Plaintiff seeks a declaratory judgment of its obligations under an automobile liability insurance policy issued to Samuel and Ida Randolph, rescission of such policy and recovery of monies expended by it in the defense of a suit instituted against Edward Randolph by Noel Duncan and Florence Duncan. The matter is before the court on final hearing.
The automobile liability policy is a "Family Combination Automobile Policy" issued to Samuel and Ida Randolph for the period August 20, 1967 to August 20, 1968. The declarations attached to the policy refer to two "owned automobile[s]," a 1961 Chrysler New Yorker and a 1958 Chevrolet pickup truck. At the time of the issuance of the policy these two vehicles were in fact owned by Samuel Randolph. An accident occurred June 15, 1968 while Edward Randolph, the son of Samuel and Ida Randolph residing in their household, was operating the 1961 Chrysler. Suit was instituted in the Law Division against Edward Randolph alone by Noel Duncan and Florence Duncan to recover damages for personal injuries sustained in the accident.
Under the terms of the insurance policy Edward was insured as a "resident of the same household." The basis of plaintiff's position that the policy does not afford coverage to Edward is that on April 2, 1968 title to the automobile was transferred by Samuel to Edward. No money was paid by Edward for the transfer. The reason for the transfer was that the registration had expired and Edward had the money to pay for the renewal. On April 2, 1968 Mrs. Randolph went to the company's agent who had written the policy and requested that Edward's status under the policy be changed because he would be the principal driver of the automobile. She said nothing about the transfer of title. It was not necessary to make any application or to file any forms. No questions were asked to determine if there had been a transfer of title or to determine the circumstances under which Edward was to become the principal operator. The company issued an endorsement the only effect of which was to show the change in premium because the principal operator would be a single male under 25 years of age.
The company takes the position that had it known at the time of the endorsement that Edward was the owner, he would have had to apply for a separate insurance policy. Because he was under 25 years of age and had had at least two moving violations prior to April 2, 1968, he would not have been issued a policy but rather would have had to obtain insurance through the Assigned Risk Plan which would have entailed a higher premium. It is admitted that had there been no transfer of title Edward was insured under the specific terms of the policy whether or not notice had been given to the insurance company that he would be the principal operator. It is further admitted that the risk to the company with Edward as owner-principal operator was no greater than the risk to the company with Edward being the principal operator of the automobile owned by his parents. By advising the insurance company that Edward was to be the principal operator, Mr. and Mrs. Randolph incurred a liability for a higher premium which they paid.
There is no provision in the policy that would have allowed the company to cancel during the coverage period merely for the reason that Edward was to be the principal driver.
There was no evidence of any fraud on the part of any of the Randolphs. There was no evidence of any attempt to conceal. In fact, their advising the insurance company that Edward was going to be the principal operator indicates a lack of any intent to defraud.
After the transfer of title to Edward he continued as a resident of the household. In general, the use of the Chrysler was the same as it had been before the transfer. All family members used it. It remained the family automobile.
To say the least, the policy is poorly written. Although the plaintiff alleges a breach of warranty, nowhere in the policy is there any warranty of ownership. The policy by its terms insured the 1961 Chrysler. Nowhere does it specifically provide for a loss of coverage upon transfer of title among the family group.
In Merchants Indemnity Corp v. Eggleston , 37 N.J. 114 (1962), the court was concerned with an endorsement to a family automobile policy adding a substitute automobile. The decision was based upon the insurance company's disclaimer being barred by its conduct; however, the court stated:
"There has been much litigation with respect to 'ownership' provisions in automobile liability policies. [Citations omitted] Insurance carriers must be thoroughly aware of the problem. A statement as to 'ownership' may, as here, be but conclusion or opinion upon a factual complex. Alamo Cas. Co. v. William Reeves & Co. , 258 S.W. 2 d 211, 214 (Tex Civ. App. 1953). Representations with respect to matters of opinion certify to the truthfulness with which the opinion is held rather than to the validity of the opinion itself. See Shapiro v. Metropolitan Life Ins. Co. , 114 N.J. Eq. 378, 381 (E. & A. 1933). It is not difficult to frame questions which will elicit such facts concerning the subject as bear upon the acceptance of the risk. If a carrier is content to ask only for a conclusional statement as to ownership, it should ...