July 21, 2009

TO THE COMPANIES IN INTEREST:

On July 16, 2009, the New Jersey Supreme Court decided Sebastian Fernandez v. Nationwide Mutual Fire Insurance Company, A-54 September Term 2008, which addresses whether a Personal Injury Protection (PIP) carrier’s right to reimbursement pursuant to N.J.S.A. 39:6A-9.1 for PIP benefits it has paid has priority over an insured’s right to be made whole where a tortfeasor’s insurance does not fully cover the insured’s personal injury damages.

Generally, N.J.S.A. 39:6A-9.1 permits an insurer which has paid New Jersey PIP benefits to recover the amount it paid from the liability carrier of a tortfeasor which is not required to maintain PIP, such as a commercial vehicle or an out of state tortfeasor insured by an insurer that is not licensed to write insurance in New Jersey. In a three to three opinion, (Justice Hoens did not participate), the Supreme Court upheld the Appellate Division’s ruling that the insurer of the tortfeasor, and not the injured victim’s insurer, is ultimately liable for the PIP expenses for the victim. Simply because that conclusion diminishes the total amount available to the victim from the tortfeasor’s policy of insurance does not produce an unjust result. Rather, that conclusion advances stability in the insurance marketplace by requiring that the ultimate cost of PIP benefits be borne by the insurer of the responsible party, not the insurer of the victim.

It should be noted that there is presently pending in the Legislature a bill to amend N.J.S.A. 39:6A-9.1. The bill provides that any reimbursement claim by a PIP insurer shall be subject to any claim against the insured tortfeasor’s insurer by the injured party and shall be paid only after satisfaction of that claim up to the limits of the insured tortfeasor’s motor vehicle or other liability insurance policy. However, until and unless that bill becomes law, a PIP insurer may recover from the tortfeasor’s insurer the full amount of PIP benefits paid even if the injured party is not made whole from the tortfeasor’s liability insurance policy.

If you should have any questions or would like a copy of Fernandez, please do not hesitate to contact me at (856) 673-3463 or by e-mail at danks@bbs-law.com..

Very truly yours,

Glendon E. Danks

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