January 22, 2010

TO THE COMPANIES IN INTEREST:

In Zabilowicz v. Kelsey, 2009 WL 509 1937, the New Jersey Supreme Court held that the insured of an insurance carrier that does not do business in New Jersey cannot assert the verbal threshold as an affirmative defense.

Zabilowicz filed a lawsuit alleging that defendant Kelsey’s automobile struck his truck from behind while stopped in traffic at an intersection in Pleasantville, New Jersey. Both Zabilowicz and Kelsey are residents of Pennsylvania and are covered by automobile insurance policies written in Pennsylvania. Zabilowicz is insured by State Farm Mutual Automobile Insurance Company, which is authorized to do business in New Jersey. Kelsey’s insurance carrier, Infinity, is not authorized to do business in New Jersey.

The court first noted that, N.J.S.A. 17:28-1.4, the deemer statute, requires insurers authorized to transact automobile insurance business in New Jersey to provide covered out-of-state drivers with New Jersey’s statutory no-fault PIP and other benefits, and, in exchange, deems that driver to have selected the limitation-on-lawsuit option. N.J.S.A. 39:6A-8(a). The court noted that Zabilowicz was insured by State Farm, a carrier transacting automobile insurance business in New Jersey, and therefore was bound by the deemer statute. However, because defendant Kelsey was insured by a carrier not doing business in New Jersey, she did not fall within the deemer statute and was not covered by the no-fault PIP provisions of N.J.S.A. 39:6A-4.

The court next addressed the issue of whether an out-of-state defendant not eligible for New Jersey PIP benefits can invoke the limitation-on-lawsuit threshold defense against a plaintiff covered by the deemer statute. The court noted the critical language of the deemer statute makes plaintiff, as a covered out-of-state driver, who was entitled to New Jersey PIP benefits, “subject to the tort option specified in subsection a. of N.J.S.A. 39:6A-8.” The court then noted that by the clear language of N.J.S.A. 39:6A-8, a defendant who wishes to invoke the limitation-on-lawsuit threshold defense against a plaintiff must demonstrate that she is eligible for no-fault PIP benefits. Unless the defendant meets this initial burden, the remainder of the statute does not apply. Therefore, a defendant without a statutory entitlement to PIP benefits cannot insist than an injured plaintiff satisfy the limitation on lawsuit threshold.

The court noted one of the rationales for the limitation-on-lawsuit threshold “is to offset the cost to insurers of a system that mandates the prompt payment of medical expenses resulting from automobile accidents.” An insurer of a defendant not participating in New Jersey’s no-fault system is not “subject to the monetary quid pro quo that justifies making the limitation-on-lawsuit threshold available to a PIP eligible defendant. It is for that reason that a defendant ineligible for PIP benefits cannot assert the limitation-on-lawsuit threshold as a defense.”

Accordingly, the court found that as Kelsey’s insurer, Infinity, was not licensed to do business in New Jersey, it was not subject to the deemer statute and therefore not required to provide PIP benefits. As Kelsey’s insurer was not required to provide New Jersey PIP benefits, Kelsey was not entitled to assert the limitation-on-lawsuit threshold as an affirmative defense.

Very truly yours,

Glendon E. Danks
(856) 673-3463
danks@bbs-law.com.

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