured party's lesser coverage. See discussion here.
Added May 2, 2018: Reference to the relationship between verbal threshold and workers' compensation subrogation claims in the section on verbal threshold and an article about the issues (and a recent legal victory by Law Offices of Jan Meyer and Associates, P.C. concerning this issue).
Updated February 7, 2018: Noted that the New Jersey Supreme Court granted certification (i.e. will hear an appeal on) Haines v. Taft, which is discussed here.
Updated July 7, 2017:Updated discussion of whether an injured party with minimal PIP coverage may recover uncompensated medical costs from a tortfeasor to reflect the recent published opinion of Haines v. Taft that an injured party with a $15,000 standard PIP policy may sue for medical bills in excess of that PIP coverage.
Added July 7, 2017: Added note regarding Lambert b. Travelers holding that where a worker's compensation carrier pays claims that would otherwise be coverd by PIP, the compensation carrier has the subrogation rights arforded by the worker's compensation statute to the discussion of N.J.S.A. 39:6A-6.
Added June 7, 2016: Added note in discussion of ERISA preemption of New Jersey's collateral source rule and administrative code preventing health care policies from subrogating
to Roche v. Aetna, Inc., 2016 U.S. Dist. LEXIS 25208, 21-22 (D.N.J. Mar. 1, 2016) providing further indication that the New Jersey Administrative Code will prevent fully-insured ERISA health care plans from enforcing subrogation language in the plans.
Added May 16, 2016: Added further discussion to section on verbal threshold including the requirements for a plaintiff to be subject to verbal threshold, a reference to pedestrians injured by automobiles, and a reference to policies which, by their own language, "step up" to New Jersey insurance requirements in NJ accidents but are not statutorily required to do so (these vehicles are not entitled to a threshold defense). Added similar reference to policies that "step up" in the discussion of PIP reimbursement claims against out of state vehicles.
Added May 6, 2016: Added discussion of recovery of PIP income continuation benefits (or reduction of available PIP benefits) from state mandated disability benefits to the discussion of N.J.S.A. 39:6A-6. A reference to this was also added to our Quick Guide to New Jersey PIP Recovery
Added April 15, 2016: Added discussion of NJPLIGA phasing out its coverage of PIP for pedestrians struck by non-automobiles. See discussion here.
Added April 14, 2016: Discussion of Appellate Division (unpublished opinion) holding that where the insured submitted a generic PIP application and then, some time later, filed the specific PIP application form requested by the insurer, it is the latter form that triggers the SOL for PIP reimbursement. See discussion below here and further discussion including a link to the court's decision here.
Added March 4, 2016: Discussion of Appellate Division (unpublished opinion) holding that the receipt of the PIP application triggers the statute of limitations for PIP reimbursement even where the insurer did not request the application but requested other documentation for the PIP claim. See discussion below here and further discussion including a link to the court's decision here.
January 6, 2016: Added discussion of whether the rules of comparative negligence and modified joint and several liability apply to PIP reimbursement claims.
December 1, 2015: Added discussion of today's New Jersey Supreme Court decision in Demarco v. Stoddard to the discussion of automobile coverages that must be afforded to "innocent third parties" where coverage is denied/rescinded, noting that a malpractice carrier rescinding its policy for misrepresentation does not need to provide state minimum coverage to innocent third parties.
August 13, 2015: Added discussion of today's New Jersey Supreme Court decision in Cure v. Perez to the discussion of which "state minimum" coverages must be afforded to "innocent third parties" where coverage is denied/rescinded, including discussion of the case's implications for whether the innocent third party's insurer may take advantage of the fact that the tortfeasor's insurer must provide minimum coverage.
Added July 29, 2015: Added discussion of the fact that an insured's filing of a bodily injury claim does not satisfy the statute of limitations for a PIP reimbursement claim. See discussion here and background here.
Added March 31, 2015:Discussion of when certain legal disputes between insurance carriers related to recovery rights under N.J.S.A. 39:6A-9.1 (at-fault recovery) and N.J.S.A. 39:6A-11 (pro-rata recovery) may be litigated despite the arbitration requirements of those statutes.
Added March 31, 2015: Discussion of whether vehicles used for services such as Uber and Lyft should be considered "automobile"s for New Jersey PIP law added to the the page discussing the definition of "automobile."
Added March 24, 2015: Further clarification of ERISA preemption of New Jersey's collateral source rule and administrative code preventing health care policies from subrogating (see last paragraph of this section).
Added February 7, 2015:Updated discussion of whether an injured party with minimal PIP coverage may recover uncompensated medical costs from a tortfeasor to reflect recent unpublished appellate cases that touch upon the subject.
Added January 23, 2015:Discussion of whether David v. GEICO's holding that attorneys fees for pursuing PIP reimbursement cannot be recovered should be revisted.
Added January 15, 2015: Added discussion of exactly which "state minimum" coverages must be afforded to "innocent third parties" where coverage is denied/rescinded. Added reference to "basic" and "special" policies in section on minimum insurance requirements.
Added January 12, 2015: Further discussion of Country-Wide Ins. Co. v. Allstate Ins. Co., 336 N.J. Super. 484, 491-92 (App.Div.) certif. den. 168 N.J. 293
(2001) as it relates to pro-rata sharing of PIP payments and the applicability of standard policy exclusions to policies deemed to conform to New Jersey law.
a. An insurer, health maintenance organization or governmental agency paying benefits pursuant to subsection a., b. or d. of section 13 of P.L.1983, c. 362 (C.39:6A-4.3), personal injury protection benefits in accordance with section 4 or section 10 of P.L.1972, c. 70 (C.39:6A-4 or 39:6A-10) , medical expense benefits pursuant to section 4 of P.L.1998, c. 21 (C.39:6A-3.1) or benefits pursuant to section 45 of P.L.2003, c.89 (C.39:6A-3.3), as a result of an accident occurring within this State, shall, within
two years of the filing of the claim, have the right to recover the
amount of payments from any tortfeasor who was not, at the time of the
accident, required to maintain personal injury protection or medical
expense benefits coverage, other than for pedestrians, under the laws of this State, including personal injury protection coverage required to be provided in accordance with section 18 of P.L.1985, c. 520 (C.17:28-1.4), or although required did not maintain personal injury protection or medical expense benefits coverage at the time of the accident.
b. In the case of an accident occurring in this State involving an insured tortfeasor, the determination as to whether an insurer, health maintenance organization or governmental agency is legally entitled to recover the amount of payments and the amount of recovery, including the costs of processing benefit claims and enforcing rights granted under this section, shall be made against the insurer of the tortfeasor, and shall be by agreement of the involved parties or, upon failing to agree, by arbitration. Any recovery by an insurer, health maintenance organization or governmental agency pursuant to this subsection shall be subject to any claim against the insured tortfeasor's insurer by the injured party and shall be paid only after satisfaction of that claim, up to the limits of the insured tortfeasor's motor vehicle or other liability insurance policy.
Private passenger automobiles (this includes minivans and SUVs)
as long as they are not used as a livery (e.g. taxi) or rented with a driver. Note that in determining whether a private passenger vehicle is a livery or rented with a driver, we look at the general use of the vehicle, not its specific use at the time of the accident. Bello v. Hurley Limousines, 249 N.J. Super. 31, 37 (App. Div. 1991). NB: These vehicles are "automobile"s even if they are used commercially.
Pickup trucks, vans (which means large vans used for cargo or large
numbers of people and therefore typically used by business rather than
families), etc. only if they are used for recreational purposes
and owned by an individual or husband and wife and are not generally
used for work (other than farm work).
for relevant statutory text, case law references, and further
information regarding whether a vehicle is an "automobile" required to
carry PIP and therefore exempt from PIP recovery if it carries PIP.
What is a "motor bus?": Under N.J.S.A. 17:28-1.6, vehicles meeting the definition of a "motor bus" must carry "Medical Expense Benefits Coverage" (MEB, also known as "Bus PIP"). MEB is basically the same coverage as PIP. Coach USA, Inc. v. Allstate New Jersey Ins. Co.,
354 N.J.Super. 277 (App.Div. 2002), certif. den,, 175
N.J. 170 (2002) interpreted N.J.S.A. 39:6A-9.1 as
insulating any bus carrying MEB from recovery of PIP. Based on Coach USA and Park v. Park,
309 N.J. Super. 312 (App.Div. 1998), it can safely be presumed that a
bus required to carry MEB (either because they have a New Jersey MEB
policy, or because they are "deemed" to have new Jersey coverage) will be treated the same as any "automobile" under 39:6A-9.1.
Determining whether a bus is required to have MEB can be tricky A fairly good rule of thumb is provided by
Nebinger v. Maryland Cas. Co. 312 N.J. Super. 400 ( App. Div. 1998), which states:
From the language of the statute and its legislative
history it is clear that the Legislature intended to mandate MEB
coverage primarily for the protection of passengers of commercial buses
which operate regular routes as well as charter buses. In other words,
situations where the user of a motor bus pays a fee or fare for the
transportation itself, rather than situations where the user pays a fee
for a different kind of service which includes transportation thereto. .
We also note that the exception to the definition of "motor bus" in
N.J.S.A. 17:28-1.5 excludes hotel-to-airport buses, as well as school,
camps, and day care, buses. These arrangements are akin to the Senior
Care arrangement where clients do not pay a transportation fare. Rather,
they pay a weekly fee for multiple services including
Thus, as a general rule, charter buses and buses operating on a
certain route where a fee is charged for the transportation (i.e. the
transportation is not provided as part of another service) will require
PIP and will be exempt from PIP recovery if they do so. Other buses
(school buses, hotel buses, etc.) will not have to carry PIP and will be
subject to recovery of PIP if they are the tortfeasor.
for relevant statutory text, case law references, and further
information regarding whether a vehicle is an "motor bus" required to
carry PIP and therefore exempt from PIP recovery if it carries PIP.
Out of state vehicles subject to "deemer"
will be treated the same as in-state vehicles, both to have a right to
recover their PIP and to be insulated from recovery of PIP. Out of
state vehicles not subject to deemer will be liable for recovery and
will have no right of recovery under the NJ PIP reimbursement statute (but consider choice of law analysis). The "deemer"
statute (N.J.S.A. 17:28-1.4) requires the insurer of certain vehicles
from outside of New Jersey to pay New Jersey PIP (or Bus-PIP) benefits
to insured parties when an accident occurs in New Jersey. N.J.S.A.
39:6A-9.1 allows recovery of PIP from vehicles not required to carry
PIP. Among the type of vehicles required to carry PIP (and therefore
not subject to PIP recovery, N.J.S.A. 39:6A-9.1, states "including
personal injury protection coverage required to be provided in
accordance with . . . . (C.17:28-1.4)." Therefore, if a vehicle is
subject to "deemer", then if the insurer pays PIP benefits, it will have
the same rights of recovery as a New Jersey vehicle would (i.e. PIP
could be recovered from a tortfeasor not required to carry PIP or not in
fact carrying PIP). Also, if an at-fault out-of-state vehicle is "deemed" to carry PIP, it will not be subject to PIP recovery. On the other hand, if the out-of-state vehicle is not subject to deemer, it will have neither the protections nor the recovery rights found in 39:6A-9.1 (though arguably it may be able to apply its home state's subrogation laws under choice-of-law analysis).
Following is a selection of cases discussing the relationship between
"deemer" and 39:6A-9.1:
Park v. Park, 309 N.J. Super. 312 (App.Div. 1998). Out of
state buses paying PIP under deemer can recover from tortfeasors not
required to carry PIP. Park recognizes that where N.J.S.A.
39:6A-9.1 allows recovery to an insurer paying "personal injury
protection benefits in accordance with" 39:6A-4 (the PIP requirement
statute), it includes not only PIP paid on vehicles garaged in New
Jersey and therefore directly subject to 39:6A-4, but to PIP paid on
vehicles subject to the requirements of 39:6A-4 by way of deemer.
David v. Government Employees Ins. Co., 360 N.J.Super. 127 (App. Div.), certif. denied 178 N.J. 251 (2003). Out of state vehicles not subject to "deemer" are liable for PIP recovery. SeefurtherGovernment Employees Ins. Co. v. Allstate Ins. Co., 358 N.J.Super. 555 (App. Div. 2003)(Insurer paying
PIP under the mistaken impression it was subject to deemer was still liable for PIP reimbursement). Presumably, even if the tortfeasor's policy includes a provision that requires it to conform to New Jersey insurance requirements for accidents ocurring in New Jersey, the vehicle will still be subject to a PIP reimbursement claim unless it is subject to deemer. SeeLoftus-Smith v. Henry, 286 N.J. Super. 477, 486-487 (App.Div. 1996)(Regarding verbal threshold).
Liberty Mut. Ins. V. Thomson, 385 N.J. Super. 240 (App. Div. 2006): No recovery of PIP from out of state vehicle required to provide PIP pursuant to "deemer." Thus, if an out-of-state vehicle is of a type that would require PIP in New Jersey (see discussion of which vehicles require PIP above) is in an accident in New Jersey, and its insurer is subject to dememer, the insurer must provide PIP benefits for its vehicle, and is immune from PIP recovery if it is the at-fault vehicle.
Statute of Limitations is two years from the date of the filing of the PIP claim. In presenting the right to recover PIP from a tortfeasor who was not
required to and/or did not carry PIP, N.J.S.A. 39:6A-9.1 says that the
PIP carrier shall, "within two years of the filing of the claim, have
the right to recover . . ." In New Jersey Manufacturers Ins. v. Holger Trucking Corp.,
417 N.J. Super. 393 (App. Div. 2011), the Appellate Division held that the
"filing of the claim" means the receipt, by the insurer, of the formal
PIP application/claim form, even where the insurer had previously opened
a file, assigned it a claim number, received medical bills and
treatment plans and had had approved a treatment plan. Click here for further analysis of Holger as well a discussion of other cases based on Holger. This means that proper action must be taken within two years of when the insured filed the PIP claim. New Jersey Automobile Full Insurance Underwriting Association v. Liberty Mutual Insurance Co., 270 N.J. Super. 49 (App.Div. 1994). Some interesting unpublished (and therefore non-precedential) cases have further clarified Holger's meaning.
In Drive N.J. v. Sofield, A-1989-14T4 (March 4, 2016)(and appellate victory for LOJM), the Appellate Division held that receipt of the PIP application triggers the SOL even where the insurer did not request the application but requested other documentation for the PIP claim. See further discussion (including a link to the court decision) here.
In Abdulai v. Casabona, A-3855-14T1 (April 6, 2016), the Appellate Division held that where the insured submitted a generic PIP application and then, some time later, filed the specific PIP application form requested by the insurer, it is the latter form that triggers the SOL, as long as there was not excessive delay by the insurer in requesting its own form be submitted. See further discussion and link to the decision at here.
Satisfying the SOL against an insured tortfeasor:
Where the right of recovery is against an insured tortfeasor, the
statute specifies that recovery, "shall be made against the insurer of
the tortfeasor, and shall be by agreement of the involved parties or,
upon failing to agree, by arbitration."
There is a strong argument to be made that the principles of comparative negligence and modified joint and several liability do not apply to a PIP reimbursement claim and that a tortfeasor who contributed, even only minimally, to an accident is liable for 100% of a PIP reimbursement claim if that tortfeasor is the only tortfeasor subject to a PIP reimbursement claim. Both the comparative neglience rule and the modified joint and several liability rules are based on statutes addressing apportionment of fault between parties at trial. When a finder of facts apportions fault, it generally can only do so towards parties to the case. SeeN.J.S.A 2A:15-5.2. Note, importantly, that, as discussed above, PIP reimbursement claims are not subrogation claims and the insurer does not "stand in the shoes" of its insured, and hence, the insured is not a party to the litigation. In addition, the insured, as a person receiving PIP, is by definition, not liable for PIP reimbursement claims.
The New Jersey Supreme Court's recent decision in Krzykalski v. Tindall, 232 N.J. 525 (2018)(discussed further here) clarified to whom fault may be apportioned in New Jersey law. The Court noted that when a jury apportions fault it should generally include unknown parties, parties lacking sufficient assets, and parties who would not be required to satisfy a judgment, but not parties that are immune from liability (examples in next paragraph).
When other parties that are arguably "to blame" for an accident are immune from liability and therefore don't "make the jury sheet," the remaining liable party or parties are liable for 100% of the damages even if they are only minimally "to blame." Thus, in Bencivenga v. J.J.A.M.M., Inc., where a bar was sued by a patron who was punched by an unknown patron, the bar was not allowed to allocate fault to the unknown patron and thus was 100% liable for the damages (Krzykalski states that it was significant that the bar was in a better position to identify the unknown assailant). 258 N.J. Super. 399, 406-08 (App.Div. 1992). Similarly, where an employee is injured through the negligence of his/her employer (who is immune from suit under the Workers Compensation law) and other tortfeasor(s), the jury may not consider the negligence of the employer, and the other tortfeasor(s) may be held liable for the entire damages even based on a minimal percentage of fault. Seee.g.Ramos v. Browning Ferris Industries, Inc., 103 N.J. 177 (1986)(Tortfeasor who was 5% at fault was liable for 100% of damages even though injured party's employer was 95% at fault), and Stephenson v. R.A. Jones & Co., 103 N.J. 194 (1986), compare cases allowing apportionment of fault to parties that, though not legally immune could not be required to satisfy a judgment, e.g. Krzykalski (unknown vehicle involved in an accident), Jones v. Morey's Pier, Inc., 230 N.J. 142, 165 (2017)(public entities dismissed from a case because a tort claims notice had not been filed), Town of Kearny v. Brandt, 214 N.J. 101 (2013)(defendant dismissed on Statute of Repose grounds), Brodsky v. Grinnell Haulers, Inc., 181 N.J. 102 (2004)(defenadant dismissed due to discharge in bankruptcy), Burt v. W.Jersey Health Sys., 339 N.J. Super. 296, 305 (App. Div. 2001) cited with approval inKrzykalski (Doctor whose malpractice claim was dismissed for failure to properly file an affidavit of merit), and Cartel Capital Corp. v. Fireco of N.J., 81 N.J. 548, 569 (1980)(parties that settled with the Plaintiff).
Arguments could be raised in favor or opposed to applying these rules to PIP reimbursement claims. On the one hand, one could argue that N.J.S.A. 39:6A-9.1 is meant to mimic a subrogation claim, which would be subject to reduction based on the liability of the insured and other at-fault parties. On the other hand, the statute deliberately makes certain tortfeasors liable for PIP reimbursement claims and immunizes anyone entitled to PIP benefits from PIP reimbursement claims. Furthermore, the statute is designed to shift costs from PIP carriers on to liability insurance carriers, a goal that would be supported by having liability carriers fully reimburse PIP carriers any time the liability carrier's insured contributed to the PIP claim.
Though no published cases have addressed the applicability of these rules to a PIP reimbursement claim, in the unpublished case of IFA Insurance Company v. American Trucking & Transportation Insurance Company, A-1845-09T2 (App. Div. Mar. 22, 2011)(available online from Justia here - opens in new tab), an arbitrator refused to assess comparative negligence of the injured party, saying that comparative negligence does not apply in PIP recovery. The appellate division upheld the decision. Despite the injured party being partially at fault, the PIP insurer recovered 100% from the other at-fault party.
Further, the Collateral Source Rule, N.J.S.A. 2A:15-97,
which prohibits recovery in personal injury actions of amounts "plaintiff receives or is entitled to receive . . . for the injuries allegedly incurred from any other source other than a joint tortfeasor,"
has been interpreted by Perreira v. Rediger, 169 N.J. 399 (2001)(unanimous) to prohibit subrogation claims to recover medical bills which are covered by insurance (with certain exceptions,see discussion below). Thus, subrogation recovery of Medpay benefits is probably prohibited, and insurance regulations permitting subrogation and lien clauses for medpay are probably invalid as they are violate N.J.S.A. 2A:15-97. Seefurtherthe discussion of N.J.S.A. 2A:15-97 below, the unreported (and therefore non-precedential) Law Division case of Mid-Century v. Freeman (MID-L -3753-15, May 16, 2016) available here holding that Medpay cannot be recovered, and the unreported (and therefore non-precedential) Appellate Division case of Walsh v. Starr Transit (a4340-06 January 14, 2008), indicating that N.J.S.A. 2A:15-97 applies to medpay and prohibits recovery of medpay (note that the parties to the case did not debate this issue).
The argument in favor of subrogation of Medpay: Medpay subrogation was clearly permitted prior to the passage of the collateral source statute (N.J.S.A. 2A:15-97). NJ Circular Letter Automobile No. 9 (February 22, 1973) ("Medical payments coverage with a minimum of $1,000 per person must be supplied and will be excess over other collectible insurance, including PIP benefits, and will be subrogable."). As a general rule, a court will "accord a high degree of deference to administration agency regulations that are consistent with the statues and public policy of the state." Perreira v. Rediger, 169 N.J. 399, 415-416, 439, 778 A.2d 429, quotingParkway Ins. Co. v. New Jersey Neck & Back, 330 N.J. Super. 172, 182, 748 A.2d 1221 (Law Div. 1998). There is nothing in the collateral source statute indicating that the legislature intended to reject Medpay subrogability. In Perreira, the New Jersey Supreme Court was guided by its conviction that the legislature chose, through the collateral source rule, to protect liability carriers at the expense of health insurers' subrogation rights. On the other hand, N.J.S.A. 39:6A-9.1 demonstrates that the legislature wanted to allow automobile insurers to seek recoveries at the expense of liability insurers. In fact, commercial insurers are almost always liable for medical bills paid on behalf of those injured in motor vehicle accidents (if the injured party is in a non-PIP vehicle, the injured party will generally collect workers compensation, which is subrogable under N.J.S.A. 34:15-40). There is no indication that the legislature chose to make medpay benefits the exception to this rule. Therefore, it is reasonable to assume that the legislature did not intend to eliminate Medpay subrogation through the collateral source rule. Although N.J.S.A. 39:6A-9.1 does not explicitly mention a right of recovery for Medpay, New Jersey courts have tended to recognize recovery rights that were not explicitly referenced in the statute but were presumed to be part of the statutory intent. See e.g. the Park case regarding bus-PIP (discussed here) and regarding PIP paid pursuant to the deemed statute (discussed here). In addition, the New Jersey motor vehicle insurance industry has long assumed a right of medpay subrogation, including maintaining a Medpay subrogation forum in Arbitration Forums in New Jersey. This assumption has been priced into the insurance market and should not be upset by an expansive interpretation of the collateral source rule and/or a narrow interpretation of N.J.S.A. 39:6A-9.1. The few cases to discuss Medpay should be given limited weight regarding the question of subrogability. Mid-Century and Walsh are unreported cases. Mid-Century is a trial level court. In Walsh, neither party argued the issue of medpay subrogability, so the court was not required to contemplate the correctness of the parties' assumption that Medpay is not subrogable. Warning's holding that Medpay carriers do not have rights under N.J.S.A. 39:6A-6 is irrelevant because Medpay carriers clearly have recovery rights under N.J.S.A. 34:15-15.1 (see discussion here). Ingressol's holding that medpay benefits can be stacked is also of little guidance since that is an entirely separate issue and the language of the anti-stacking statute in its reference to PIP benefits is different from the language in N.J.S.A. 39:6A-9.1.
Note the above discussion relates to subrogation of Medpay. Subrogation professionals should consider whether medpay was paid to a person who might be entitled to Medpay or other benefits from another policy and whether that policy might be responsible to reimburse some or all of what was paid. For instance, if the insured was injured while in a taxi, perhaps the taxi carried medpay coverage as well (though the fact that Medpay benefits can be "stacked," as discussed above, may make recovery unlikely).
What if PIP is paid to a pedestrian? If a pedestrian is struck by an automobile, the pedestrian receives PIP benefits from his/her own PIP coverage, since N.J.S.A. 39:6A-4 specifies that an "automobile"'s PIP policy applies where an insured sustains an injury "as a pedestrians, caused by an automobile or by an object propelled by or from an automobile[.]" Note that the coverage that applies is the pedestrian's insurer's policy. The automobile that strikes a pedestrian has no PIP obligation. If the pedestrian does not have his/her own PIP coverage, the pedestrian can collect PIP from the New Jersey Property-Liability Insurance Guaranty Association (NJPLIGA) per N.J.S.A. 17:30A-1 et. seq. If the driver of the automobile striking the pedestrian is properly insured, the driver of the automobile will not be liable for the PIP, because the driver will have been required to carry PIP and will have had PIP and thus N.J.S.A.39:6A-9.1 will not afford a right of recovery. If the driver of the automobile was not properly insured, then that driver would be liable for PIP recovery per N.J.S.A. 39:6A-9.1. If the pedestrian was struck by a non-automobile, then the person's automobile carrier should not pay PIP in the first place. See discussion below regarding this situation and potential rights of recovery.
Certain legal questions may go to the courts rather than arbitration. N.J.S.A. 39:6A-9.1 requires that where the tortfeasor who is subject to PIP reimbursement claims is insured, "the determination as to whether an insurer ... is legally entitled to recover ... shall be by agreement of the involved parties or, upon failing to agree, by arbitration." Similarly, in N.J.S.A. 39:6A-11 the statute says that where multiple PIP policies apply to the same injrued party, the carriers, "shall be entitled to recover ... only by inter-company arbitration or inter-company agreement, an equitable pro-rata share of the benefits paid." In State Farm Indem. Co. v. National Liab. & Fire Ins. Co., 439 N.J. Super. 532 (2015) an insurer being sought after for pro-rata contribution claimed that the injured party was not a resident of their household. They argued that this was a "coverage question" that needed to be decided by the court before the arbitration requirement of N.J.S.A. 39:6A-11 kicked in. The Appellate Division disagreed and indicated that almost any question regarding pro-rata recovery should be decided through arbitration. The court's opinnion in State Farm seems quite different from its indications in Coach USA, Inc. v. Allstate New Jersey Ins. Co., 354 N.J.Super. 277 (App.Div.), certif. den,, 175 N.J. 170 (2002). In that case, the court decided that a bus carrying bus-PIP was not liable for at-fault PIP reimbursement claims under N.J.S.A. 39:6A-9.1. The court rejected the suggestion that this issue was subject to the arbitration requirement in N.J.S.A. 39:6A-9.1 saying, "we reject Allstate's argument that this dispute, which involves a recurrent issue of statutory interpretation, should have been subject to the vagaries of separate and endlessly-initiated arbitration proceedings under authority granted by the arbitration provisions of N.J.S.A. 39:6A-9.1. The issue presented, a purely legal one, is 'much more within the expertise of the court' than of arbitrators." Coach 354 N.J. Super. at 282. Similarly, in AAA Mid-Atlantic Ins. of N.J. v. Prudential Prop. & Cas. Ins. Co., 336 N.J. Super. 71 (App. Div. 2000) the court declined to refer a question of PIP recoverability to arbitration, instead ruling that a PIP insurer could not make a PIP reimbursement claim against a social host for serving alcohol to the injured (adult) insured because the injured party could not maintain a claim against the social host, and as such the social host was not a "tortfeasor" so as to trigger applicability of N.J.S.A. 39:A-9.1. The court in State Farm did not discuss AAA or Coach and how they could be distinguished. Potential distinguishing factors include how "purely legal" the question presented was (and hence how likely the issue was to result in multiple identical arbitration cases which could be avoided if the court established a rule) as well as the fact that Coach dealt with N.J.S.A. 39:6A-9.1 while State Farm addressed N.J.S.A. 39:6A-11 (though the arbitration requirement in both statutes seem reasonably similar).
The "Follow the Family" exclusion makes pro-rata situations fairly rare. N.J.S.A. 39:6A-7(b)(3) and (4) (click here for the statutory text)
allows an insurer to exclude a person from benefits if there is another
policy that is more closely related to that person. In general, this
is designed to ensure that each person is entitled to benefits under
only one PIP policy. This statute was designed to avoid most pro-rata
sharing situations on the theory that the transactional costs would not
be worth it, since, over time, each carrier should be on the "receiving
end" of a pro-rata share just as often as they would be on the "giving
end." SeeRutgers Cas. Ins. Co. v. The Ohio Cas. Ins. Co., 299 N.J. Super. 249, (App.Div. 1997), aff'd, 153 N.J. 205 (1998). Note
that the statute merely permits an insurer to include the "follow the
family exclusion," but the exclusion must actually appear in the policy
in order to apply. Also, it is wise to check the exact text of the
exclusion in the policy, as well as all terms as defined both in the New
Jersey statute (N.J.S.A. 39:6A-2) and in the policy, to be certain the
In sum, the "Follow the Family" exclusion comes down to two points.
First, if a person is a named insured on any PIP policy (including "Basic" and "Special PIP"
policies), s/he may be excluded from coverage on any other policy on
which s/he is only a resident relative or might otherwise be entitled to
coverage (e.g. as a passenger in a vehicle). Second, if a person is a
resident relative of a named insured, s/he may be excluded from coverage
on any other policy on which s/he is not a named insured or resident
relative, but might otherwise be entitled to coverage (e.g. as a
passenger in a vehicle). In other words, if the person is a named
insured on a policy, that policy must pay and other policies can
exclude. If the person is not a named insured, but is a resident
relative on a policy, then the resident relative policy pays, and the policy of the host vehicle can exclude. The only instances in which pro-rata
sharing will apply is when the injured person is a named insured on more
than one policy or is a resident relative on more than one policy
(while not a named insured on any policy).
"Named insured" means the person or persons identified as the
insured in the policy and, if an individual, his or her spouse, if the
spouse is named as a resident of the same household, except that if the
spouse ceases to be a resident of the household of the named insured,
coverage shall be extended to the spouse for the full term of any policy
period in effect at the time of the cessation of residency.
Thus, if a spouse is listed on a policy, even if not as a "named
insured," that spouse is a "named insured" and may not be excluded by
the "Follow the Family" exclusion. So, if A is a named insured on
one policy, and the spouse of named insured B on a second policy, and A
is injured, then A and B's policies should share the costs of the PIP
claim on an equitable pro-rata basis. Note also that it is worth
checking the definition of "named insured" in any particular policy, as
the definition might be more expansive than the one found in the statute
(if the definition is more restrictive than the one in the statute, the
more restrictive language would likely be ignored in favor of the
See the discussion of the deemer statute for an important note regarding whether standard exclusions are read in to a policy conforming to New Jersey law per deemer.
Arguably, the motor vehicle involved in the accident in Country-Wide might have had some obligation to provide PIP coverage to the injured pedestrian based on its New York policy, since under New York law the vehicle involved in the accident pays PIP benefits to the pedestrian, seethis discussion of "priority of payments" on our New York PIP page. This point was not raised in the case.
Note that, until recently, in general the non-automobile insurer fulfilled its obligation to provide pedestrian PIP by paying into the New Jersey Property-Liability Insurance Guaranty Association (NJPLIGA) and therefore the injured party would go to NJPLIGA for PIP benefits. This is per the July 21, 2004 opinion of the Department of Insurance accessible here. However, since risk retention groups (RRGs) cannot be forced to participate in NJPLIGA and thus do not pay into that system, RRGs subject to the NJ non-automobile pedestrian PIP requirement would have to provide those benefits themselves, per American Int'l Ins. Co. v. 4M Interprise, Inc., 431 N.J. Super. 514,(App. Div.), certif. denied, 216 N.J. 366 (2013) and the March 1, 2006 opinion of the Department of Insurance accessible here. Note that American Internaional agreed that RRGs could be left out of NJPLIGA's administrating non-automobile pedestrian PIP claims. The court went out of its way to state that it was not asked to review the legality of NJPLIGA's administrating non-automobile pedestrian PIP claims in the first place. Id. at 516 fn1. More recently, NJPLIGA decided to stop administering pedestrian PIP benefits on behalf of non-automobiles based on the June 30, 2015 order accessible here. All policies issued/renewed on or after April 1, 2016 must include pedestrian PIP. NJPLIGA will continue to handle pedestrian PIP for policies that have not yet renewed after April 1, 2016, all of which should be phased out by March 31, 2016.
What if one carrier paid PIP when another policy should have instead? As we saw in the discussion of the "follow the family" exclusion above, if a guest passenger is a named insured or a resident relative on another policy or policies, then that other policy should cover the PIP and the host vehicle's PIP policy will likely exclude coverage. Similarly if someone is a resident relative on a policy or policies but a named insured on another policy or policies, then the policies on which the person is a named insured should pay, and the policies under which the injured party is a resident relative will likely exclude coverage. What if a policy affords PIP coverage and then realizes that it should have excluded coverage and another policy should have paid? Similarly, what if an automobile insurer paid PIP claims to an insured who was struck by a non-automobile (see above). The insurer paying the PIP claim erroneously can likely recover its entire claim from the policy or policies that should have applied, see section below regarding recovering payments made in error where another insurer should have provided coverage. Note that this type of situation does not literally fall within N.J.S.A. 39:6A-11, since this section only covers the situation where two companies were actually liable to pay PIP benefits, not situations where one company mistakenly paid benefits that another should have. However, the unpublished (and therefore non-precedential) case of Pratts v. Hulme, 2007 N.J. Super. Unpub. LEXIS 665, 12-13 (App.Div. Dec. 20, 2007) concluded such a case is subject to the arbitration requirement of N.J.S.A. 39:6A-11. Further, Pratts concuded that no statute of limitations applied, just as in Ideal Mut. Ins. Co. v. Royal Globe Ins. Co., 211 N.J. Super. 336, 340 (App.Div. 1986) discussed above. Although Pratt's finding of a right of recovery seems to be well grounded (see further discussion below), its decision to apply the rules of N.J.S.A. 39:6A-11 is at least debateable. Also, since Pratts predicates its finding of a right of recovery based on a theory of unjust enrichemnt, see p. 6-7, perhaps there is an argument for a a six-year statute of limitations to apply. SeeJacobson v. Celgene Corp., 2010 U.S. Dist. LEXIS 36714, 8-9 (D.N.J. Apr. 14, 2010).
The benefits provided in sections 4 and 10 of P.L. 1972, c. 70 (C.39:6A-4 and 39:6A-10), the medical expense benefits provided in section 4 of P.L. 1998, c. 21 (C. 39:6A-3.1) and the benefits provided in section 45 of P.L. 2003, c. 89 (C. 39:6A-3.3)
shall be payable as loss accrues, upon written notice of such loss and
without regard to collateral sources, except that benefits, collectible
under workers' compensation insurance, employees' temporary disability
benefit statutes, Medicare provided under federal law, and benefits, in
fact collected, that are provided under federal law to active and
retired military personnel shall be deducted from the benefits
collectible under sections 4 and 10 of P.L. 1972, c. 70 (C. 39:6A-4 and 39:6A-10), the medical expense benefits provided in section 4 of P.L. 1998, c. 21 (C. 39:6A-3.1) and the benefits provided in section 45 of P.L. 2003, c. 89 (C. 39:6A-3.3).
If an insurer has paid those benefits and the insured is entitled
to, but has failed to apply for, workers' compensation benefits or
employees' temporary disability benefits, the insurer may immediately
apply to the
provider of workers' compensation benefits or of employees' temporary
disability benefits for a reimbursement of any benefits pursuant to
sections 4 and 10 of P.L. 1972, c. 70 (C. 39:6A-4 and 39:6A-10), medical expense benefits pursuant to section 4 of P.L. 1998, c. 21 (C. 39:6A-3.1) or benefits pursuant to section 45 of P.L. 2003, c. 89 (C. 39:6A-3.3) it has paid.
Medpay may not be recovered from a Workers' Compensation carrier under N.J.S.A. 39:6A-6, but may be recoverable under N.J.S.A. 34:15-15.1 Medpay is not provided for directly in
N.J.S.A. 9:6A-4 or N.J.S.A. 39:6A-10, but instead is based on an administrative code (N.J.A.C.
11:3-7.3(b)) promulgated by the Commissioner of Insurance, arguably pursuant to 9:6A-4 and/or, 39:6A-10. Warnig v. Atlantic County Special Servs.,
363 N.J.Super. 563 (App.Div. 2003) held that an insurer paying Medpay cannot recover those payments from a worker's compensation carrier under N.J.S.A. 39:6A-6,
which allows for recovery from a worker's compensation carrier of "benefits pursuant to sections 4 and 10 . . ." The Appellate Division found that this recovery
statute did not refer to Medpay, and therefore Medpay was not recoverable pursuant to this statute. However, note that N.J.S.A. 34:15-15.1, which was not argued in Warnig, allows any insurance carrier which pays "expenses of medical, surgical or hospital services, to which the petitioner would be entitled to reimbursement if such petitioner had paid the same" to recover those payments from the compensation carrier. This appears to provide separate authority for Medpay to be recovered from a compensation carrier.
"Medical expense benefits" up to $250,000. N.J.S.A. 39:6A-4(a);
"Income continuation benefits" of up to $100 per month up to a total of $5,200. N.J.S.A. 39:6A-4(b);
"Essential services benefits" of up to $12 per day up to a total of $4,380. N.J.S.A. 39:6A-4(c);
"Death benefits" of up to the amount that would be allowable for income continuation benefits and essential services benefits. N.J.S.A. 39:6A-4(d);
"Funeral expense benefits" of up to $1,000. N.J.S.A. 39:6A-4(e);
Pursuant to N.J.S.A. 39:6A-4.3, insurers of "automobiles" must offer the option for certain reduced coverages:
Options to reduce the medical expense benefits coverage to $150,000, $75,000, $50,000 or $ 15,000, except that $250,000 of coverage remains availalbe for certain particularly serious injuries. N.J.S.A. 39:6A-4.3(e);
Options for per-accident medical expense benefit deductibles of $ 500.00, $ 1,000.00, $ 2,000.00 and $ 2,500.00. N.J.S.A. 39:6A-4.3(a);
Option to exclude income continuation benefits, essential services benefits, death benefits, and funeral expense benefits. N.J.S.A. 39:6A-4.3(b);
Option to have the insured's health care coverage be primary over PIP coverage for those medica expenses covered by the insured's health care coverage. N.J.S.A. 39:6A-4.3(d);
N.J.S.A. 39:6A-4.3 specifies that elections made under this statute apply only to the named insured and to resident relatives of the named insured (except if that resident relative is the named insured on another policy) and not to anyone else eligible for benefits (e.g. guest passengers).
Pursuant to N.J.S.A. 39:6A-3.1, an "automobile" owner may elect a "basic" policy with significantly reduced coverages discussed further here. This coverage includes $15,000 of medical expense benefits coverage, except that $250,000 of coverage is available for certain particularly significant injuries. The election of a basic policy applies to anyone receiving benefits under that policy. As to which PIP policy should apply if the person is qualified under more than one policy, see the above discussion on the "follow the family" exclusion.
Pursuant to N.J.S.A. 39:6A-3.3, an "automobile" owner who qualifies for certain public assistance (basically those qualified for Medicaid)
may elect a "special" policy with significantly reduced coverages discussed further here. This policy provides $250,000 in coverage, but only for emergency care, which is defined in the statute, and only for "the named insured and dependent members of his family, as defined by the federal Medicaid program, residing in his household." The policy also includes a $10,000 death benefit.
Note that as discussed above, this rule may not apply in certain situations, for instance claims for PIP reimbursement pursuant to N.J.S.A. 39:6A-9.1, where one tortfeasor has statutory immunity (e.g. an employer with immunity under Workers Compensation laws), or where the identity of one tortfeasor is unknown.
Note that as discussed above, this rule may not apply in certain situations, for instance claims for PIP reimbursement pursuant to N.J.S.A. 39:6A-9.1, where one tortfeasor has statutory immunity (e.g. an employer with immunity under Workers Compensation laws), or where the identity of one tortfeasor is unknown.
Levine v. United Healthcare, 402 F.3d 156 (3d Cir. 2005), held that New Jersey's Collateral Source Rule,
N.J.S.A. 2A-15-97, is not a law regulating insurance and therefore was
preempted by an ERISA plan's subrogation clause. However, Levine footnotes 2-4 note that subsequent to the NJ Supreme Court's decision in Preirera (discussed immediately above in the section on New Jersey's Collateral Source Rule)
N.J.A.C. 11:4-42.10 was amended to prohibit subrogation clauses in
health insurance policies. As N.J.A.C. 11:4-42.10 seems to be a "law . .
. which regulates insurance," it would seem to be saved from ERISA
preemption under 29 U.S.C. 1144(b)(2)(A) and only preempted for
self-funded ERISA plans under "deemer," 29 U.S.C. 1144(b)(2)(B). This
seems to be confirmed in footnote 5 of Cty. Of Bergen v. Horizon Blue Cross Blue Shield, 412 N.J. Super. 126 (App. Div. 2010):
Plaintiffs basically argue that application of Section 97 as
enacted has unfair, unintended consequences. They point to the fact that
non-governmental self-insured health plans, governed by the federal
Employees Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. §
1001-1461, may pursue subrogation because ERISA preempts Section 97.
See Levine v. United Healthcare Corp., 402 F.3d 156, 166 (3d
Cir.), cert. denied, 546 U.S. 1054, 126 S.Ct. 747, 163 L.Ed.2d 611
(2005). We disagree. Although ERISA preempts a state law that "relates
to" an employee welfare plan, Shaw v. Delta Air Lines, Inc., 463
U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490, 501 (1983), state
laws that regulate insurance companies are "saved" from preemption. O'Brien v. Two West Hanover Co.,
350 N.J.Super. 441, 449 (App.Div. 2002) (citing 29
U.S.C.A.§ 1144(b)(2)(A)). Thus, N.J.A.C. 11:4-42.10 prohibits health
care insurers from including subrogation and reimbursement provisions in
insurance contracts. See 34 N.J.R. 647(a); 34 N.J.R. 2798(a). As a
result, neither plaintiffs nor a non-governmental health insurer would
be able to seek subrogation or reimbursement in this case.
Roche v. Aetna, Inc., 2016 U.S. Dist. LEXIS 25208, 21-22 (D.N.J. Mar. 1, 2016), particularly footnote 11, agrees that N.J.A.C. 11:4-42.10 is not preempted by fully funded ERISA plans, although the parties did not argue this point.
Based on this analysis, plan language in a self-insured ERISA plans will preempt New Jersey's collateral surce rule as well as N.J.A.C. 11:4-42.10. ERISA disability plan language should apply even for fully-insrued plans, because N.J.A.C. 11:4-42.10 applies to health insurance and not to disaiblity insurance. If one of these plans allows for subrogation/lien rights then those rights will apply (some consideration should also be given to whether the plan has language to override New Jersey's "Made Whole Doctrine" discussed below). Fully-funded ERISA health plans will not be able to subrogate in New Jersey because of N.J.A.C. 11:4-42.10.
As discussed above, this statute
applies to prohibit PIP recovery against a public entity/employee.
The restriciton on subrogation only applies to tort claims. N.J.S.A.
59:1-4 specifically says that "[n]othing in this act shall affect liability based on contract or the right to obtain relief other than
damages against the public entity or one of its employees."
"Public" here probably includes entities of states other than New Jersey, see McDonnell v. State of Ill., 319 N.J. Super. 324, 337-338 (App.Div. 1999) affirmed 163 N.J. 298 (2000) cert. den. 531 U.S. 819 (2000) but presumablyDOES NOT apply to bi-state agencies such as the Port Authority. SeeBell v. Bell, 83 N.J. 417, 423-24 (1980), Mandal v. Port Authority of New York and New Jersey, 430 N.J. Super. 287, 298-300 (App.Div.) certif. denied, 216 N.J. 4 (2013).
The verbal threshold will not apply to a Plaintiff unless the Plaintiff "is: (a) 'subject to' the verbal threshold statute and (b)(i) is required to maintain PIP coverage, or (ii) has a right to receive PIP benefits under N.J.S.A. 39:6A-4."Beaugard v. Johnson, 281 N.J. Super. 162, 168 (App.Div. 1995)(emphasiss in the original)(citations omitted). A person is "subject to" verbal threhold when, as noted in the beginning of the discussion of threshold, the person is a "named insured" who elected a threshold policy or an "immediate family member" who is not a named insured on another policy. Id. A person is required to maintian PIP if a person owns an vehicle garaged in New Jersey. Id, Koff v. Carrubba, 290 N.J. Super. 544, 547 (App.Div.) certif. denied 146 N.J. 498 (1996)(see further discussion below). A person "has a right to receive PIP benefits" if the person is entitled to PIP benefits in the accident in question Id at 169 (see further discussion below). Hence:
In Beaugard, a fifteen year old student injured when when struck by an automobile while on a school bus was not subject to verbal threshold because while she was "subject ot the statute" (since her father held a treshold policy), she was not obligated to maintain PIP (since she didn't own a car) nor was she eligible for PIP benefits, since she was not injured, "while occupying, entering into, alighting from or using an automobile." Id. at 169 quoting N.J.S.A. 39:6A-4.
In Koff v. Carrubba, 290 N.J. Super. 544, 547 (App.Div.) certif. denied 146 N.J. 498 (1996), Plaintiff injured by an automobile while Plaintiff occupied a motorcycle was subject to verbal threshold despite being ineligible for PIP benefits (since he was not "occupying," etc. an automobile) because he was "subject to" the statute and was required to maintain PIP (he owned an automobile with a threshold policy).
In Ibarra v. Vetrano, 302 N.J. Super. 578, 581 (App.Div. 1997), Plaintiff was not subject to verbal threhold because, although she was entitled to PIP benefits in the accident (she was occupying an automobile), she was not "subject to the statute," since she did not own a vehicle with a treshold policy and was not an "immediate family member" of a person with a threshold policy.
A pedestrian (including a person riding a bicycle) injured by an automobile can be subject to verbal trehshold if the requirements discussed above are met. Harbold v. Olin, 287 N.J. Super. 35 (App. Div. 1996).
Where an out-of-state vehicle is subject to deemer, the named insured and immediate family members are subject to verbal threshold. N.J.S.A. 17:28-1.4. This is true even if the out-of-state policy is from a state with a similar threshold-election system and the out-of-state policy is a no-threshold policy. SeeWhitaker v. DeVilla, 147 N.J. 341 (1997).
Where an out-of-state automobile is not subject to deemer, its driver is not entitled to a verbal threshold defense, because only those who are eligible for PIP are entitled to the defense. Zabilowicz v. Kelsey, 200 N.J. 507 (2009). Note that this is true even if the tortfeasor's policy includes a provision that requires it to conform to New Jersey insurance requirements for accidents ocurring in New Jersey. Loftus-Smith v. Henry, 286 N.J. Super. 477, 486-487 (App.Div. 1996). Based on Government Employees Ins. Co. v. Allstate Ins. Co., 358 N.J.Super. 555 (App. Div. 2003), a case dealing with PIP reimbursement claims, this would presumably also be true if the tortfeasor's insurer voluntarily provided PIP benefits to its insured (e.g. if it did so based on a misinterpretation of the deemer statute).
Verbal threshold applies to an uninsured/underinsured motorist claim even where the underlying tortfeasor would not be entitled to the defense (e.g. the tortfeasor is a non-automobile). Stamps v. New Jersey Auto. Full Ins. Underwriting Ass'n, 279 N.J. Super. 485 (App.Div.) certif. denied 141 N.J. 96 (1995).
The verbal threshold requirement does not apply if the tortfeasor is a
bus, even if that bus is required to carry "Bus PIP." Lymon v. Cape Transit Corp., 340 N.J.Super. 573, 575 (App.Div.), certif. denied, 169 N.J. 608 (2001). However, passengers in busses required to carry "Bus PIP" must meet verbal threshold before suing the operator of the bus, per N.J.S.A. 17:28-1.7. As to which buses require "Bus PIP", see above section regarding "What is a 'Motor Bus'".
Verbal threshold is not applicable to a worker's compensation subrogation claims. N.J. Transit Corp. v. Sanchez, 457 N.J. Super. 98 (App. Div. 2018). See our discussion of this issue here.
The "state minimum" liability coverage that such policies must provide for innocent third parties is 15/30/5 per NJM v. Varjabedian dispite the fact that, technically, New Jersey allows a "basic" policy for automobiles that provides 0/0/5 coverage per N.J.S.A. 39:6A-3.1 (and a 0/0/0 "special" policy is available for certain eligible persons with low income pursuant to N.J.S.A. 39:6A-3.3). In N.J.M., the court found that despite its insured’s misrepresentation regarding her daugthter's driver’s license status, the insurer was required to provide state minimum liability coverage for an injured innocent third party. C.f.Marotta v. New Jersey Auto. Full Ins. Underwriting Assoc. By and Through Liberty Mut. Ins. Co., 280 N.J. Super. 525 (App.Div. 1995) holding state minimum coverage to apply for protection of innocent third parties where the insured had misrepresented the state of residency. In Cure v Perez, 223 N.J. 143 (2015) the New Jersey Supreme Court effectively agreed with the Varjabedian decision indicating that, in general, a rescinded policy will still need to provide 15/30/5 coverage despite the legislature's creation of the "basic" and "special" policies. However, since the policy in question in Cure v Perez was a "basic" policy with the optional $10,000 bodily injury liability coverage, CURE was only required to provide $10,000 in coverage for the innocent third party. In its last sentence, the Supreme Court indicated (in dicta that it refered to as a "holding") that if a policy had no liability coverage at all (i.e. a "special" policy or a "basic" policy without the optional $10,000 in coverage) an insurer rescinding the policy would not owe any liabiilty coverage for an innocent third party.
The "state minimum" PIP coverage to be provided to innocent third policies is $15,000 in standard PIP coverage pursuant to N.J.S.A. 39:6A-4.3(e) (up to $250,000 is avaialble for certain significant injuries). Rutgers Cas. Ins. Co. v. LaCroix, 194 N.J. 515, 532-533 (2008).
Where a policy has an exclusion that would result in no protection of innocent third parties, the exclusion will likely be invalid and at least state minimums will apply, seee.g.Proformance Ins. Co. v. Jones, 185 N.J. 406 (2005)(policy with business use exclusion), Hanco v. Sisoukraj, 364 N.J. Super. 41 (App.Div. 2003)(policy with exclusion for liability of lessor of vehicle), Alvarez v. Norwood, 2012 N.J. Super. Unpub. LEXIS 910 (App.Div. Apr. 25, 2012) Certif. denied 216 N.J. 6 (2013)(unscheduled driver), compareConnecticut Indem. Co. v. Podeszwa, 392 N.J.Super. 480 (App.Div. 2007) approving of a "bobtail" policy which excluded coverage where other valid coverage was in place. As to whether the full policy limits will apply, see discussion below, "If an insurance policy needs to be reformed, the changes may (or may not) only apply to provide the statutory minimum coverage." We are not aware of any New Jersey authority for whether denial of coverage for lack of cooperation may be asserted against an innocent third party. However, Cowan v. Allstate Ins. Co., 357 S.C. 625 (S.C. 2004) is persuasive authority indicating that such a denial should not be enforceable against an innocent third party and at least state minimums should apply.
An interesting question is whether an insurer of an innocent third party may take advantage of the fact that the tortfeasor's insurance must provide minimum coverage to an innocent third party even when the tortfeasor's insurance rescinds coverage. For instance, if an insurer pays an uninsured motorist claim to its insured because the tortfesaor's insurer rescinded coverage, can the insurer attempt to subrogate against the tortfeasor's carrier? Alternatively, may a UM/UIM carrier reduce its benefits available by the 15/30 coverage that the tortfeasor's insurer must still provide? One might argue that since the purpose of this rule is to make sure that innocent victims do not go unprotected, there is no reason to apply the "inncocent third party rule" if the innocent third party is protected by his or her own UM/UIM coverage. On the other hand, the tortfeasor's carrier contracted for certain risks including the risk that it would have to pay out on a rescinded policy and perhaps the rescinding carrier has some responsibilty for not not investigating its policy prior to the loss. Additionally, a subrogating carrier stands in the shoes of its insured, which is the innocent third party who has a valid claim against the tortfeasor's carrier. We are not aware of any case law on this point, however, some indication of the answer to this question may come from Cure v Perez discussed in this section. In Cure v Perez, CURE argued, 223 N.J at 149, that since it rescinded its policy, the benefits of its obligation to pay an innocent third party "should be provided to only those third parties who do not have first party uninsured/underinsured motorist (UM/UIM) coverage, as the UM/UIM carrier should be the insurer chiefly liable for damages." Although the New Jersey Supreme Court did not directly respond to this argument, it still found that CURE had to provide coverage to the innocent third party even though the injured party had insurance with Progressive, thus suggesting that the tortfeasor's insurer's obligation to pay state minimum coverage takes precedence over the innocent third party's insurer's obligations.
On the other hand, in Potenzone v. Annin Flag Co., 191 N.J. 147 (2007), the New Jersey Supreme Court found an exclusion for loading and unloading to be invalid, and held that the full policy limits applied to the reformed policy. The Court was aware of the analysis in Proformance, and decided to "choose a different path here." Id. at 155. The Court argued that the loading-and-unloading exclusion was different, because there was long-standing precedent that such exclusions were unenforceable, and therefore the carrier should have expected that its exclusion would be invalid and its full policy would apply.
Craig & Pomeroy, New Jersey Auto Insurance Law §2:3-4 criticizes the Proformance case. The authors note that Proformance’s reliance on Marotta is misplaced, because Marotta involved a valid disclaimer of coverage due to an insured’s misrepresentation, while the only denial of coverage in Proformance was due to the insurer including an impermissible exclusion in the policy. The authors note that the insured in Proformance ended up exposed to liability above their now 15/30/5 coverage through no fault of their own and after having paid for greater policy limits. Craig & Pomeroy also criticize Potenzone’s attempt to distinguish itself from Proformance. Potenzone argued that there was long-standing precedent that loading-and-unloading exclusions were unenforceable, and therefore the carrier should have expected that its exclusion would be invalid and its full policy would apply. The authors note that this argument ignores the fact that the type of exclusion in the Proformance case, the business use exclusion, had been clearly unenforceable since at least 1990.
Craig & Pomeroy argue that the only valid distinction between these two cases is that in Proformance, where the business use exclusion was stricken, but the policy was reduced to state minimums, the at-fault party was a permissive user of the vehicle, rather than a named insured; whereas in Potenzone, where the loading and unloading exclusion was stricken and the policy remained in full force, the at-fault party was the the named insured. The authors argue that, “First-party insureds have every reason to believe that offending clauses will merely be struck and they will be left in the same position as would have applied without the offending clause. Third-party insureds, on the other hand, could not have formed any expectations as to coverage beyond the statutory minimums. While Craig and Pomeroy’s criticism of Proformance is well placed, the attempt to harmonize Proformance and Protenzone, is perhaps more forgiving than it should be. While the expectations of the parties may be significant, one could easily argue that a permissive user of a vehicle is an intended third-party beneficiary of the insurance contract, and therefore any expectations of insurance that the named insured has should also translate to the permissive user. It may be reasonable to assume that the Supreme Court in Potenzone was not happy with the Proformance decision, and given the opportunity would reverse it in its entirety. Note that in the unpublished case of Mantzouranis v. Pratolongo, 2015 N.J. Super. Unpub. LEXIS 2161, 15-19 (App.Div. Sept. 10, 2015) the Appellate Division declined to distinguish Proformance and Protenzone on the basis of the expectations of the parties, and held that a policy with an exclusion of coverage for a valet-parker must apply its full policy because it was well known for decades that such an exclusion was unenforceable.
A number of other cases are worthy of note on this subject. In Hanco v. Sisoukraj, 364 N.J. Super. 41 (App.Div. 2003), a lessor’s insurance policy excluded coverage for liability of the lessee. The offensive language was stricken, and the policy reduced to state minimums. It seems that this case can be justified, even in light of Protenzone, since a lessee is not an intended beneficiary of the lessor’s policy. Similarly, Alvarez v. Norwood, 2012 N.J. Super. Unpub. LEXIS 910 (App.Div. Apr. 25, 2012) held that a policy excluding unlisted drivers was reduced to state minimum coverage, and noted in distinction to Protenzone that, “[w]e find no comparable grounds to conclude that [the insured] or [the insurer] should have expected that the full policy limits would apply to accidents involving a principal driver of the insured taxi who was omitted from the application and the policy.” Here, also, it is significant to note that there was some wrongdoing on the part of the insured, by not listing its driver.
In Kish v. Motor Club of Am. Ins. Co., 108 N.J. Super. 405 (App. Div.) , certif. denied, 55 N.J. 595 (1970), an exclusion for liability for injuries to family members was found invalid, and the policy held to remain in for its full value. The court noted, “... N.J.S.A. 39:6-46(a) in specifying the scope of the omnibus coverage to be afforded by an owner's policy, makes no distinction between a policy containing the minimum statutory limits and one embodying higher limits. In either case, a provision limiting the broad omnibus coverage called for by N.J.S.A. 39:6-46(a) would be contrary to law.” Id. at 412. The Kish case was recently sited by Khandelwal v. Zurich Ins. Co., 427 N.J. Super. 577 (App.Div.), certif. den. 212 N.J. 430 (2012) which held that a supplemental automobile insurance policy could not exclude coverage for injuries to family members.
In conclusion, although there is some apparently contradictory authority, the weight of authority seems to be that where an insured, through no fault of his or her own, is denied coverage due to an invalid policy exclusion, the full policy will apply. Where the insured engaged in some wrongdoing which triggered the exclusion, or where the insured cannot be said to have a valid expectation for full policy limits to apply, the reformed policy may apply only to minimum state insurance requirements.