Court Opinion

ID: 9746855
Source: CourtListenerOpinion
Date Created: 2023-08-27 14:41:17.795257+00
Date Added: 2024-06-11T07:25:00.229347
License: Public Domain

PASHMAN, J.,
concurring and dissenting in part.
I agree with the majority that Aetna’s suit was properly dismissed on the ground that, in light of N.J.S.A. 39:6A-12, there *573was no claim to which Aetna could be subrogated. Although this ground alone would support its decision, the majority has nevertheless addressed the general question whether the single controversy doctrine is applicable in the context of subrogation. Because I believe that the majority has incorrectly treated this issue, I write separately to express my disagreement with the majority on that subject.
I would hold that the single controversy doctrine is available as a defense against a subrogation claim after a settlement between the insured and the tortfeasor, unless the tortfeasor knew about the existence of the subrogation claim at the time of the settlement. Because I would find that defendant in this case was chargeable with such knowledge, I agree with the majority’s conclusion that the single controversy doctrine would not bar Aetna from maintaining its suit, assuming that the No-Fault Act had not eliminated Aetna’s right to subrogation.
Contrary to the belief of the majority, the single controversy doctrine is directly relevant to the law of subrogation and bars any action by an insurer-subrogee on its subrogation claim after its insured has settled with the tortfeasor. The doctrine applies because the rights of a subrogated insurer rise no higher than the rights of its insured against the third party — a principle recognized by the majority, ante at 561. Consequently, a subro-gee is subject to all the legal and equitable defenses that the third party enjoys against the subrogor. Standard Accident Insurance Co. v. Pellecchia, 15 N.J. 162, 172-73 (1954). After a settlement with the insured, the third party obviously could raise the single controversy doctrine as a defense against a subsequent action brought by the insured arising from the same accident, since dismissal of an action pursuant to a settlement operates as a judgment for the purposes of res judicata. See Kelleher v. Lozzi, 7 N.J. 17, 26 (1951). Therefore, the third party can also raise the defense against an action brought by the insurer to enforce its subrogation rights. See 6A Appleman, Insurance Law and Practice § 4092 at 239-40 (1972) (citing cases).
*574The majority reasons that the single controversy doctrine is not a bar in the context of this case because the doctrine does not require joinder of parties. Ante at 557-59. But this principle, even if valid, is not relevant here. The question is not whether the insured must join the insurer in its action as a party plaintiff, but whether the insurer must intervene in the action, or at least give notice to the tortfeasor of the existence of its subrogation claim, in order to avoid the merger of its claim in any judgment or settlement obtained in the insured’s action. In my opinion, such intervention or notice by the insurer is necessary to preserve its claim as the subrogee.
The majority’s reliance on McFadden v. Turner, 159 N.J.Super. 360 (App.Div.1978), is misplaced. In McFadden, where the issue did involve failure to join parties, the court held that the single controversy doctrine does not prevent a plaintiff from electing to litigate successively against two defendants liable on the same claim. The court correctly observed that the doctrine is based on the principle that “litigants in an action should not be required, after final judgment therein is entered, ‘to engage in additional litigation in order to conclusively dispose of their respective bundles of rights and liabilities which derive from a' single transaction or series of transactions.’ ” Id. at 369-70. The plaintiff’s action in McFadden did not implicate this principle, because a single defendant was not compelled to litigate successively claims arising from the same transaction. In contrast, the policy underlying the single controversy doctrine is relevant in the present case. The defendant here would be required to engage in multiple litigation to resolve claims arising from a single accident in favor of a single plaintiff or of parties, like Aetna, whose interests derive from that plaintiff.
The majority indicates that even if a procedural rule requiring a subrogee to intervene in an action by its insured were appropriate, it would be unfair to apply the rule in this case because our procedural rules have not previously required such intervention. Ante at 559-60. This statement overlooks the fact that no such procedural rule is necessary, since well-established princi-*575pies of res judicata already require a subrogee to take action to protect its interests as a matter of substantive law. See, e. g., Story v. Rivers, 220 Ga. 232, 138 S.E.2d 304 (1964); Travelers Insurance Co. v. Hartford Accident & Indemnity Co., 222 Pa.Super. 546, 294 A.2d 913 (1972); United Services Automobile Association v. Hartford Accident & Indemnity Co., 220 Tenn. 120, 414 S.W.2d 836 (1967); Southern Pacific Transport Co. v. State Farm Mutual Insurance Co., 480 S.W.2d 59 (Tex.Civ.App. 1972); State Farm Mutual Automobile Insurance Co. v. De Wees; 143 W.Va. 75, 101 S.E.2d 273 (1957); 6A Appleman, supra, § 4092 at 239-40.
The majority also suggests that any rule requiring a subrogee to intervene would be inapplicable where, as here, the insured has settled instead of proceeding to judgment. Ante at 559-560. This suggestion disregards the principle, stated above, supra at 573, that a settlement is treated as the equivalent of a judgment for purposes of res judicata, including the single controversy doctrine. See Kelleher v. Lozzi, supra.
Although a settlement between an insured party and a tortfeasor will normally bar maintenance of an action to enforce subrogation rights, this rule should not apply to cases where the tortfeasor has actual knowledge or is chargeable with knowledge of the subrogated claim at the time of the settlement. See, e. g., Melick v. Stanley, 174 N.J.Super. 271 (Law Div.1980); Sentry Insurance Co. v. Stuart, 439 S.W.2d 797 (Ark.1969); Home Insurance Co. v. Hertz Corp., 71 Ill.2d 210, 16 Ill.Dec. 484, 375 N.E.2d 115 (1978); Travelers Indemnity Co. v. Vaccari, 310 Minn. 97, 245 N.W.2d 844 (1976); State Farm Mutual Insurance Co. v. Farmer’s Insurance Exchange, 27 Utah 2d 166, 493 P.2d 1002 (1972); Hardware Dealers Mutual Fire Insurance Co. v. Farmers Insurance Exchange, 4 Wash.App. 49, 480 P.2d 226 (1971). In those circumstances, a general release would constitute “such a fraud upon the subrogee as will avoid it both at law and in equity so far as it affects the rights of the subrogee.” Standard Accident Insurance Co. v. Pellecchia, supra, 15 N.J. at *576175, quoting Fire Association of Philadelphia v. Wells, 84 N.J.Eq. 484, 486 (E & A 1915).
In this case, if payment of. PIP benefits did give rise to subrogation rights, defendant would be chargeable with knowledge of Aetna’s subrogation claim since every New Jersey motorist must carry automobile insurance and the standard policy must include PIP coverage. N.J.S.A. 39:6A-3 and -4. Because of such knowledge, defendant would be deemed to have waived its single controversy defense when it entered the settlement agreement without the participation of the subrogee. But, as the Court holds today, payment of PIP benefits does not create a right of subrogation. Therefore, the trial court correctly dismissed Aetna’s claim, regardless of defendant’s waiver of its rights under the single controversy doctrine.
I concur in the opinion of the majority except for the discussion of the single controversy doctrine in part I of that opinion.
PASHMAN, J., concurring in the result.
For modification and affirmance — Justices PASHMAN, CLIFFORD, SCHREIBER, HANDLER and POLLOCK — 5.
For reversal and remandment — Justice SULLIVAN — 1.