Even if all of these stated elements of collateral estoppel are met, a court can decide not to apply the doctrine where there are sufficient countervailing interests, or if it would not be fair to do so.

Here, viewing the motion record in a light most favorable to defendants as the nonmoving parties, see R. 4:46-1 et seq., at least the first four of these five collateral estoppel factors are met.

First, the issue of proximate causation of the partial amputation of plaintiff’s right foot is substantively identical in both the PIP arbitration proceeding and in this personal-injury case.

With respect to the second and third elements of the Restatement test, the doctrine requires the identical issue to have been “actually litigated” in the prior proceeding and that a court in the prior proceeding issued a “final” judgment on the merits. These factors are easily satisfied here.

In Kozlowski v. Smith, 193 N.J. Super. 672 (App. Div. 1984), the Appellate Division held that collateral estoppel may prevent a litigant in a personal-injury action from relitigating a fact in issue determined against that litigant in a PIP action against her insurer in the Superior Court.

In Habick, 320 N.J. Super. 244, 258 (App. Div. 1999), these concepts of collateral estoppel were applied in the context of a PIP arbitration. Habick acknowledged the preclusive effect of an arbitration when the party to be bound has had an ample chance to be heard in the arbitral forum. The guiding principle, according to Habick, is that the party to be bound had a “‘full and fair opportunity to litigate the issue’ in the earlier proceeding.” Id. at 257. In that vein, Habick relied on � 84 of the Restatement (Second) of Judgments, which allows for the preclusive effect of a valid and final award by arbitration.

Here, there is no doubt that the issue of whether the June 19, 2002, auto accident caused Panniel’s foot injury was “actually litigated” before the PIP arbitrator. Indeed, that was a central issue in the arbitration. Both parties put on competing proofs from medical experts on the issue. The arbitrator noted that the plaintiff’s expert, Dr. Williams, testified at length and was subjected to “skillful cross-examination” by defense counsel. Moreover, the PIP arbitrator’s decision is “final” because under the Auto Arbitration Act, N.J.S.A. 39:6A-31, his decision is binding and there is no right to seek a trial de novo in the Superior Court. The parties here waived any further internal review of the award by a DRP panel of the AAA.

The fourth element of the collateral estoppel test is whether the arbitral finding that the accident proximately caused the partial amputation of plaintiff’s right foot was “essential” to both the PIP award and to this personal injury action. Without that causation finding, the arbitrator could not have awarded plaintiff her medical expenses for the foot surgery. Likewise, a jury in the tort action would have to decide whether the auto accident was the proximate cause of the plaintiff’s injuries, as an essential element to an award of damages for those injuries.

As for the fifth element of the Restatement‘s test, the parties here are not identical. Neither RWJ nor Diaz was a party to the PIP arbitration. Indeed, it is undisputed that they had no notice of that proceeding, either from the arbitration tribunal or from the Lenox law firm.

The question then becomes whether there is privity between NJM, on the one hand, and Diaz and RWJ on the other. It is clear that NJM, through its counsel, controlled the defense of the PIP arbitration.

On the other hand, NJM and the present defendants have had a common interest in disproving plaintiff’s claims of causation. If NJM had succeeded in persuading the PIP arbitrator that Panniel’s right foot condition was unrelated to the motor vehicle accident, RWJ and Diaz would have been able to take advantage of those findings in this tort action. Kozlowski and Habick estopped plaintiffs who had failed to prove causation in their PIP cases from relitigating those causation issues in the UM context. NJM, Diaz and RWJ all would have a shared desire for plaintiff to lose the PIP arbitration. Likewise, if the tort action had been tried first before the PIP case, NJM presumably would hope that plaintiff would fail in proving causation to the jury, and then invoke that adverse finding to its benefit in the PIP action.

The overlap of defense interests here is heightened by several additional factors. First, NJM happens to be the insurer of both vehicles involved in the accident. Thus, it has the dual status as the respondent on the plaintiff’s PIP claims and as the insurer of the defendants in the tort action. Pursuant to its liability policy with RWJ and Diaz, NJM would have the right to control the defense of the tort action. Indeed, NJM engaged the very same law firm to serve as defense counsel in both cases.

Further, plaintiff has disavowed any right of recovery beyond NJM’s policy limits in the tort action. That eliminates the possibility that RWJ or Diaz would be exposed to an excess verdict payable out of their own assets. Any judgment would be paid solely by NJM.

Given these various characteristics, NJM is sufficiently in privity with its insureds, RWJ and Diaz, to satisfy the fifth element of the Restatement test. However, there are five recognized exceptions to collateral estoppel listed in � 28 of the Restatement (Second) of Judgments (1982), all of which are recognized by New Jersey case law. See Ensslin v. Township of North Bergen, 275 N.J. Super. 352, 370 (App. Div. 1994). At least one of those exceptions warrants close attention in this case. In particular, collateral estoppel should not be imposed where:

(5) [t]here is a clear and convincing need for a new determination of the issue (a) because of the potential adverse impact of the determination on the public interest or the interests of persons not themselves parties in the initial action, (b) because it was not sufficiently foreseeable at the time of the initial action that the issue would arise in the context of a subsequent action, or (c) because the party sought to be precluded, as a result of the conduct of his adversary, or other special circumstances, did not have an adequate opportunity or incentive to obtain a full and fair adjudication in the initial action. Ibid.

Subparts (a) and (c) are germane to this case. It turns first to subpart (a): “potential adverse impact … on the public interest or the interests of persons not themselves parties in the initial action.” In terms of private justice, there are adverse follow-up consequences that could befall RWJ and Diaz if the PIP arbitrator’s finding of causation is foisted on them in this tort action. If, for example, the preclusive finding of causation leads to a plaintiff’s verdict, the damages awarded for her five amputated toes and her associated pain and suffering may well be considerable. As RWJ’s affiant explains, such a verdict would reduce its remaining aggregate coverage from NJM for policy year 2002. The verdict could also damage RWJ’s rating in its current self-insurance pool, and might even affect another hospital in the same risk cell within that pool.

Similarly, a large verdict might affect Diaz’s own personal automobile insurance rates in the future, or his ability to procure coverage in the private insurance market.

A preclusive finding of causation for plaintiff’s amputated toes could have a pivotal impact at trial. Plaintiff is subject to the verbal threshold for noneconomic damages under the Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-8. If the loss of her toes were found by the jury to be unrelated to the accident, plaintiff’s soft-tissue neck and back injuries from the collision may well be inadequate to vault the threshold. Hence, the presence or absence of a causal link between plaintiff’s foot injury and the auto accident could be dispositive of the verbal threshold, and thus serve as the linchpin between a no-cause verdict and a substantial award for pain and suffering. Precluding a full trial on causation issues would realistically deprive RWJ and Diaz of the chance for an award of zero damages, a result they would certainly prefer with or without NJM’s indemnity protection.

Also, if collateral estoppel is applied to insured defendants in circumstances such as these, such an approach might produce undesirable ripple effects within our automobile insurance system. For example, the PIP arbitration process could become unwieldy if an arbitrator’s findings of causation favorable to a PIP plaintiff were routinely exported to such plaintiffs’ personal-injury actions against third parties. Such a rule of law could lead defense counsel and their carriers to, resist PIP claims even more aggressively, since the PIP case would be the final chance for anyone to prove or disprove causation of an injury. This very well could lead to more discovery, more adversity and more formality in the PIP arbitration process, a process that was legislatively intended to be expeditious.

Of course, these policy concerns are tempered by the fact that, under present case law as set forth in Habick, a plaintiff in a PIP arbitration has only a limited amount to gain (payment of medical expenses) and potentially much more to lose (a preclusive finding of lack of causation). This might suggest that notions of reciprocity require collateral estoppel to be applied in a reverse situation.

However, our courts have at times withheld the imposition of collateral estoppel on a plaintiff where doing so would work an extreme injustice. For example, in Barker v. Brinegar, 346 N.J. Super. 558 (App. Div. 2002), despite repeated efforts plaintiff was unable to procure before the arbitration hearing a supporting diagnostic report from her treating orthopedic surgeon. Eventually, the surgeon generated such a report, some 11 months after the arbitration.

Moreover, under subpart (c) of the Restatement‘s fifth exception, the court should consider whether “the party sought to be precluded, as a result of the conduct of his adversary or other special circumstances, did not have an adequate opportunity or incentive to obtain a full and fair adjudication in the initial action.” Restatement (Second) of Judgments � 28(5). Viewing the totality of circumstances here, it would be unfair to RWJ and Diaz to foist on them the PIP arbitrator’s finding of causation.

Even if RWJ and Diaz had been notified of the pending PIP arbitration and of defense counsel’s intended strategy for handling that proceeding, there is no provision in the AAA rules that would have allowed them to intervene in the arbitration if they wanted to do so.

As a practical matter, it is unlikely that insured drivers would want to devote the time and effort (and perhaps the expense of personal counsel) to intervene in PIP arbitrations concerning the injured driver’s medical bills. Even an institutional entity such as RWJ would not be apt to get involved very often, if at all, in a PIP arbitration process in which its interests were only indirectly at stake. Even so, it is instructive to recognize the option of intervention.

Further, even though the Lenox firm was concurrently representing RWJ and Diaz in the personal-injury case, its advocacy role at the PIP arbitration was confined to its representation of NJM.

Indeed, were the court to find the law firm’s dual representation to be the pivotal factor here for purposes of collateral estoppel, such a ruling might discourage insurers in the future from assigning a PIP defense to the same law firm that would handle the defense of the related liability case. That, in turn, could lead to the wasteful duplication of attorney time and complicate the coordination of discovery in the PIP action and in the third-party tort action.

By its ruling, the court does not suggest that collateral estoppel would be unavailable against NJM. For instance, if the sequence of proceedings had been reversed, this court sees no apparent unfairness in imposing a jury finding of causation from the tort action on NJM in a subsequent PIP case. Likewise, the court finds that NJM presumptively would be estopped by its loss in the PIP arbitration from relitigating causation if plaintiff had a UM or UIM claim against NJM arising out of this same auto accident. The holding is limited to the question of preclusion against NJM’s insureds in a third-party personal-injury action.

III. As a final comment, the Court is well aware that its decision will lead in this case to the repeat presentation of certain proofs that were already considered by the PIP arbitrator. There is also the possibility for seemingly inconsistent outcomes, for the jury may disagree with the arbitrator and find that plaintiff’s right foot injury was not proximately caused by the motor vehicle accident. Despite those considerations, the court believes that defendants RWJ and Diaz are entitled to a plenary trial on all issues, including causation, as matter of law and as a matter of fundamental fairness.

Plaintiff’s motion for partial summary judgment is therefore denied. A form of order accompanies this opinion.

� Digested by Steven P. Bann

[The slip opinion is 33 pages long.]

For plaintiff � Steven Blader (Szaferman, Lakind, Blumstein, Blader, Lehmann & Goldshore). For defendants � James J. Breslin III (Lenox, Socey, Wilgus, Formidoni, Brown,Giordano & Casey) and Lawrence N. Lavigne (Norris, McLaughlin & Marcus) as general counsel for Robert Wood Johnson University Hospital at Hamilton.