The Secret Is Out. Auto Insurance Carriers Have the Right To Access the Superior Court When There Is a Pending Personal Injury Protection Demand for Arbitration In the National Arbitration Forum

New Jersey - Automobile Liability

Auto insurance carriers normally do not seek to avoid the National Arbitration Forum ("NAF") arbitration process. However, in certain circumstances, an auto insurance carrier can seek the assistance of the Superior Court to compel the NAF tribunal to comply with existing law. This type of Superior Court relief is expressly authorized by the PIP statute and regulations.

The New Jersey Alternative Procedure for Dispute Resolution Act ("APDRA") is set forth at N.J.S.A. 2A:23A-1 to -30. That statute was intended to apply, and does apply, to parties that have agreed to voluntary arbitration proceedings. In cases involving auto insurance carriers, such agreements are set forth in the respective policies of insurance.

This Superior Court review is expressly authorized by N.J.S.A. 2A:23A-7 which states:

a.    In exceptional circumstances, to prevent a manifest denial of justice, or when it clearly appears that a party will suffer irreparable harm or that damages may not be reasonably calculated or, if capable of calculation, that they will not be collectible, a party who is aggrieved by any intermediate ruling, except intermediate rulings made pursuant to section 6 of this act, or the failure to rule by an umpire may move before the Superior Court for an expedited summary review under procedures adopted by the Supreme Court. The alternative resolution proceeding shall not be abated, stayed or delayed by the application for an intermediate review unless the umpire or the court, in exceptional cases or circumstances, so rules. The ruling on a summary intermediate review application by the court shall thereafter govern the parties in the alternative resolution proceeding, provided, however, that this ruling may be later modified or vacated by the umpire or the court where specific facts are thereafter determined that would make the continuance of the court ruling manifestly unfair, unjust or grossly inequitable. When it appears that resort to the court to review an intermediate ruling has been abused by any party, the court may award reasonable counsel fees without regard to the ultimate outcome of the alternative resolution proceeding.

b.    The signature of an attorney or party to an intermediate appeal, or in opposition thereto, constitutes a certification by him:

(1)    That he has read the pleadings and all supporting papers relating to the intermediate appeal;

(2)    That to the best of his knowledge, information and belief, formed after reasonable inquiry, the appeal or opposition is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law; and

(3)    That it is not interposed for any improper purpose, such as to cause unnecessary delay or a needless increase in the cost of litigation.

If such a pleading, application or other paper is filed in violation of this subsection, the court by summary review, upon motion by one of the parties or upon its own initiative, may impose upon the party causing the summary review, reasonable expenses, including a reasonable attorney's fee, incurred because of the filing of the pleading, application or other paper. (emphasis added)

In other words, not only does a right of formal appeal exist at the conclusion of the arbitration process, as prescribed by N.J.S.A. 2A:23A-13, but the APDRA also authorizes a right of interlocutory (or intermediate) review via N.J.S.A. 2A:23A-7. Section seven of the APDRA authorizes an aggrieved party to apply to the Superior Court for "expedited summary review" in accordance with procedures adopted by the Supreme Court. Those procedures would, obviously, be set forth in R. 4:67-1.

Examples of How to Access the Superior Court

N.J.A.C. 11:3-5.4(a)(6) expressly mandates that the arbitration tribunal have "published" rules available to the "parties and the public" regarding how the arbitration process must be conducted. In fact, N.J.A.C. 11:3-5.4(b) the Administrative Code mandates that the arbitration organization shall submit a "plan" to the Insurance Commissioner for review. In other words, the tribunal must prepare a plan, and that plan must provide for the methods that are "consistent with traditional notions of due process and fundamental fairness" and must address procedural issues. That plan must be reviewed and approved by the Commissioner. There is no option for the tribunal to engage in unilateral, ad hoc revisions as it may deem desirable.

N.J.A.C. 11:3-5.4(a)(8) mandates that PIP dispute resolution proceedings be consistent with "traditional notions of due process and fundamental fairness." "Due process requires that the adjudication of a litigant's rights and duties be governed by rules sufficiently clear and objective to guard against an arbitrary result, and that such rules be sufficiently precise to enable a lawyer to advise a client intelligently as to the probable results of a proposed course of conduct." Painter v. Painter, 65 N.J. 196, 208 (1974). Finally, N.J.A.C. 11:3-5.6(d) mandates that arbitration decisions be made in accordance with "applicable substantive law" and the Department's rules. Some arbitrators believe that the NAF Rules are controlling. However, the NAF rules have to be read in conjunction with the PIP statute, PIP regulations, and APDRA.

As such, when there are cases where the NAF case coordinator fails to abide by the published rules of the NAF; where the NAF case coordinator or an arbitrator denies the auto insurance carrier's due process of law; and where an arbitrator fails to follow the law with regard to requests of discovery such as requests for a medical provider's patient records, requests for an Examination Under Oath and situations where the auto insurance carrier is complying with its statutorily mandated investigative duties, the auto insurance carrier has the right to apply to the Superior Court for interlocutory review.

*Doug is a shareholder in the Cherry Hill, New Jersey, office. He can be reached at (856) 779-6119 or dmalba@mdwcg.com.

Defense Digest, Vol. 15, No. 4, December 2009