Schaefer v. Allstate NJ Ins. Co.

Citations: 870 A.2d 745; 376 N.J. Super. 475

Court: New Jersey Superior Court; April 15, 2005; New Jersey; State Appellate Court

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The legal matter revolves around whether the medical expense benefits (MEB) for injuries sustained by passengers on a bus should be provided by the bus company’s insurer or by the injured passenger's automobile insurer. The court determined that the bus company’s insurer, United States Fidelity Guaranty Co. (USF&G), is solely responsible for these benefits, despite the injured passengers also having personal injury protection (PIP) coverage under their automobile insurance policies.

The plaintiffs, Charlotte Schaefer, Cynthia Lee, and Denise Sottilare, were injured in separate incidents while riding buses insured by USF&G. Each plaintiff held personal automobile insurance that included PIP benefits, which are mandated under New Jersey law (N.J.S.A. 39:6A-4). However, USF&G's insurance policies for the buses provided MEB coverage as required by another statute (N.J.S.A. 17:28-1.6).

After incurring medical expenses, the plaintiffs sought reimbursement from both USF&G and their respective automobile insurers, but both denied coverage, claiming the other was responsible. This led the plaintiffs to initiate legal actions seeking declaratory judgments to clarify which insurer was obligated to pay their claims. The Court's ruling affirmed that the bus company’s insurer remains liable for MEB, resolving the coverage dispute.

Three separate trial courts addressed cases involving plaintiffs seeking medical expense benefits (MEB) under policies issued by USF&G to bus companies. Lee's case was initiated via an order to show cause, while the other two cases involved cross-motions for summary judgment. All trial courts concluded that the plaintiffs were entitled to MEB under USF&G's policies and that their personal injury protection (PIP) automobile policies did not cover the accidents, as the plaintiffs were not in, entering, or exiting their vehicles at the time of the incidents. In Lee, the court awarded counsel fees and costs amounting to $5,448, whereas in Sottilare, the request for such fees was denied. USF&G appealed the judgments requiring it to cover MEB for the plaintiffs' medical expenses, and Sottilare cross-appealed the denial of fees. The appeals were consolidated, resulting in the affirmation of the judgments mandating USF&G's payment of MEB while reversing the denial of Sottilare's fees.

The New Jersey Automobile Reparation Reform Act, known as the "No Fault Act," mandates that standard automobile policies provide PIP benefits for medical expenses to insured individuals and family members injured while using an automobile. The statute defines "automobile" in a way that excludes buses. In 1991, the Legislature enacted provisions allowing MEB up to $250,000 for injuries sustained by bus passengers, while also imposing a verbal threshold for lawsuits against bus owners or operators. Consequently, individuals injured on a bus are not entitled to PIP benefits but may claim MEB. USF&G contends that under N.J.S.A. 39:6A-4.2, the responsibility for MEB payments should shift from the bus's insurer to the passenger's automobile insurer if the passenger is insured under an automobile policy. N.J.S.A. 39:6A-4.2 establishes that the PIP coverage of the named insured is primary, preventing recovery under multiple automobile policies for injuries from a single accident.

N.J.S.A. 39:6A-4.2 focuses on determining the "primary" coverage for PIP benefits when an injured party is covered by multiple automobile policies. However, since the plaintiffs were injured while using buses, they are not entitled to PIP benefits under any automobile policy, thus eliminating any need to address the primacy of such coverages under N.J.S.A. 39:6A-4.2. USF&G argues that this provision should apply to N.J.S.A. 17:28-1.6, which mandates MEB for bus passengers, suggesting a legislative oversight occurred when the 1991 law did not incorporate a similar directive for bus insurers. This argument is supported by the precedent set in Park v. Park, where it was determined that the deemer statute applies to MEB coverage, despite its lack of specific reference to N.J.S.A. 17:28-1.6. The court in Park also stated that insurers offering MEB benefits could seek reimbursement under N.J.S.A. 39:6A-9.1. The court emphasized the necessity of a cohesive legislative scheme that integrates these statutory provisions, warning against interpreting the omission of bus-passenger PIP coverage as intentional. Nonetheless, the court clarified that not all PIP provisions should automatically apply to MEB statutes, indicating a cautious approach toward amendments by implication, which was deemed appropriate in the Park case. In Lymon v. Cape Transit Corp., the court reiterated that N.J.S.A. 39:6A-4 and N.J.S.A. 17:28-1.6 are distinct and should not be conflated with other PIP statutes, apart from the deemer and reimbursement provisions.

The plaintiff in Lymon was rear-ended by a bus owned by the defendants, who contended that the plaintiff's personal injury claim should meet the "verbal threshold" for tort liability under N.J.S.A. 39:6A-8, despite the bus not qualifying as an "automobile" under N.J.S.A. 39:6A-2(a). The court rejected this argument, stating that the legislative scheme for PIP benefits in N.J.S.A. 39:6A-8 is distinct from the provisions for bus passengers in N.J.S.A. 17:28-1.6 and -1.7. The plaintiff was not a bus passenger, and therefore, the bus did not fit the statutory definition of an automobile, which excludes the defendants from liability under PIP requirements.

In Coach USA, Inc. v. Allstate N.J. Ins. Co., it was reaffirmed that N.J.S.A. 39:6A-9.1 allows insurers who pay PIP benefits to seek reimbursement from tortfeasors that are exempt from maintaining PIP, and this principle should be applied within the context of MEB provisions for bus passengers. Thus, an automobile insurer could not seek reimbursement from bus owners involved in accidents with their insureds, as the bus owners were liable under MEB statutes.

The court clarified that while Park established a need to view the statutes as a unified scheme for reimbursement, it does not imply that all provisions regarding automobile insurers' PIP obligations apply to MEB benefits for bus passengers. The absence of a requirement for MEB payments from an injured bus passenger's automobile insurer in the statutes cannot be interpreted as a legislative oversight warranting remedial judicial action. N.J.S.A. 39:6A-4.2 aims for transactional efficiency, stipulating that when an injured party could receive PIP benefits from two policies, only their own insurer is liable. Since plaintiffs were not entitled to PIP benefits under their policies due to injuries occurring while using buses, N.J.S.A. 39:6A-4.2 is not applicable, and any shift of MEB payment responsibility from the bus company's insurer to the injured passenger's automobile insurer would represent a different policy decision than that captured in N.J.S.A. 39:6A-4.2.

Assignment of primary responsibility for the payment of Medical Expense Benefits (MEB) among automobile insurers aims to enhance efficiency and lower costs for policyholders. Requiring automobile insurers to pay MEB for personal injuries to passengers on buses would increase their claims expenses and premiums while decreasing those for bus insurers. Thus, there is no implied legislative intent under N.J.S.A. 39:6A-4.2 to transfer MEB payment responsibility from bus insurers to automobile insurers. Counsel fees are typically awarded under II Rule 4:42-9(a)(6) for successful claimants in liability or indemnity insurance actions, and an exception applies in PIP cases. MEB coverage for bus passengers is akin to PIP coverage, qualifying bus passengers who win MEB claims for counsel fees.

The trial court denied Sottilare's counsel fee application, stating the coverage issue had already been presented through summary judgment motions. However, this denial was unjustified since Sottilare incurred fees to pursue her claim after both insurers denied her reimbursement for medical expenses from a bus accident. USF&G's claim that Sottilare is not entitled to counsel fees because a specific MEB amount is not yet established is rejected; a declaratory judgment confirming USF&G’s obligation suffices to warrant such an award. The trial court also wrongly denied Sottilare's request for costs, as Rule 4:42-8 generally allows costs to the prevailing party unless there are special reasons to deny them. Consequently, the judgments affirming USF&G's obligation to pay MEB are upheld, while the denial of Sottilare's counsel fees and costs is reversed, and the case is remanded to determine the amounts owed.