Where PIP Reimbursement Sought, Arbitrator Must Decide If Party Is Tortfeasor
The appeals court reversed a Law Division order denying the motion of Liberty Mutual Insurance Co. to compel a self-insured trucking company to arbitrate Liberty's demand for reimbursement of personal injury protection benefits.
May 23, 2019 at 05:17 PM
5 minute read
An auto insurer who seeks reimbursement from a tortfeasor after paying personal injury protection benefits to its policyholder is entitled under the state No-Fault Act to arbitration of any dispute over who was at fault in the crash, the Appellate Division has ruled.
The appeals court reversed a Law Division order denying the motion of Liberty Mutual Insurance Co. to compel a self-insured trucking company to arbitrate Liberty's demand for reimbursement of PIP benefits. The appeals court remanded the case to the Law Division for entry of an order compelling Liberty and the trucking company to arbitrate whether Liberty is entitled to the reimbursement and the amount, as well as whether the driver of the truck was a tortfeasor.
Judges Joseph Yannotti, Garry Rothstadt and Robert Gilson rejected the trial court's reasoning that the trucking company, Ceva Freight, could not be compelled to arbitrate because no determination had been made as to whether it was a tortfeasor. Superior Court Judge Lourdes Lucas, in Monmouth County, denied Liberty Mutual's bid for arbitration based on a finding that the statute did not define the term “tortfeasor.”
The suit stems from a collision between a tractor-trailer and a pickup truck on southbound Route 9 in Freehold on Oct. 7, 2016. Albert Kika was backing his tractor-trailer into a car dealership when a pickup truck driven by Eugene Jerinsky hit the trailer of Kika's truck. A police report said Kika “failed to yield the right-of-way to traffic” while backing his tractor-trailer into the dealership.
Jerinsky had an auto insurance policy from Liberty Mutual. Kika was employed by Ceva Freight, which owned and self-insured the truck. Jerinsky received medical treatment and applied to Liberty for PIP benefits.
In August 2017, Liberty requested reimbursement from Ceva for the PIP benefits it paid on behalf of Jerinsky and stated that if it did not agree to provide reimbursement. Liberty demanded arbitration of its right to reimbursement. Ceva, through its third-party administrator, denied Liberty's request for reimbursement, refused to arbitrate the issue and contended that its driver was not at fault for the accident.
Liberty and Jerinsky filed suit against Ceva and Kika in September 2017, demanding reimbursement of the PIP benefits and arbitration of its claim. The suit also sought automobile property damages for Jerinsky's vehicle, which was alleged to be a total loss.
Lucas denied Liberty's motion to compel arbitration of the PIP reimbursement claim. Ceva opposed the claim, arguing that the question of Kika's fault for the crash should be decided in court and not at arbitration.
On June 1, 2018, Lucas denied Liberty's motion, reasoning that before it could compel arbitration of the amount of its reimbursement, there had to be a determination that Kika was a tortfeasor. Kika's fault for the accident would be decided in a court proceeding, either by a judge or jury.
Liberty appealed the ruling, and the appeals court said the central issue to be decided is whether the No-Fault Act compels arbitration of a dispute over whether a party is a tortfeasor. The appeals court said the statute 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,” Gilson wrote for the panel.
“The plain meaning of the phrase '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,” Gilson wrote.
To accept the trial court's argument that the statute did not apply to Ceva until Kika is determined to be a tortfeasor would require adjudication of a factual dispute concerning whether Kika was negligent, which could involve a prolonged trial, the appeals court said.
“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,” Gilson wrote.
Case law cited by Lucas, which stood for the proposition that a “purely legal” question should not be resolved through arbitration, is distinguishable from the present case, which presents a factual issue, the appeals court said.
Robert Clark of Clark & DiStefano in Sea Girt, who represents Liberty Mutual and Jerinsky, said the question that arose in the present case is one that his firm encounters regularly, thanks to case law consulted by Lucas, such as AAA Mid-Atlantic Insurance of N.J. v. Prudential Property & Casualty Insurance.
“Hopefully this sets it right. I think it's a worthwhile opinion,” Clark said. “This should be the end of that nonsense where somebody fights you on an order to compel arbitration.”
Michael Notartomas of Marks, O'Neill, O'Brien, Doherty & Kelly in Cherry Hill, who represented Ceva Freight and Kika, did not return a call about the case.
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