Court Opinion

ID: 9746854
Source: CourtListenerOpinion
Date Created: 2023-08-27 14:41:17.787579+00
Date Added: 2024-06-11T07:24:59.648773
License: Public Domain

SULLIVAN, J.,
dissenting.
While I concur in parts I and II of the majority opinion, I disagree with the majority’s conclusion in part III, that subrogation law bars Aetna’s claim in this case. Since I am convinced that today’s ruling will result in private automobile owners “subsidizing” the cost of insurance on non-PIP-covered commercial vehicles in this State, and since such a result is unreasonable *568and inequitable on its face and clearly conflicts with the purposes of the No Fault Act,1 I respectfully dissent.
Under today’s ruling the tortfeasor is given immunity from liability for the PIP damages he caused and Aetna’s right to reimbursement for PIP obligations incurred is limited to requests for rate increases from the Department of Insurance. In essence, the PIP insurer’s own customers will ultimately pay, through higher PIP premiums, for tortious conduct by operators of commercial vehicles.2 Commercial insurers, on the other hand, are not subject to the provisions of the No Fault Act and, thus, suffer from no similar restriction on their right to sue private automobile operators and their PIP insurers for PIP-type expenses paid to their commercial insureds. They enjoy reimbursement and subrogation rights under our workers’ compensation statute. N.J.S.A. 34:15-40(a), (b), (f). As a result, workers’ compensation carriers are free to recover for benefits paid their insureds as a result of negligence by private automobile operators, and thus, are able to avoid unwarranted increases in the liability rates of their insureds. This imbalance in the subrogation rights of insurance carrier will necessarily result in higher liability insurance premiums for private automobile own*569ers in this State with a corresponding windfall for commercial vehicle owners.
In Cirelli v. Ohio Casualty Ins. Co., 72 N.J. 380 (1977), we considered whether the No Fault Act placed any limitation upon a New Jersey No Fault insurer’s contractual subrogation rights, where the accident in question occurred in New York and involved a New York tortfeasor. In ruling that the subrogation provisions of the No Fault Act were inapplicable, we held that
where the accident occurs outside New Jersey and a New Jersey and an out of state vehicle are involved, the predicate for the PIP provisions preventing subrogation does not exist. Elimination of subrogation rights among New Jersey carriers may operate to reduce premium costs because of reduced administrative expenses, including counsel fees. This factor may be absent when an out of state insurance carrier is involved. The shifting of dollars among New Jersey and out of state carriers may be an element in fixing the cost of automobile liability policies in New Jersey. If insurers of New Jersey vehicles are deprived of subrogation rights, liability carriers in foreign jurisdictions may reap an unjustifiable benefit. In other words the New Jersey insurance company could not collect from the New York tortfeasor or his insurance carrier. Those out of state insurance companies in turn may not be subject to such deprivation in favor of the New Jersey carrier. The Legislature certainly did not intend that New Jersey residents should subsidize residents of other jurisdictions. [Id. at 387-388; emphasis added]
This same rationale is equally applicable in the case sub judi-ce. The Legislature no more intended that private automobile owners should subsidize commercial vehicle owners in this State than it intended that New Jersey residents subsidize New York automobile owners.
A more reasonable interpretation of the No Fault Act, first, recognizes N.J.S.A. 39:6A-12 as an evidentiary exclusionary rule only, having no effect on the subrogation rights of PIP insurers. The majority’s analysis, which utilizes the plain language of N.J.S.A. 39:6A-12 and strict enforcement of traditional principles of subrogation law to deny plaintiff’s subrogation claim, overlooks the unique circumstances posed by the No Fault Act’s applicability in this case. The equitable principles of subrogation law cannot be routinely applied in a situation where the Legislature has dramatically altered the contractual rights and liabilities of the parties to an insurance contract. Moreover, it is *570axiomatic that a court will not strictly enforce equitable doctrines where to do so would lead to an unjust result. See Midland Bank & Trust Co. v. Fidelity & Deposit Co. of Md., 442 F.Supp. 960, 973 (D.N.J.1977); Fidelity & Cas. Co. of New York v. First Nat’l Bank in Fort Lee, 397 F.Supp. 587, 589 (D.N.J. 1975), app. dism., 538 F.2d 319 (3d Cir. 1976).
Second, I read N.J.S.A. 39:6A-9 as eliminating, as of January 1, 1975, all subrogation rights of PIP insurers for PIP obligations incurred, but only where all the insurance carriers involved in a given dispute are subject to the requirements of the No Fault Act.3 Only when all vehicles involved in an accident are PIP-covered is the policy behind the Act’s subrogation bar served (the elimination of cumbersome and uneconomic shifting of dollars from one insurance company to another) because only in this instance do all insurance carriers involved stand on equal footing.4 Under this interpretation of N.J.S.A. 39:6A-12 and 39:6A-9, in cases where section 9’s subrogation bar would be inapplicable, the contractual subrogation rights of the PIP carrier would be fully recognized.
The majority asserts that “significant economic reasons” justify the denial of subrogation rights here. It points out, first, that today’s ruling guarantees the fast and efficient reimbursement of medical expenses of all injured persons, regardless of fault. Second, it states that administrative costs and counsel *571fees will be saved as a result of the decrease in litigation. Finally, while the majority concedes that its ruling will not benefit the vast majority of New Jersey residents who own only private passenger vehicles, it claims the ruling will have some, unstated, “favorable financial impact” on those New Jersey consumers who own and insure both commercial and private passenger motor vehicles. I am not persuaded that any of these claimed “economic reasons” justify the result reached in this case.
Initially, I note that the fast and efficient reimbursement of medical expenses, guaranteed by N.J.S.A. 39:6A-5, is assured regardless of our holding as to Aetna’s subrogation claim. Second, while the recognition of subrogation rights under these facts would increase the administrative costs, including counsel fees, of PIP carriers, these costs would undoubtedly be more than offset by the recovery of PIP expenses from those ultimately responsible for the underlying personal injuries (non-PIP carriers and their insureds). Finally, the only “favorable financial impact” that I foresee accruing to the few New Jersey residents who own both commercial and private passenger vehicles will be lower liability rates for their commercial coverage. As heretofore noted, commercial vehicle owners as a class necessarily enjoy a windfall under today’s ruling. PIP premiums on all private passenger vehicles, however, including those owned by commercial vehicle owners, will undoubtedly rise as a result of the imbalance in subrogation rights that, henceforth, will exist between commercial and private passenger vehicle carriers.
Furthermore, the majority apparently believes that the primary goal of N.J.S.A. 39:6A-12, barring an insured from introducing in any civil action evidence of PIP-covered expenses, was to prevent double recovery by insureds for PIP damages. In attempting to distinguish the ruling in Cirelli, the majority notes that “[tjhere is no reason why in New Jersey litigation the principle against double recovery should be thwarted.” 85 N.J. at 564. This perception of the primary purpose of section 12 is incorrect and the majority’s concern that the principle against double *572recovery would be thwarted were we to uphold Aetna’s right to subrogation in this case is unjustified.
First, as Iavicoli points out, the “principal reason” for the passage of section 12 was to deter plaintiffs from seeking unneeded medical treatment and thereby inflating medical expenses in hopes of currying jury sympathy at trial. Iavicoli, supra at 90. If in drafting section 12, the Legislature merely intended to preclude double recovery by insureds for PIP damages, it would not have constructed such an elaborate evidentia-ry rule. A provision stating that an insured shall hold in trust for his insurer any PIP-type damages recovered in an action against a tortfeasor would have been sufficient. A recognition of the unique evidentiary purpose underlying the passage of section 12 reinforces the conclusion that it was intended only to affect the. admissibility of evidence in suits brought by insureds — it was not intended to affect the subrogation rights of PIP insurers. Moreover, interpreting section 12 as having no effect on the subrogation rights of PIP insurers would in no way “thwart” the principle against double recovery. Under my interpretation of the Act, section 12 would continue to bar insureds from introducing evidence of PIP-covered expenses in any civil action. Section 9, meanwhile, would allow PIP insurers to assert contractual subrogation rights against non-PIP-insured tortfeasors.
Since the accident at the heart of the instant case involved a PIP-covered automobile and a non-PIP-covered commercial vehicle, I would hold the subrogation provisions of the No Fault Act inapplicable. Consequently, the subrogation rights reserved to Aetna in its contract with its insured should be held fully enforceable. Accordingly, I would reverse the Appellate Division and remand the matter to permit Aetna to assert its subrogation claim.

One obvious goal of the No Fault legislation was to effect a reduction in private automobile insurance rates in this State. See Iavicoli, No Fault & Comparative Negligence in New Jersey (1973), at 205-206, 207-208 (excerpts from Automobile Insurance Study Commission Report to the Governor and the Legislature, December 1971).

Henceforth, PIP insurers are barred from suing any party for PIP costs incurred, regardless of whether the tortfeasor is (1) a commercial trucker not subject to the No Fault Act; (2) an out-of-state driver not subject to the No Fault Act who negligently causes an accident with a No Fault insured in New Jersey; (3) a person who by law is required to carry No Fault coverage but who culpably failed to obtain the coverage; or (4) a person who does not own #an automobile but who causes an automobile accident, i. e., by throwing a brick through a No Fault insured’s windshield. In each of these hypothetical instances, the cost of PIP benefits paid by PIP carriers will be borne by the carrier’s insureds instead of the individuals responsible for the injury who, in good conscience, ought to pay them.

As of January 1, 1975, PIP insurers’ subrogation rights were replaced by a rate setting system, supervised by the Department of Insurance, designed to “reimburse” each insurer for its PIP costs. Pa. Mfrs. Assn. Ins. Co. v. Gov’t Emp. Ins. Co., 136 N.J.Super. 491, 498-499 (App.Div.1975), affd o.b., 72 N.J. 348 (1977); Cirelli v. Ohio Casualty Insurance Co., 133 N.J.Super. 492, 498 (Law Div.1975), affd as mod., 72 N.J. 380 (1977); Iavicoli, supra, at 117.

We acknowledged the validity of this construction of N.J.S.A. 39:6A-9 in Cirelli where we held that the elimination of subrogation rights under the Act “contemplated situations where New Jersey vehicles (those registered or principally garaged in this State, N.J.S.A. 39:6A-3) were involved and the insurance policies related to those vehicles were subject to the requirements of the No Fault Law.” 72 N.J. at 386-387.