An Injured Party Who Elected Lower PIP Limits May Not Sue for Medical Bills Over Those Limits (Without Meeting Verbal Threshold?)
By: Noah Gradofsky, Esq.
March 26, 2019
Haines v. Taft, A-13/14 079600, 2019 N.J. LEXIS 441 (Sup. Ct. N.J. Mar. 26, 2019)

Although "standard" New Jersey PIP coverage, provided for in N.J.S.A. 39:6A-4, generally covers $250,000 of medical bills, N.J.S.A. 39:6A-4.3(e) allows insurers to offer coverage options that limit PIP to $150,000, $75,000, $50,000 or $15,000 (although these coverages are increased to $250,000 for particularly serious injuries). N.J.S.A. 39:6A-3.1 and N.J.S.A. 39:6A-3.3 also provide for lesser PIP coverages known as "basic" and "special" coverage, respectively (for further dicussion see here). As the options for these lesser coverages were added to the New Jersey PIP statutes over time, how these provisions relate to other provisions within the PIP scheme is often less than clear. One such issue, which was the subject of differing lower court decisions (discussed in our prior article below) was decided by the New Jersey Supreme Court today, though further legislative action is a distinct possibility.

In Haines v. Taft, A-13/14 079600, 2019 N.J. LEXIS 441 (Sup. Ct. N.J. Mar. 26, 2019), the New Jersey Supreme Court held, 3-2 (the other Justices of the court did not participate in the case), that an injured party with less than $250,000 in PIP coverage cannot sue a tortfeasor for medical bills exceeding his or her own PIP coverage but that would fall within a $250,000 PIP policy. The Court's opinion does suggest, however, that its ruling does not apply where the injured party meets verbal threshold or is otherwise not subject to verbal threshold (see bullet point below).

At issue in these cases was the interpretation of N.J.S.A. 39:6A-12, a provision that basically prohibits injured parties from recovering from tortfeasors for medical costs that could have been paid under PIP coverage. The statute reads in part:

Except as may be required in an action brought pursuant to . . . (C. 39:6A-9.1), evidence of the amounts collectible or paid under a standard automobile insurance policy . . . a basic automobile insurance policy pursuant to section 4 of P.L. 1998, c. 21 (C. 39:6A-3.1) and . . . under a special automobile insurance policy . . . to an injured person, including the amounts of any deductibles, copayments or exclusions . . . is inadmissible in a civil action for recovery of damages for bodily injury by such injured person. . . .

Nothing in this section shall be construed to limit the right of recovery, against the tortfeasor, of uncompensated economic loss sustained by the injured party.

Although this statute serves as an evidentiary bar, it effectively makes it impossible to recover from a tortfeasor the amounts collectible or paid under standard, basic, or special PIP coverage. In Haines, Defendants argued that the words "amounts collectible or paid under a standard automobile insurance policy ..." means "$250,000 rather than the insured’s policy limit because $250,000 is the amount of PIP coverage available to every consumer," while Plaintiffs argued that it means "the insured’s policy limit because that is the amount that the insured consumer may collect" and bolstered this argument by noting the final paragraph of the statute states that "[n]othing in this section shall be construed to limit the right of recovery, against the tortfeasor, of uncompensated economic loss sustained by the injured party."

The majority of the New Jersey Supreme Court found the language of the statute to be ambiguous (for reasons discussed in the first bullet point bleow). Finding the statute ambiguous, the Court turned to a lengthy review of the history and purpose of the New Jersey PIP scheme. The majority found that since the legislature intended to reduce litigation related to automobile accidents the statute should be interpreted to prohibit suits to recover any amounts that would be covered under a $250,000 PIP policy. The Court also noted that if the injured party could recover for medicals bills from the at-fault party, that at-fault party would be subject to a claim for medical bills that were not subject to the PIP fee schedule or other cost-containment procedures related to PIP claims.

The two dissenting judges found that the majority's interpretation resulted in an injustice to those who held lesser PIP policies, who, in general, will be those people who could not afford larger PIP policies. Therefore the dissenting judges argued that a person with a lesser PIP polciy should be permitted to sue a tortfeasor for all medical bills exceeding his or her PIP policy. The dissent further argued that the statutes did not clearly indicate that a person purchasing a lesser PIP policy forfeited the common law right to sue for medical bills.

Both the majority and dissenting opinions observed that the legislature might want to review this issue and clarify the law. The legislature, indeed, has at least begun to look into this matter. Senate Bill S2432 proposes to specify that persons carrying less than $250,000 in PIP may sue for any medical costs that are above their available PIP limit (which would follow the dissent in Haines). The bill was voted out of committe on 6/11/18 and can be tracked here.

ADDITIONAL NOTES

  • How does this case affect subrogation in New Jersey? Immediately, there is no direct effect. However:
  • The Haines decision may only apply where the injured party is subject to and does not meet verbal threshold. In order to reach their decision, the majority had to explain why the statute's statement that, "[n]othing in this section shall be construed to limit the right of recovery, against the tortfeasor, of uncompensated economic loss sustained by the injured party" did not unequivocally indicate that claims in excess of a lower PIP limit could be made. The court does this by noting that the general purpose of N.J.S.A. 39:6A-12 is to discuss what evidence is admissible if a case goes to trial and conclude, therefore, that the statute's statement that "uncompensated economic loss" may be recovered means to apply only when the injured party has an otherwise viable claim for for noneconomic loss, i.e. when the injured person is not subject to or has met the verbal threshold. The Court notes that, "we are considering this issue in the context of a stand-alone claim to be able to sue for only uncompensated medical expenses in a case where the limitation-on-lawsuit policy option prevented a claim for bodily injury," and that, "plaintiffs construe the third paragraph’s language to give rise to a stand-alone right to pursue a third-party liability claim against a tortfeasor exclusively for uncompensated economic loss of medical benefits not covered due to having a lesser amount of PIP coverage." Finally, concluding that an ambiguity exists, they write that, "[o]ne can envision an equally plausible construction, from the intertwined thrust and sense of this section overall and its three component paragraphs, that such uncompensated economic losses may be recovered from the tortfeasor within the context of a viable suit for bodily injury." Had the Court not found this possible understanding of the last paragraph of Section 12, it seems the Court would have had to agree that the statute unambiguously allowed Plaintiffs claim. Further, this indicates that the majority agreed that the last paragraph of Section 12 allows a claim for medical expenses in excess of an injured party's lower PIP limits as long as the injured party has a viable claim for noneconomcic damagaes.

    That the majority intend their holding to apply only to cases where the injured party does not have a viable claim for noneconomic loss also seems clear from the court's discussion of its ultimate conclusion on the case. The court writes that "we cannot conclude that the Legislature clearly intended Section 12 to allow fault-based suits consisting solely of economic damages claims for medical expenses in excess of an elected lesser amount of available PIP coverage" (emphasis added) and that "[t]he thrust of that amendment does not support the full effect urged by plaintiffs--namely, a right to bring a new cause of action where before one could not."

    The rationale of the Court seems to be that N.J.S.A. 39:6A-12 reduces costs of litigation by prohibiting a claim for medical expenses in excess of an injured party's lower PIP limits where that injured party's claim for noneconomic loss is prevented by the verbal threshold. However, the Court's conclusion does not hold up to close scrutiny. As the Appellate Division recently stated in N.J. Transit Corp. v. Sanchez, 457 N.J. Super. 98, 112, (App. Div. 2018), and as is clear on the face of the verbal threshold statute, "[t]he verbal threshold does not apply to [claims for] economic loss." Note that N.J. Transit Corp. v. Sanchez is discussed further here. Sanchez is subject to appeal to the New Jersey Supreme Court and perhaps Haines calls the rationale of Sanchez into question. However, it seems that the Appellate Division's attention in Sanchez was more squarely on the meaning of the verbal threshold statute and therefore its interpretation of verbal threshold seems to have been more precise.

    It is worth noting that the dissent does not seem to iterpret the majority's opinion this way, writing that "[i]f Haines’s father had selected the no limitation on lawsuit option, Haines theoretically could have recovered $28,000 in pain and suffering damages but, given the majority’s interpretation of N.J.S.A. 39:6A-12, not recover $28,000 in unpaid medical expenses."

  • Although not discussed by the Court, it seems that another argument in favor of the dissent is the explicit mention in N.J.S.A. 39:6A-12 of amounts covered under the "basic" and "special" PIP policies. If the legislature did not intend for the court to look at the particular PIP policy held by the injured party, but rather to exclude any medical costs that would theoretically be covered by a $250,000 PIP policy, then the legislature could simply have omitted any reference to "basic" and "special" policies. In addition, it seems unlikely that holders of these lesser policies would be given a right of recovery that holders of $15,000 "standard" PIP policies would not have.
  • Another concern for the majority's decision is its effect on medical providers. If the injured party only has $15,000 in PIP coverage and lacks health insurance, and tortfeasors are not responsible for the balance of the medical costs, medical providers are likely to have services for which they are not compensated, which will in turn require them to charge higher fees in general. Of course, the alternative, making tortfeasors responsible for these bills, would increase automobile insurance rates.
  • One argument in favor of the majority's decision is that the dissent's rule would results in a particularly unfair scenario when one takes issues of subrogation into account. Under N.J.S.A. 39:6A-9.1, amounts paid under PIP may not be recovered from an at-fault vehicle if that vehicle is subject to the PIP requirement and has PIP coverage. Though there is no case law on piont, this would presumably includes an at-fault vehicle with a $15,000 "basic" policy. This would mean that a vehicle carrying $15,000 in PIP would be protected from $250,000 in liability to a person carrying regular PIP limits, but would be able to hold an at-fault vehicle liable for all of his or her medical bills beyond his or her $15,000 limits. Take, for example, the situation where A carries $15,000 in PIP, and B carries $250,000 in PIP. If A is at fault and B's insurer pays $250,000 in PIP, B's insurer will not be able to recover that $250,000. On the other hand, if B was at fault and caused $250,000 in medical bills to A, A's insurer would pay $15,000 and A could sue B for $235,000 in medical costs. To the extent that the dissent is correctly interpreting N.J.S.A. 39:6A-12, any legislative fix to the Haines decision should consider address this unfairness. For instance, the legislature might care to provide that those who legitimately cannot afforde a $250,000 policy should be entitled to collect those benefits from a fund (E.g. NJPLIGA) and that that fund would be subject to similar restrictions on recovery of PIP.
  • The dissent's approach would also create an interesting possibility of UM/UIM exposure. If injured party P has a $15,000 "standard" PIP policy, medical expenses that exceed this amount, and the tortfeasor is either uninsured or underinsiured, then the medical expenses not covered under P's PIP policy may be recoverable from P's insurer under the UM/UIM policy. Any legislative fix to the Haines decision should consider this issue as well.
  • Another issue for the legislature to consider if it overturns Haines is that, as discussed by the majority, if the tortfeasor were liable for medical expenses between the injured party's PIP limits and $250,000, that at-fault party would be subject to a claim for medical bills that were not subject to the PIP feel schedule or other cost-containment procedures related to PIP claims. Perhaps the legislature can create a mechanism for applying such limits to these bills, for instance by requiring medical providers to follow the PIP fee schedule for such bills, though the logistics of such a requirement would be difficult. Another possibility would be to allow the insurer of the at-fault vehicle to provide PIP coverage to the injured party once that injured party's PIP is exhausted.
  • N.J.S.A. 2A:15-97 prohibits recovery in personal injury matters of amounts covered by insurance, except those recoveries allowed by the PIP loss-transfer statute, worker's compensation, or life insurance. Therefore, if a party insured under a $15,000 PIP policy were entitled to coverage under a medical insurance policy, the amounts covered under that policy would not be recoverable in suit even under the dissent's interpretation (except if ERISA preemption applies; see http://www.janmeyerlaw.com/njpip/main_frame.html#erisa).

  • Please visit our Guide to Recovery of PIP in New Jersey for the text of the key New Jersey statutes regarding PIP recovery, together with an outline of those statutes, hyperlinks to definitions of key terms, discussions of key provisions of each statute, relevant case law, and other selected issues of New Jersey subrogation.

    Please note that the information included herein is solely the product of Law Offices of Jan Meyer and Associates, P.C., and does not constitute legal advice. For legal advice kindly contact our office.


    An Injured Party Who Elected Lower PIP Limits May Sue for Medical Bills Over Those Limits
    By: Noah Gradofsky, Esq.
    February 20, 2012 with updates added February 17, 2015 and July 7, 2017, and June 25, 2018

    PLEASE NOTE THAT THIS ARTICLE IS SUPERSEDED BY THE ARTICLE ABOVE

    Although "standard" New Jersey PIP coverage, provided for in N.J.S.A. 39:6A-4, generally covers $250,000 of medical bills, N.J.S.A. 39:6A-4.3(e) allows insurers to offer coverage options that limited PIP to $150,000, $75,000, $50,000 or $15,000 (although these coverages are increased to $250,000 for particularly serious injuries). It is worth noting that N.J.S.A. 39:6A-3.1 and N.J.S.A. 39:6A-3.3 also provide for lesser PIP coverages known as "basic" and "special" coverage, respectively (for further dicussion see here). As the options for these lesser coverages were added to the New Jersey PIP statutes over time, how these provisions relate to other provisions within the PIP scheme is often less than clear. One such issue has resulted in differing opinions by New Jersey trial courts.

    In Wise v. Marienski, 425 N.J. Super. 110 (Law Div. 2011), Union County Superior Court Judge Kenneth J. Grispin wrestled with whether a person covered under a "standard" policy with $15,000 of coverage could seek recovery of any excess medical bills from the tortfeasor. Judge Grispin answered the question in the affirmative, thus coming to the opposite conclusion of an unpublished Bergen County Law Division case, Kim v. Kim, Docket No. BER-L-5471-08, 2010 N.J. Super. Unpub. LEXIS 2302, (Law Div., 2010).

    At issue in these cases was the interpretation of N.J.S.A. 39:6A-12, a provision that basically prohibits injured parties from recovering from tortfeasors for medical costs that could have been paid under PIP coverage. The statute reads in part:

    Except as may be required in an action brought pursuant to . . . (C. 39:6A-9.1), evidence of the amounts collectible or paid under a standard automobile insurance policy . . . a basic automobile insurance policy pursuant to section 4 of P.L. 1998, c. 21 (C. 39:6A-3.1) and . . . under a special automobile insurance policy . . . to an injured person, including the amounts of any deductibles, copayments or exclusions . . . is inadmissible in a civil action for recovery of damages for bodily injury by such injured person. . . .

    Nothing in this section shall be construed to limit the right of recovery, against the tortfeasor, of uncompensated economic loss sustained by the injured party.

    Although this statute serves as an evidentiary bar, it effectively makes it impossible to recover from a tortfeasor the amounts collectible or paid under standard, basic, or special PIP coverage. But, as noted, the normal "standard" policy covers $250,000 in medical expenses. What if the injured party is entitled to only $15,000 of PIP coverage under a "standard" policy? May the injured party recover the balance of medical expenses from the tortfeasor?

    In Kim the Bergen County Superior Court prohibited such a recovery. The court reasoned that since generally the "standard" PIP coverage covers $250,000 in expenses, the N.J.S.A. 39:6A-12 limitation on recovery of "amounts collectible or paid under a standard automobile insurance policy," would serve to prohibit recovery of $250,000 worth of medical expenses covered under PIP regardless of whether the person elected to have $250,000 in coverage. The court was influenced by a series of cases, including Roig v. Kelsey, 135 N.J. 500 (1994) and D’Aloia v. Georges, 372 N.J. Super. 246 (App. Div. 2004), which found that PIP deductibles were not recoverable under N.J.S.A. 39:6A-12. Roig reasoned that by choosing a PIP deductible, the insured accepted the tradeoffs between the possible out-of-pocket expense of a deductible versus the cost of a policy with a lesser deductible. Roig also reasoned that the New Jersey PIP scheme is designed to limit fault based recovery for medical costs.

    In Wise, Judge Grispin argued that Kim was contrary to the plain meaning of the PIP statutes. Wise notes that N.J.S.A. 39:6A-12 explicitly permits recovery of "uncompensated economic loss," and that N.J.S.A. 39:6A-2(k) explicitly includes "medical expenses" in the definition of "economic loss." Wise distinguished the Roig and D'Aloia cases, because the language of N.J.S.A. 39:6A-12 was interpreted to prohibit evidence of copayments and deductibles, and thus logically "economic loss" did not include such copayments and deductibles.

    The Wise decision reasoned that where N.J.S.A. 39:6A-12 prohibits recovery of "amounts collectible or paid under a standard automobile insurance policy," the "standard automobile policy" should be understood as a PIP policy covering $15,000 or more. The court noted that N.J.S.A. 39:6A-2(n) defines a "standard automobile policy" as a policy with the coverages required in N.J.S.A. 39:6A-4, which in turn permits the different levels of coverage permitted in N.J.S.A. 39:6A-4.3(e).

    Although not discussed by the court, it seems that another argument in favor of the result in Wise is the explicit mention in N.J.S.A. 39:6A-12 of amounts covered under the "basic" and "special" PIP policies, which indicates that holders of such policies would be entitled to recover from the tortfeasor for any medical expenses not within their lesser coverage. It seems unlikely that holders of these lesser policies would be given a right of recovery that holders of $15,000 "standard" PIP policies would not have.

    On the other hand, there is a significant argument that Wise results in a particularly unfair scenario when one takes issues of subrogation into account. Under N.J.S.A. 39:6A-9.1, amounts paid under PIP may not be recovered from an at-fault vehicle if that vehicle is subject to the PIP requirement and has PIP coverage. Though there is no case law on piont, this would presumably includes an at-fault vehicle with a $15,000 "basic" policy. This would mean that a vehicle carrying $15,000 in PIP would be protected from $250,000 in liability to a person carrying regular PIP limits, but would be able to hold an at-fault vehicle liable for all of his or her medical bills beyond his or her $15,000 limits. Take, for example, the situation where A carries $15,000 in PIP, and B carries $250,000 in PIP. If A is at fault and B's insurer pays $250,000 in PIP, B's insurer will not be able to recover that $250,000. On the other hand, if B was at fault and caused $250,000 in medical bills to A, A's insurer would pay $15,000 and A could sue B for $235,000 in medical costs. To the extent that Wise was properly decided, it may indicate a need for a significant amendment to the PIP statute to correct this unfairness.

    ADDITIONAL NOTE ADDED 2/17/15: The Appellate Division followed the Wise decision in Kimble v. Lavista, 2014 N.J. Super. Unpub. LEXIS 1308, 11-15 (App.Div. June 6, 2014) and also cited favorably to Wise in Adesina v. Santana, 2012 N.J. Super. Unpub. LEXIS 470, 15 (App.Div. Mar. 5, 2012)(noting that medical expenses beyond $250,000 covered by PIP are recoverable). However, these decisions are unpublished and therefore not binding. See N.J.R. 1:6-3.

    ADDITIONAL NOTE ADDED 7/7/17 AND UPDATED 2/7/18 - In the published opinion of Haines v. Taft, 450 N.J. Super. 295 (App.Div., 2017) certif. granted 231 N.J. 155 (2017) (available online here) the Appellate Division ruled that the holder of a $15,000 standard PIP policy could sue for medical bills in excess of the amounts coverd by that PIP policy. The matter is currently on appeal to the New Jersey Supreme Court which will likely settle this issue for the future.

    ADDITIONAL NOTE ADDED 6/25/18: Senate Bill S2432 proposes to specify that persons carrying less than $250,000 in PIP may sue for any medical costs that are above their available PIP limit (which would effectively adopt Haines). The bill was voted out of committte on 6/11/18 and can be tracked here.

     

    PRACTICE NOTES:

    This issue is also worthy of a few important practice notes. First, N.J.S.A. 2A:15-97 prohibits recovery in personal injury matters of amounts covered by insurance, except those recoveries allowed by the PIP loss-transfer statute, worker's compensation, or life insurance. Therefore, if a party insured under a $15,000 PIP policy were entitled to coverage under a medical insurance policy, the amounts covered under that policy would not be recoverable in suit (except if ERISA preemption applies; see http://www.janmeyerlaw.com/njpip/main_frame.html#erisa).

    A second important note is that Haines also creates an interesting possibility of UM/UIM exposure. If injured party P has a $15,000 "standard" PIP policy, the medical expenses that exceed this amount, and the tortfeasor is either uninsured or underinsiured, then the medical expenses not covered under P's PIP policy may be recoverable from P's insurer under the UM/UIM policy.

     

    Please visit our Guide to Recovery of PIP in New Jersey for the text of the key New Jersey statutes regarding PIP recovery, together with an outline of those statutes, hyperlinks to definitions of key terms, discussions of key provisions of each statute, relevant case law, and other selected issues of New Jersey subrogation.

    Please note that the information included herein is solely the product of Law Offices of Jan Meyer and Associates, P.C., and does not constitute legal advice. For legal advice kindly contact our office.