Coverage Disputes Between PIP Carriers Subject to Arbitration

By Gina M. Zippilli, Esq.

In New Jersey, it is statutorily mandated that disputes between insurance companies over contribution for personal injury protection (“PIP”) benefits be arbitrated.  What happens, however, where coverage between those carriers is disputed and must be resolved?  Who decides, the courts or an arbitration panel?  This was the issue addressed in State Farm Indemnity Co. v. National Liability & Fire Ins. Co., 439 N.J. Super. 532 (App. Div. 2015).  The trial court held, and the Appellate Division affirmed, that coverage issues must be arbitrated as well.

The facts are simple.  Defendant motorist struck plaintiff while riding his bicycle.   Plaintiff had no automobile insurance.  Plaintiff, nevertheless, would be entitled to PIP coverage under the policy of a family member with whom he resided.  According to State Farm, plaintiff was a resident relative of both his father (with whom State Farm insured) and also plaintiff’s cousin who had a policy with National.  State Farm paid the PIP benefits due to plaintiff and thereafter sought contribution from National under N.J.S.A. 39:6A-11.  This statute permits multiple insurers who are liable to pay PIP benefits to recover a pro rata share of benefits paid from the other insurers.  It also provides that contribution may be sought through intercompany arbitration and/or inter-company agreement.

National refused to contribute arguing that plaintiff and his cousin did not live in the same household at the time of the accident, and thus no coverage existed.  State Farm filed a summary action in the Law Division to compel arbitration.  National maintained that since contribution existed only if it was liable, then it could only be compelled to arbitrate once a trial court determined coverage.  It reasoned that the issue of residency and whether it existed was a complex factual matter that must be decided by the trial court alone.   The trial court disagreed.  The Appellate Division affirmed.  In short, the courts reasoned that arbitration requirements in the statute are broadly construed in favor of submission of all issues to arbitration instead of bifurcating issues between the courts and arbitration.