On certified appeal from the Law Division to the Appellate Division of the Superior Court.
For reversal -- Chief Justice Vanderbilt, and Justices Heher, Wachenfeld, Burling, Jacobs and Brennan. For affirmance -- Justice Oliphant. The opinion of the court was delivered by Heher, J.
The question here concerns the liability of the defendant insurer under a renewal of a policy of insurance issued May 24, 1950 to George W. Edwards, Jr., and his wife, Millie, covering the liability imposed upon them by law for "damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the ownership, maintenance or use" of a designated Buick automobile, limited to use "for pleasure," and in liability to the amounts therein specified, but providing by a rider that the insurance "applies only while the automobile is operated by the named insured," and "does not apply while the automobile is operated by any person other than the named insured."
The policy was issued to George W. Edwards, Jr., as the
owner of the vehicle, with coverage for his wife; and it includes a provision, under the heading "Financial Responsibility Laws," section 8, that such insurance "as is afforded by this policy for bodily injury liability or property damage liability shall comply with the provisions of the motor vehicle financial responsibility law of any state or province which shall be applicable with respect to any such liability arising out of the ownership, maintenance or use of the automobile during the policy period, to the extent of the coverage and limits of liability required by such law, but in no event in excess of the limits of liability stated in this policy," and the insured "agrees to reimburse the company for any payment made by the company which it would not have been obligated to make under the terms of this policy except for the agreement contained in this paragraph."
The issue of liability involves, as we shall see, the significance and meaning of the State's Financial Responsibility Law. R.S. 1937, 39:6-1, et seq., now N.J.S.A. 39:6-23 et seq., L. 1952, c. 173, approved May 10, 1952, effective April 1, 1953.
On April 7, 1952, while operating the insured automobile with Edwards' permission, one Johnson was involved in a mishap which had fatal consequences for plaintiff's deceased and himself. An action brought in the United States District Court for the District of New Jersey eventuated in a judgment of $10,000 for the plaintiff herein against Johnson's estate. Edwards and his wife and another were party defendants, but they were absolved, Edwards by a directed verdict on the ground that, while the deceased Johnson's operation of the automobile was by Edwards' leave, he was not Edwards' agent. The defendant insurer defended the action for Edwards under a "reservation of rights" based upon the contention that neither Edwards "nor Johnson is covered for said accident," and the policy afforded no indemnity for such recovery as might be had. The stipulation states the question to be "whether or not Johnson was covered by the policy P-2 as renewed and in effect at the time and place of the accident."
The contractual relations of the parties began May 24, 1949, under a like liability policy providing such coverage, for a term of one year, for the assured and his spouse and also, paragraph III, "any person while using the automobile, and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or with his permission." During the subsistence of the policy, on February 19, 1950, the insured, George W. Edwards, Jr., had an accident while operating the automobile which resulted in damage to another vehicle in excess of $100, and personal injury to another. Upon the expiration of the policy term, it is stipulated, the insurer "would only agree to the issuance of another policy to Edwards containing the same terms and conditions but limiting the operation of paragraph III * * * by the inclusion of Endorsement No. 17," and "Accordingly, on May 24, 1950, there was issued to Edwards a new policy of insurance," for the ensuing year, "similar in substance to the earlier one, but with the addition of Endorsement No. 17," providing that the insurance would not include the operation of the automobile by a person other than the named insured, the policy including also the provision that "Such insurance as is afforded by this policy" "shall comply with the provisions of the motor vehicle financial responsibility law of any state or province," but only to the "extent of the coverage and limits of liability required by such law," and "in no event in excess of the limits of liability stated in this policy." And on May 24, 1951, the policy was renewed "in its entirety" for another year.
It is also stipulated that "Policy P-1 was issued on May 24, 1949 without endorsement No. 17 because at that time defendant was not writing policies containing such an endorsement," but that the "renewal policy was issued with endorsement No. 17 thereon on May 24, 1950 because at that time the rules and regulations of the defendant required the inclusion of that endorsement on all policies issued to insurable risks such as was presented" by Edwards; that the "decision to issue P-2 containing the endorsement was based
upon the experience encountered during the insuring period of the first policy, P-1," and "Edwards was considered a bad insurance experience risk, a troublesome line of insurance and one which was recommended for cancellation unless the renewal policy contained endorsement No. 17"; and that "At the time of issuance of policy P-2 and renewal certificate, the defendant was issuing many various types of insurance policies, many of which did not include endorsement No. 17," and "If the policy P-2 and renewal thereof as issued by defendant" to Edwards, ...