In a recent case concerning Plaintiff’s entitlement to Personal Injury Protection (PIP) benefits, the Appellate Division indicated that an insurance company may be estopped from denying coverage to an insured due to the carrier’s failure to promptly respond to the insured’s PIP claim.
In Cheek v. Citizens United Reciprocal Exchange, A-0573-10T4, 2012 WL 1345079 (N.J. Super. Ct. App. Div. Apr. 19, 2012), Plaintiff was injured when she fell while opening the door of her automobile owned by her boyfriend. The subject automobile was insured under a policy issued by CURE. While Plaintiff’s boyfriend was listed as the “named insured” on the first page of the declarations page, and as a “driver” on the second page, Plaintiff herself was only listed as a “driver.” Plaintiff lived with both her boyfriend and her adult daughter, who owned a separate vehicle insured by GEICO.
Plaintiff submitted a PIP claim to CURE. CURE performed a limited investigation of Plaintiff’s claim and did not pay her PIP benefits. Plaintiff then filed an action demanding PIP benefits from CURE. CURE denied that Plaintiff was entitled to coverage under its policy. CURE argued that Plaintiff was not a “named insured,” she was not an otherwise-qualified claimant, and that she did not suffer an injury that entitled her to PIP benefits. Moreover, CURE argued that Plaintiff was excluded from coverage pursuant to the terms of the policy because she was a family member under the terms of her daughter’s GEICO policy. CURE ultimately filed a third-party complaint against GEICO, seeking a declaration that GEICO’s policy provided primary coverage for Plaintiff’s PIP benefits. The trial court subsequently entered judgment against GEICO requiring it to pay Plaintiff’s PIP benefits and concluded that CURE owed Plaintiff no PIP coverage. GEICO appealed the judgment entered against it, and Plaintiff filed a cross-appeal, wherein she argued that CURE was estopped from denying coverage due to its failure to respond to her initial PIP claim and its failure to invoke a policy exclusion in a timely manner.
The Appellate Division found that the terms of the CURE policy’s PIP endorsement were unambiguous and that, by its terms, Plaintiff was not entitled to PIP benefits under the CURE policy because she was not a “named insured” under the policy and was not a member of her boyfriend’s family. Significantly, the Appellate Division held that Plaintiff was not converted to a “named insured” under the CURE policy because she was identified as a “driver.” Moreover, the CURE policy did not provide PIP coverage to Plaintiff because she was entitled to PIP coverage as a family member under her daughter’s GEICO policy and therefore was excluded by operation of the CURE policy.
Notably, the Appellate Division remarked that, even though the “other coverage” exclusion contained in the CURE policy would be generally enforceable because it was unambiguous, an insurer may be estopped from denying coverage at a later time if a policy exclusion was not timely invoked. The Appellate Division explained that it is natural for an accident victim to file a PIP claim with the insurer that wrote coverage for the vehicle involved in his or her accident, and that an average victim would not understand the PIP claim might be required to be filed with an uninvolved insurance company. Therefore, the Appellate Division stated that it would be inclined to conclude that if an insurer wishes to invoke an “other coverage” exclusion, it has a duty to invoke such exclusion in a prompt fashion to avoid prejudicing the victim’s ability to timely demand PIP benefits from the proper insurer.
It is clear from the Cheek decision that the Courts remain cognizant of the purpose of the PIP statute, which is to ensure prompt payment of an injured insured’s medical bills. Therefore, in the event an insurer fails to promptly deny coverage because of a policy exclusion, the insurer may be compelled to provide PIP benefits, even if those benefits would be excluded under the terms of the policy, if the injured person is prejudiced by the insurer’s failure to deny coverage.
by Erin L. Peters, Esq.