Summary Judgment Affirmed: What it Means to be Culpably Uninsured in New Jersey

Matthew K. Mitchell and Patricia W. Holden, partners in the firm's Mt. Laurel and Woodbridge offices, successfully defended through the trial court and on appeal a case involving the unique question of what it means to be culpably uninsured in New Jersey.

The case involved a former Florida resident who had moved to New Jersey approximately five years before becoming involved in a motor vehicle collision.  He allegedly sustained serious injuries resulting in injections and surgery.

Mr. Mitchell and Ms. Holden represented the alleged tortfeasor who made a left turn in front of the plaintiff.  Discovery and investigation revealed that, during the five years preceding the event, there was no question that plaintiff primarily kept his vehicle in New Jersey.  Also during that time frame, the plaintiff continued to maintain his driver's license, car registration and insurance in the State of Florida, not New Jersey.  Plaintiff testified that the Florida address he used for that purpose belonged to a friend who no longer maintained the address.  Plaintiff admitted at deposition that he did this because it would have cost too much money to insure his vehicle in New Jersey.  Mr. Mitchell and Ms. Holden argued below and in the Appellate Division that the failure to purchase a policy of insurance in New Jersey, under New Jersey's mandatory financial responsibility laws, rendered the plaintiff effectively (or "culpably") uninsured and therefore, his cause of action for damages is barred as a matter of law.

Indeed, New Jersey has a statute which commands that if you are injured in an accident while operating an uninsured motor vehicle, you forfeit your cause of action for economic and non-economic damages resulting therefrom.  See, N.J.S.A. 39:6A-4.5.  Clearly, if someone has no insurance at all, they would have no cause of action under the statute.

But the question the trial and appellate court had to answer in this case was "what if a plaintiff is required to insure the vehicle in New Jersey because it is principally garaged here, but he seeks a cheaper premium out of state, often through artifice?"

On summary judgment, the trial court found that the statutory framework requires that owners of vehicles registered or principally garaged in New Jersey must insure their vehicle here in New Jersey.  The court reasoned that the plaintiff failed to do that and if he was allowed to rate evade and seek cheaper insurance out of state, the entire mandatory financial responsibility scheme would be completely subverted.  The trial court dismissed the plaintiff's case and the plaintiff appealed.

Like the trial court before it, the appellate court found that plaintiff was uninsured within the meaning of N.J.S.A. 39:6A-4.5(a), because he did not have a policy of insurance approved by New Jersey's Commissioner of Banking and Insurance, which he was required to have under New Jersey law.  It upheld the trial court's dismissal of the personal injury action.

The appellate court noted that this statute advances a policy of cost containment by ensuring that an injured uninsured driver does not draw on the premium pool of accident-victim insurance funds to which he did not contribute.  By limiting the right to sue, the uninsured driver has a very powerful incentive to comply with compulsory insurance laws.  The appellate court found that the plaintiff was required to maintain a New Jersey policy with New Jersey medical expense benefits because his vehicle was principally garaged here.  It further held that the Florida policy did not meet the New Jersey standards, even though the Florida policy provided first party benefits.  Attorneys Mitchell and Holden argued that a first party insurer's decision to afford medical expense benefits has no binding effect whatsoever on a tortfeasor's ability to assert the statutory defense at issue.

In any event, this "culpably uninsured" defense is often overlooked especially because PIP carriers who are authorized to write in New Jersey faced with an out of state driver and an in state accident, will automatically provide the individual with New Jersey PIP per the State's "deemer statute," N.J.S.A. 17:28-1.4.  That statute requires certain authorized carriers to provide New Jersey PIP to out of state drivers casually passing through the state.  The plaintiffs will often argue that they had the equivalent to New Jersey PIP because their carriers mistakenly reformed their policies to meet the New Jersey standard.  In the case at bar, the appellate court stated that such a claim is unwarranted because the "deemer statute" does not insulate such an individual from meeting his/her mandatory financial responsibility if the vehicle is garaged in New Jersey.

The plaintiff made an interesting argument that the statute on its face did not require that the policy be a New Jersey policy, an assertion the Appellate Division rejected out of hand.  Further, plaintiff argued that the statute did not provide him with procedural due process.  Plaintiff claimed that N.J.S.A. 39:6A-4.5 was so vague in its language that a reasonable insured would not understand his/her cause of action would be forfeit if he/she did not insure their vehicle in New Jersey, especially where he/she had some insurance somewhere.  The Appellate Division could find no ambiguity in the statute which would offend the plaintiff's procedural due process rights.

Attorneys Mitchell and Holden offer training on how insurers can properly identify and investigate cases involving suspected culpably uninsured claimants in personal and commercial auto lines claims.  It goes without saying that this defense can result in huge savings of claims dollars.