The Unsatisfied Claim & Judgment Fund does not have the right of reimbursement or subrogation from a third-party tortfeasor of personal-injury-protection benefits paid to passengers in an uninsured automobile that collided with an insured vehicle.

UNSATISFIED CLAIM & JUDGMENT FUND BOARD, ET AL. V. NEW JERSEY MANUFACTURERS INSURANCE COMPANY 138 N.J. 185.(A-34-94)

    Argued October 11, 1994 -- Decided November 23, 1994

    CLIFFORD, J., writing for a unanimous Court.

    On January 7, 1989, Jose Fernandez was operating an uninsured vehicle that collided with an automobile owned and driven by John Zane and insured by New Jersey Manufacturers (NJM). Two passengers in the Fernandez vehicle were injured. Those passengers sued Fernandez, Zane, the State of N.J., Department of Insurance and the Unsatisfied Claim and Judgment Fund (Fund) for their bodily injuries sustained in the collision.  

    Neither passenger had any insurance available from which to make a claim for personal injury protection (PIP) benefits or any uninsured-motorist coverage. The Fund agreed to pay the passengers' PIP-benefit claims in exchange for the dismissal of the complaint against the Fund and its release from PIP-benefits liability. The passengers did retain the right to sue Fernandez and Zane. The Fund thereafter asserted a subrogation or reimbursement claim against NJM to recover the amount of PIP benefits the Fund had paid to the passengers. Both parties moved for summary judgment on the issue of liability for those payments. The trial court denied the Fund's motion, granted NJM's cross-motion and dismissed the complaint, concluding that the Fund had no right of subrogation or of reimbursement for PIP benefits against a third-party tortfeasor. The trial court found that the Fund's only remedy was against Fernandez, the uninsured owner of the host vehicle.

    Before the Appellate Division, the Fund argued that the combined effect of N.J.S.A. 39:6A-9.1 (section 9.1 of the No-Fault Law), and discussion in Wilson v. Unsatisfied Claim & Judgment Fund Board, support the conclusion that the Fund had a right of subrogation or reimbursement. The Appellate Division disagreed, finding that neither the statutes norWilson authorized any such remedy.  

    The Supreme Court granted certification.

HELD:    The Unsatisfied Claim & Judgment Fund does not have the right of reimbursement or subrogation from a third-party tortfeasor of personal-injury-protection benefits paid to passengers in an uninsured automobile that collided with an insured vehicle.

1.    Section 86.6 grants the Fund two sources for recovery of PIP benefits that it has paid. The Fund may recover from an uninsured motorist and from the owner or operator of a hit-and-run vehicle whose identity was learned only after the Fund had paid the PIP benefits. Because the third-party tortfeasor, Zane, was neither uninsured nor unknown at the time of the accident, and because NJM was not an insurer of a hit-and-run motorist, section 86.6 fails to provide the Fund with a source of recovery. (pp. 4-8)

2.    The Fund also claims that section 9.1 of the No-Fault Law authorizes it to recover the paid PIP benefits from NJM. The party invoking section 9.1's reimbursement right must be an insurer, a health-maintenance organization or a governmental agency, and must have paid PIP benefits as a result of a New Jersey-based accident. Although the legislative history is unclear, statutory analysis demonstrates that the Fund cannot recover the PIP benefits from NJM because Zane does not come within either of the two classes specified in section 9.1 as liable for reimbursement -- insureds not required to carry PIP coverage and

uninsureds. Zane was neither an insured not required to carry PIP coverage nor an uninsured motorist. Therefore, the Fund cannot seek reimbursement from NJM or Zane directly. (pp. 8-12)

3.    The Fund's interpretation of section 9.1 that recovery may be had from any insured tortfeasor would so expand the scope of the reimbursement right as to substantially alter the legislative intent of the statute. The legislative history shows a conscious decision to eliminate any right of recovery between two PIP carriers. The only methods for recouping paid PIP benefits from another insurer are through intercompany agreement or arbitration. Moreover, permitting reimbursement rights to be pursued in the courtroom would conflict with the long-standing goal of the No-Fault Law to decrease the need for litigation. (pp. 13-16)

4.    Allowing the Fund to pursue a common-law subrogation claim against another PIP carrier would contradict the legislative intent and conflict with the goals of the No-Fault law. Moreover, subrogation is derivative; thus, the rights of the subrogee are no greater than those of the subrogor. Inasmuch as the passengers had no statutory or common-law tort rights against NJM, the Fund, as the subrogee of the passengers, has no rights against NJM either. The Fund, however, is not without a subrogation remedy. It has a subrogation claim against Fernandez, the uninsured motorist. (pp. 16-25)

5.    The cases cited by the Fund in support of the subrogation right are distinguishable because none of the vehicles driven by the tortfeasors in those cases were required by law to carry PIP coverage; thus, each of those cases falls within section 9.1's right of reimbursement from insured tortfeasor not required to maintain PIP coverage. More importantly, public policy strongly militates against finding a subrogation right for the Fund in light of the fact that the source of its funding lies with insurers. In addition, the exercise of any reimbursement or subrogation right introduces fault into a no-fault system. Of course, the Legislature may choose to create such a new right for the Fund; however, that decision rests with the Legislature. (pp. 25-29)

    Judgment of the Appellate Division is AFFIRMED.

     CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI and STEIN join in JUSTICE CLIFFORD's opinion.