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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 was last updated on October 21, 2013.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.
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.
Click here 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.
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 transportation.
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.
Click here 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.
N.J.S.A. 39:6A-11: Pro-rata sharing when more than one PIP policy applies (rare)
If two or more insurers are liable to pay benefits under sections 4 and 10 of P.L.1972, c. 70 (C.39:6A-4 and 39:6A-10) under a standard automobile insurance policy for the same bodily injury, or death, of any one person, the maximum amount payable shall be as specified in those sections 4 and 10 of P.L.1972, c. 70 (C.39:6A-4 and 39:6A-10) , section 4 of P.L.1998, c. 21 (C.39:6A-3.1) and section 45 of P.L.2003, c.89 (C.39:6A-3.3), respectively, if additional first party coverage applies and any insurer paying the benefits shall be entitled to recover from each of the other insurers, only by inter-company arbitration or inter-company agreement, an equitable pro-rata share of the benefits paid.
In sum, the "Follow the Family" exclusion comes down to two points. First, it 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 all other policies have an exclusion. 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).
N.J.S.A. 39:6A-6 Recovery of PIP from a Worklers' Compensation Carrier.
39:6A-6 Collateral source.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.
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):
Based on this analysis, all self-insured ERISA plans, as well as fully-insured disability plans will be able to subrogate in New Jersey. Fully-funded ERISA plans will not be able to subrogate in New Jersey.
Primary, excess, and co-primary coverage.
Uninsured/Underinsured Motorist Subrogation (UM/UIM)
In Proformance Insurance Co. v. Jones, 185 N.J. 406 (2005), the New Jersey Supreme Court found that a policy that excluded coverage for liability arising from using a vehicle in the course of business was invalid. The court, however, held that the reformed policy would apply only to the state minimum required coverage. The court applied the same logic that NJ courts applied in the case where coverage was denied for material misrepresentation. See e.g. Marotta v. New Jersey Automobile Full Insurance Underwriting Assn., 280 N.J. Super. 525, 656 A.2d 20, aff'd, 144 N.J. 325, 676 A.2d 1064 (1996) and further discussion below. The court reasoned that the innocent third party who was injured in the accident only had the right to presume that the vehicle causing the injury would have 15/30/5 coverage.
On the other hand, in Potenzone v. Annin Flag Co., 191 N.J. 147 (N.J. 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 business use 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 that case 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.
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 for fully 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.