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Disputes related to medical expenses or other personal injury benefits resulting from an automobile accident must be heard by an arbitrator under New Jersey law, but that arbitration requirement does not apply to disputes regarding the validity of the underlying insurance policy, according to a New Jersey state appellate court.
In Nationwide Mut. Fire Ins. Co. v. Fiouris, No. A-5458-05T2, 2007 WL 2141376 (N.J. Super. Ct. App. Div. July 27, 2007), Fiouris was injured in an automobile accident resulting in personal injury medical expenses. Nationwide, Fiouris's insurer at the time of the accident, investigated the claim, and found Fiouris had allegedly committed insurance fraud by misrepresenting his state of residence. Nationwide sued to void the insurance policy, and Fiouris opposed, moving to dismiss the complaint and claiming that the matter had to be submitted to an arbitrator under state law. The trial court granted Fiorius's motion, and Nationwide appealed.
The Court found Fiorius's motion was granted in error, holding that Nationwide's action to void the policy did not fall within the scope of arbitrable issues under the state's Personal Injury Protection (PIP) law. The state statute, N.J.S.A. 39:6A-5.1(a), required arbitration of any dispute regarding the recovery of medical expense benefits or benefits provided under PIP coverage. According to the Court, the plain language of the statute did not require arbitration of disputes regarding the validity of the underlying insurance policy, only those regarding the entitlement or amount of benefits under a valid policy.
The Court was further persuaded by the fact that Nationwide pursued its claim under the Insurance Fraud Prevention Act, which expressly provides for a remedy to be sought in "any court of competent jurisdiction." To the Court, this demonstrated the New Jersey Legislature's intent to have such claims resolved by courts, not arbitrators.
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