LIBERTY MUTUAL INSURANCE COMPANY VS. PENSKE TRUCK LEASING, CO. (L-3377-17, MONMOUTH COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: May 23, 2019
• Docket: A-5624-17T3
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-5624-17T3

LIBERTY MUTUAL INSURANCE COMPANY, a corporation, and EUGENE JERINSKY, APPROVED FOR PUBLICATION Plaintiffs-Appellants, May 23, 2019 v. APPELLATE DIVISION

PENSKE TRUCK LEASING, CO., a company, corporation and/or other business entity,

Defendant,

and

CEVA FREIGHT, LLC, a company, corporation and/or other business entity, and ALBERT KIKA,

Defendants-Respondents. _____________________________

Submitted March 12, 2019 – Decided May 23, 2019

Before Judges Yannotti, Rothstadt and Gilson.

On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3377-17.

Clark & Di Stefano, PC, attorneys for appellants (Robert P. Clark, on the briefs). Marks O'Neill O'Brien Doherty & Kelly PC, attorneys for respondents (Michael J. Notartomas, on the brief).

The opinion of the court was delivered by

GILSON, J.A.D.

Section 9.1 of the New Jersey Automobile Reparation Reform Act (the

No-Fault Act), N.J.S.A. 39:6A-1 to -35, provides insurers, which have paid

personal injury protection (PIP) benefits to their insured, with the statutory right

to seek reimbursement against certain tortfeasors. N.J.S.A. 39:6A-9.1. If the

tortfeasor is insured, the determination whether the insurer that paid the PIP

benefits is entitled to recover those payments and the amount of the recovery is

by agreement of the parties, and, if they are unable to agree, by arbitration. Ibid.

In this appeal, the non-PIP insurer disputes whether its insured was a

tortfeasor. Thus, the question presented is whether that dispute must be

arbitrated under Section 9.1 of the No-Fault Act or resolved in a court

proceeding. We hold that the issue of whether a party is a tortfeasor is to be

resolved at arbitration when that issue involves factual questions as to the fault

or negligence of the insured.

Accordingly, on this appeal we reverse the Law Division order dated June

4, 2018, which denied the motion of plaintiff Liberty Mutual Insurance

Company (Liberty or plaintiff) to compel defendant CEVA Freight, LLC

A-5624-17T3 2 (CEVA), a self-insured company, to arbitrate Liberty's demand for

reimbursement of PIP benefits. We also reverse a July 20, 2018 order denying

Liberty's motion for reconsideration. We remand with the direction that the Law

Division enter an order compelling CEVA and Liberty to arbitrate both whether

Liberty is entitled to the reimbursement and the amount of the reimbursement.

Thus, the arbitrator will determine whether the driver of the truck, which was

owned and self-insured by CEVA, was a tortfeasor.

I.

The basic facts concerning the underlying automobile accident are not in

dispute. At approximately 4:45 a.m. on October 7, 2016, a tractor-trailer truck

driven by Albert Kika and a pickup truck driven by Eugene Jerinsky were

involved in a collision. Kika was attempting to back the truck he was driving

into a car dealership located off the southbound lanes of Route 9 in Freehold.

While backing into the entrance to the dealership, Kika's truck blocked the

southbound lanes of Route 9. As Kika was maneuvering his truck into the

driveway, Jerinsky was driving his pickup truck in the right southbound lane of

Route 9 and his pickup truck struck the trailer of Kika's truck.

A police accident report stated that Kika "failed to yield [the] right-of-

way [to] traffic" while attempting to back his tractor-trailer into the dealership

A-5624-17T3 3 driveway. A witness gave a statement and reported that he was driving his

vehicle in the left southbound lane, saw the tractor-trailer blocking the roadway,

and was able to stop. The witness then saw the pickup truck hit the trailer. The

police report also stated that there was visible damage to the side of the trailer

and the front end of the pickup truck.

Jerinsky had automobile liability insurance provided by Liberty. Kika

was employed by CEVA, and CEVA owned and self-insured the truck driven by

Kika. CEVA does not maintain and is not required to maintain PIP coverage

because the truck was a commercial vehicle. See Empire Fire & Marine Ins. Co.

v. GSA Ins. Co., 354 N.J. Super. 415, 417 (App. Div. 2002) ("Commercial

vehicles are not within the definition of 'automobile' as used in N.J.S.A. 39:6A-

4 and, therefore, are not statutorily required to maintain PIP coverage.").

Following the accident, Jerinsky received medical treatment and applied to

Liberty for PIP benefits. Liberty opened a PIP claims file and began paying

Jerinsky's medical providers. Jerinsky also applied for automobile property

damage benefits. Liberty paid both types of benefits on behalf of Jerinsky.

In August 2017, Liberty requested reimbursement from CEVA for the PIP

benefits it had paid on behalf of Jerinsky. Liberty also informed CEVA that if

it would not agree to provide reimbursement, Liberty demanded arbitration of

A-5624-17T3 4 its right to reimbursement of the PIP benefits. CEVA, through its third-party

administrator, denied Liberty's request and refused to arbitrate the issue,

contending that Kika was not at fault for the accident.

In September 2017, Liberty and Jerinsky filed a complaint against CEVA

and Kika. Liberty demanded reimbursement of the PIP benefits it had paid on

behalf of Jerinsky. Liberty also demanded arbitration of its claim for

reimbursement of the PIP benefits. In addition, Liberty and Jerinsky sought

automobile property damages directly from defendants for the alleged total loss

of Jerinsky's vehicle.

CEVA and Kika filed an answer and CEVA admitted that it was self-

insured. Liberty again requested CEVA to consent to arbitration, but CEVA

continued to refuse to arbitrate Liberty's PIP benefits claim. Liberty, therefore,

filed a motion to compel CEVA to arbitrate the PIP benefit reimbursement claim

citing N.J.S.A. 39:6A-9.1. CEVA opposed that motion, contending that its

driver, Kika, was not a tortfeasor and the question of Kika's fault for the accident

should be decided in a court proceeding and not at arbitration.

After hearing oral arguments, the trial court denied Liberty's motion. The

court read its decision into the record on June 1, 2018, and supplemented those

reasons in a written rider to its order. The court reasoned that Section 9.1 of the

A-5624-17T3 5 No-Fault Act used the term "tortfeasor," but the statute did not define that term.

The trial court went on to reason that before Liberty could compel arbitration of

the amount of its reimbursement, there had to be a determination that CEVA's

insured was a tortfeasor. Consequently, the court held that the issue of Kika's

fault for the accident would be determined in a court proceeding, either by a

judge or jury. Thereafter, if Kika was found to be a tortfeasor, the amount of

reimbursement Liberty was entitled to receive would be determined at

arbitration in accordance with N.J.S.A. 39:6A-9.1. Thus, in an order dated June

4, 2018, the trial court denied Liberty's motion to compel CEVA to arbitration.

Liberty moved for reconsideration. The trial court again heard oral

argument, but on July 20, 2018, denied reconsideration. The trial court again

explained the reasons for its decision on the record.

II.

Liberty now appeals from the orders entered on June 4, 2018 and July 20,

2018, denying its motion to compel CEVA to arbitration. Liberty has a right to

appeal those orders because Rule 2:2-3 allows appeals from orders granting or

denying arbitration.

The central issue on this appeal is whether Section 9.1 of the No-Fault

Act, N.J.S.A. 39:6A-9.1, compels arbitration of the question whether a party is

A-5624-17T3 6 a tortfeasor when that issue is disputed. That issue requires us to construe the

statute and, therefore, is a question of law that we determine de novo.

Kocanowski v. Twp. of Bridgewater, 237 N.J. 3, 9 (2019) (citing State v. Fuqua,

234 N.J. 583, 591 (2018)).

A.

To put this issue in context, we will briefly review the No-Fault Act and

some of its relevant amendments. In 1972, the Legislature enacted the No-Fault

Act to eliminate inefficient common-law subrogation litigation among insurers

by "requiring automobile insurers to provide 'primary coverage' and 'pay the

medical expenses of [their] insured.'" Johnson v. Roselle EZ Quick LLC, 226

N.J. 370, 382-83 (2016) (alteration in original) (quoting State Farm Mut. Auto.

Ins. Co. v. Licensed Beverage Ins. Exch., 146 N.J. 1, 6 (1996)).

As originally enacted, the No-Fault Act provided that PIP insurers would

be "subrogated to the rights of any party to whom [they] make[] [PIP]

payments," through "'inter-company arbitration or by inter-company agreement'

with the tortfeasor's insurer." Id. at 383 (alterations in original) (quoting L.

1972, c. 70, § 9). That subrogation provision, however, became "inoperative"

two years after the effective date of the No-Fault Act. Ibid. (citing L. 1972, c.

70, § 9).

A-5624-17T3 7 In 1981, our Supreme Court addressed the question whether, following

the expiration of the No-Fault Act subrogation provision, an insurer had a

common-law right to subrogation. Aetna Ins. Co. v. Gilchrist Bros., Inc., 85

N.J. 550, 561-62, 566-67 (1981). The Court held that insurers had such a

subrogation right, but also held that the insurers could not seek reimbursement

because of other provisions of the No-Fault Act. Id. at 566-67. In that regard,

the Court pointed out that another section of the No-Fault Act stated that

"[e]vidence of the amounts collectible or paid pursuant to [PIP coverage] is

inadmissible in a civil action for recovery of damages for bodily injury by such

injured person." Id. at 562 (quoting N.J.S.A. 39:6A-12). Thus, the Court

reasoned that the No-Fault Act had extinguished an insured person's right to

maintain an action for PIP payment and, as a result, the insurer had no right to

reimbursement through subrogation. Ibid.

The Legislature responded in 1983 by enacting Section 9.1. N.J.S.A.

39:6A-9.1; L. 1983, c. 362, § 20. That provision allows automobile insurers to

recover PIP benefits through reimbursement against certain tortfeasors. Thus,

Section 9.1 created a right of reimbursement belonging to the insurer and not

dependent on a right of subrogation. Johnson, 226 N.J. at 383-84 (citing State

Farm, 146 N.J. at 9). In 2011, Section 9.1 was amended to make clear that an

A-5624-17T3 8 insurer's reimbursement right was subject to any personal injury claim by the

insured and that the reimbursement could be paid only after satisfaction of that

personal injury claim. N.J.S.A. 39:6A-9.1; L. 2011, c. 11, § 1.

Currently, subsection (a) of Section 9.1 provides that an insurer that has

paid PIP benefits as a result of an accident in New Jersey has a right to recover

those benefits from any "tortfeasor" that is not required to maintain PIP

protection or did not maintain PIP protection. Specifically, the statute states:

An insurer, health maintenance organization or governmental agency paying benefits pursuant to subsection a., b. or d. of [N.J.S.A. 39:6A-4.3], personal injury protection benefits in accordance with [N.J.S.A. 39:6A-4 or -10], medical expense benefits pursuant to [N.J.S.A. 39:6A-3.1] or benefits pursuant to [N.J.S.A. 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 [N.J.S.A. 17:28-1.4], or although required did not maintain personal injury protection or medical expense benefits coverage at the time of the accident.

[N.J.S.A. 39:6A-9.1(a).]

Subsection (b) of Section 9.1 goes on to state that if the tortfeasor is

insured, the reimbursement is to be made by the insurer. N.J.S.A. 39:6A-9.1(b).

A-5624-17T3 9 This subsection also states that the determination of whether the insurer that paid

PIP benefits is entitled to recover and the amount of the recovery shall be made

by agreement of the parties, or if they cannot agree, in arbitration. In that regard,

the statute states:

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.

[N.J.S.A. 39:6A-9.1(b).]

In summary, Section 9.1 "creates a direct right of reimbursement, not a

subrogation right." Unsatisfied Claim & Judgment Fund Bd. v. N.J. Mfrs. Ins.

Co. (UCJF), 138 N.J. 185, 191 (1994). The statute "allows PIP carriers to

recover not from other PIP carriers but from non-PIP carriers and uninsureds."

Ibid. If there is a non-PIP carrier involved, the two insurers are either to agree

on the reimbursement claim or, if they cannot agree, the dispute is to be resolved

A-5624-17T3 10 in arbitration. N.J.S.A. 39:6A-9.1(b). With this statutory overview, we turn to

the issue in this case.

B.

CEVA is self-insured and, as the owner of a commercial vehicle, it was

not required to carry PIP coverage. See Empire Fire, 354 N.J. Super. at 417

(first citing N.J.S.A. 39:6A-4; and then citing N.J.S.A. 39:6A-2(a)). As a self-

insured entity without PIP coverage, CEVA is subject to N.J.S.A. 39:6A-9.1.

Liberty Mut. Ins. Co. v. Thomson, 385 N.J. Super. 240, 243 (App. Div. 2006)

("Under the No-Fault Law, our courts have consistently held that 'a self-insurer's

coverage obligations are co-extensive with the obligations of those possessing

liability policies.'" (citation omitted) (quoting Ryder/P.I.E. Nationwide, Inc. v.

Harbor Bay Corp., 119 N.J. 402, 410 (1990))).

Liberty argues that because CEVA's status as a self-insured entity brings

it within the ambit of N.J.S.A. 39:6A-9.1(b), CEVA is required to arbitrate the

issue of whether Kika was negligent and, therefore, a "tortfeasor," to determine

whether Liberty is "legally entitled" to reimbursement of PIP benefits paid on

behalf of Jerinsky. CEVA, in contrast, contends that Kika's negligence is a legal

issue to be determined in a court proceeding and that N.J.S.A. 39:6A-9.1(b) does

A-5624-17T3 11 not apply to it until Kika's status as a "tortfeasor" is established. We agree with

Liberty and reject the position of CEVA.

As noted earlier, the question presented is a question of statutory

interpretation. Specifically, if there is a dispute concerning whether one of the

drivers was at fault, did the Legislature intend that the dispute would be resolved

in arbitration?

When construing a statute, our goal is "to discern and implement" the

Legislature's intent. State v. Smith, 197 N.J. 325, 332 (2009). The language of

the statute provides "the best indicator of that intent." DiProspero v. Penn, 183

N.J. 477, 492 (2005) (citing Frugis v. Bracigliano, 177 N.J. 250, 280 (2003)).

"We ascribe to the statutory words their ordinary meaning and significance[.]"

Ibid. (citing Lane v. Holderman, 23 N.J. 304, 313 (1957)). Furthermore, a court

may not "rewrite a plainly-written" statute or "presume that the Legislature

intended something other than that expressed by way of the plain language."

Ibid. (quoting O'Connell v. State, 171 N.J. 484, 488 (2002)).

The language of N.J.S.A. 39:6A-9.1(b) is clear on its face when it states

that "the determination as to whether an insurer . . . is legally entitled to recover

the amount of payments and the amount of the recovery" shall be by agreement,

or, "upon failing to agree, by arbitration." The plain meaning of the words

A-5624-17T3 12 "legally entitled to recover" includes disputes about whether the non-PIP

insurer's insured was a tortfeasor. Moreover, the phrase "the amount of

payment" is a separate and additional concept from "legally entitled to recover,"

thereby further clarifying that the first phrase refers to disputes over whether an

insured is a tortfeasor.

We also consider the legislative intent of the No-Fault Act in construing

Section 9.1. See Haines v. Taft, 237 N.J. 271, 283-84 (2019). Interpreting

Section 9.1 to include arbitration of factual disputes over whether an insured is

a tortfeasor is consistent with and helps promote the goal of the No-Fault Act,

which "is to avoid excessive litigation related to accidents and insurance[.]"

UCJF, 138 N.J. at 205. "[T]he reimbursement right conferred by [S]ection 9.1

encompasses all tortfeasors that are not subject to the No-Fault law[,]" and was

intended to alleviate the court system of reimbursement litigation by requiring

claims to be arbitrated. State Farm, 146 N.J. at 14-15. See also Haines, 237

N.J. at 283-84, 290 (explaining that a major legislative intent of the No-Fault

Act was to contain costs, and one way to reduce costs was to limit litigation in

favor of arbitration).

CEVA and the trial court focused on the word "tortfeasor" and reasoned

that the statute was inapplicable to CEVA until Kika is determined to be the

A-5624-17T3 13 "tortfeasor." To accept that argument, the Law Division would first need to

adjudicate the factual dispute whether Kika was negligent. That proceeding

could well involve a protracted trial. Such an interpretation would undermine

the statutory scheme by creating an extra and potentially lengthy step in what

the Legislature intended to be an expeditious and efficient process.

Thus, the statutory provision has to be read in full context. Such a

construction is also consistent with well-established case law. In 1996, our

Supreme Court ruled that the phrase "any tortfeasor" in the No-Fault Act was

intended to have "a broad meaning" encompassing "all tortfeasors that are not

subject to the No-Fault law." State Farm, 146 N.J. at 13-15.

CEVA relies on several cases for the proposition that a "purely legal"

question of who is a tortfeasor should not be resolved through arbitration. See

AAA Mid-Atlantic Ins. of N.J. v. Prudential Prop. & Cas. Ins. Co., 336 N.J.

Super. 71 (App. Div. 2000); Coach USA, Inc. v. Allstate N.J. Ins. Co. 354 N.J.

Super. 277 (App. Div. 2002); Hanover Ins. Co. v. Borough of Atl. Highlands,

310 N.J. Super. 568 (App. Div. 1998). Each of these cases is distinguishable

from this case.

The cases cited by CEVA are based on the general principle that purely

legal questions should generally be decided by a court. For example, in AAA

A-5624-17T3 14 Mid-Atlantic, we addressed the issue whether parents who served alcohol to

their adult child, who subsequently was involved in a car accident, were

"tortfeasors" under N.J.S.A. 39:6A-9.1. 336 N.J. Super. at 73. Noting that the

case involved "a question of a statutory defense" under the social host liability

statute, we held that a court, rather than arbitrators, should decide that purely

legal question. Id. at 77.

Similarly, in Coach USA, we addressed the issue of whether insurers

could seek automobile PIP reimbursement from insurers whose policies covered

bus PIP payments only. 354 N.J. Super. at 278. We rejected the idea that the

issue should be resolved in arbitration, declining to subject a decision of

statutory interpretation to arbitration. Id. at 282. Instead, we held that the issue

presented a purely legal question that should be decided by a court. Ibid.

Finally, the issue in Hanover Insurance Co. was whether a public entity

tortfeasor must reimburse a PIP carrier pursuant to Section 9.1. 310 N.J. Super.

at 570. After determining that the appeal presented a "single legal question"

with "no material facts in dispute," we held that public entity tort immunity

applies to actions brought under Section 9.1. Id. at 570, 572.

Here, the question whether Kika was a tortfeasor does not present a purely

legal question. Instead, it presents a factual issue. Accordingly, that issue is

A-5624-17T3 15 appropriate for arbitration. Again, the language of the statute itself includes the

determination as to whether the insurer seeking PIP reimbursement "is legally

entitled to recover." N.J.S.A. 39:6A-9.1(b). Consequently, the statute calls for

a determination of liability through agreement of the parties or arbitration.

The orders denying Liberty's motion to compel arbitration are reversed.

The matter is remanded with the direction that the trial court enter an order

compelling CEVA to arbitrate all issues related to Liberty's request for

reimbursement of PIP benefits.

Reversed and remanded. We do not retain jurisdiction.

A-5624-17T3 16