In Part 1 of this article, we read about civil litigation that followed an accident in which an injured victim of a personal injury case was initially denied compensation because the driver was not on the car owner’s insurance policy and the policy was therefore, voided. The insurance company’s declaratory action regarding the victim’s compensation was denied. Keep reading to find out what happened in the appeal.

The Appellate Division’s Holding and Reasoning

A divided Appellate Division upheld the ruling of the trial court.  In writing for the majority, Judge Hayden stated that New Jersey’s “no-fault system of first party recovery for injuries sustained in automobile accidents encourages the prompt distribution of personal injury protection (PIP) benefits to accident victims.” (Id. at 6).  Furthermore, the purpose of New Jersey’s no-fault system was to protect the public from automobile injuries with a minimum amount of protection.  (Id. quoting Rutgers Cas. Ins. Co. v. LaCroix, 194 N.J. 515, 523 (2008) (internal citation omitted).

Relying on LaCroix, the court agreed with the trial court that CURE had the right to cancel Perez’s policy ab initio.  But, the cancellation of this policy did not mean that the other drivers on the road do not expect that a driver is not insured.  It is for this reason that the court affirmed the trial court’s ruling that CURE was still liable to Green for his personal injury claim.

To reach this conclusion the Appellate Division relied on Marotta v. N.J. Auto. Full Ins. Underwriting Ass’n, 280 N.J. Super. 52 (App. Div. 1995), aff’d o.b., 144 N.J. 325 (1996).  Marotta found that “an innocent third party ‘has the right to expect that all other drivers will be insured to the extent required by compulsory insurance.” (Perez, A-3100-11T1, at 7 quoting Marotta at 532).

Judge Hayden then proceeded to note other cases involving car insurance and compulsory minimums where the court found that the Automobile Insurance Cost Reduction Act (AICRA) only allowed the insured from not carrying the legislated minimums, it did not release the insurer from only offering the requirements now afforded by AICRA.

Judge Hayden noted that previously the court in NJ. Mfrs. Ins. Co. v. Varjabedian, 391 N.J. Super. 253 (N.J. Super. 2007) found that “‘a carrier seeking to retroactively void coverage based upon the prior conduct of its insured tortfeasor cannot rely on the alternative basic policy’s lack of mandated liability coverage to avoid providing the minimum compulsory non-cancelable $15,000/$30,000 liability limits.’” (Perez, A-3100-11T1, at 10, quoting Varjabedian at 260).  Judge Hayden likened CURE’s argument to the one previously rejected by the court in Varjarbedian. (Id. at 10).

Conclusion

This case allows driver in New Jersey a piece of mind when driving on the roads that those driving around them will be able to cover their injuries should an accident occur.  Furthermore, the court reaffirmed its ruling in Varjarbedian and informed the lower courts to use it as guidance in similar cases.  More importantly were Judge Hayden’s final words regarding this case.  She stated “[w]e recognize that the automobile insurance law continues to provide for mandatory minimum liability coverage and also provide for option liability coverage. . . . To the extent that this creates an anomalous situation, it may be appropriate for the Legislature to address. . . .” (Id. at 12) (internal citations omitted).

It is tough to know whether the New Jersey Supreme Court would uphold the Appellate Division’s ruling.  There is also possibility that the New Jersey State Legislature could draft legislation that would overturn this ruling for future accidents.  This is not without precedent as a bill was recently introduced to overturn the New Jersey Supreme Court’s recent ruling finding a texter liable for texting a driver who then causes an accident.

The dissent is not addressed in this article.