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Motor Club of America Insurance Co. v. Phillips

Decided: December 18, 1974.


For reversal -- Chief Justice Hughes, Justices Jacobs, Mountain, Sullivan, Pashman and Clifford and Judge Conford. For affirmance -- None. The opinion of the Court was delivered by Conford, P.J.A.D., Temporarily Assigned.


[66 NJ Page 279] This appeal presents to this court for the first time the extensively litigated question whether an "other insurance" exclusion in the uninsured motorist (UM) endorsement of an automobile

liability policy, which purports to prohibit recovery on the UM coverage on the accident victim's own policy if he has recovered or has available recourse to the UM coverage of the vehicle he was occupying when injured (except to the extent of an excess in amount of coverage of the former over the latter), is invalid because repugnant to a statute requiring every automobile liability policy issued to include an offer of UM coverage in stated amounts per person and per accident for damages for bodily injury. The question is posed in the context of an assumption of total damages to the insured exceeding the maximum coverage of the primary policy (that covering the vehicle involved in the accident). The Law Division and the Appellate Division held the other insurance exclusion valid and operative. While the Appellate Division affirmed for the reasons stated orally by the Law Division judge, its views were amplified in its opinion in a different case involving the same issue, decided the same day by the same Part of the court. Hartford Ins. Co. v. Allstate, 127 N.J. Super. 460 (1974).

On June 24, 1971 defendant was a passenger in an automobile owned by Walter Malinowski and operated by David Malinowski which became involved in an accident with an uninsured automobile owned and operated by one Watson. Plaintiff concedes the uninsured motorist was responsible for the collision. Defendant alleges that he suffered fractures of the right tibia and fibula, causing medical expenses of $1,600 and loss of income of $5,500, and "resulting pain and suffering and permanency".

The host vehicle was covered by a policy issued by Allstate Insurance Company which contained a UM endorsement providing coverage of $10,000 for injuries to one person. Defendant collected that sum from Allstate. Plaintiff had previously issued an automobile liability insurance policy on a car owned by defendant's wife with a UM endorsement of $10,000 per person and $20,000 per accident for which defendant had paid a $5 premium. Defendant

was an insured under that policy, and made a claim against plaintiff for payment on the UM endorsement. The company denied liability on the basis of the other insurance provision in the UM endorsement the first paragraph of which read as follows:

With respect to bodily injury to an insured while occupying a highway vehicle not owned by the named insured, this insurance shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such vehicle as primary insurance and this insurance shall then apply only in the amount by which the limit of liability for this coverage exceeds the applicable limit of liability of such other insurance.*fn1

As the UM limits for injury to a single person were $10,000 in each policy, the other insurance exclusion would exculpate plaintiff on the claim.

The defendant thereupon filed a demand for arbitration with the American Arbitration Association seeking recovery from the plaintiff on the UM endorsement. Plaintiff instituted an action in the Chancery Division to restrain defendant from proceeding with the arbitration, and defendant moved for summary judgment. On that motion and plaintiff's cross-motion for summary judgment, the Chancery Division judge granted the plaintiff's motion and entered an order enjoining defendant from proceeding with arbitration. On appeal, as noted above, the Appellate Division affirmed. This court granted defendant's petition for certification. 65 N.J. 556 (1974).

Although the Chancery Division had previously, in McFarland v. Motor Club of Amer. Ins. Co., 120 N.J. Super. 554

(Ch. Div. 1972, per Francis, J.S.C.), held in a precisely similar situation that the other insurance clause was violative of the public policy reflected by our statute mandating an offer of UM coverage in stated limits in every automobile liability policy issued, N.J.S.A. 17:28-1.1, the lower courts in the present case, and the Appellate Division more precisely in Hartford Ins. Co. v. Allstate, supra, held to the contrary. Their view was that the UM statute, adopted in 1968 and effective in January 1969, was designed solely to relieve the Unsatisfied Claim and Judgment Fund of a large part of its existing financial burden, and was essentially a transfer of UM relief from the Fund to the insurance industry. In that view, since relief from the Fund was limited to a single recovery of $10,000 for one person and $20,000 for one accident, and a contemporaneous amendment of the Fund act made availability of UM insurance a defense to a claim against the Fund, N.J.S.A. 39:6-62, there was no reason to believe the Legislature intended by the UM statute to mandate allowance of claims by an injured person aggregating more than the $10,000 limit fixed for UM coverage by the act, even if the injured motorist was covered by more than one policy containing UM protection and his damages in fact, as here, exceeded the $10,000 limitation. 127 N.J. Super. at 464-465. This view was thought to gain strength from the fact that, as required by the statute, the Commissioner of Insurance had approved the form of the UM endorsement, including the other insurance exclusion. Id., at 465-466.

Views accordant with those expressed in Hartford, unsympathetic with multiple-policy recovery on UM endorsements (sometimes pejoratively labelled as "stacking"), were expressed in Allstate Ins. Co. v. McHugh, 124 N.J. Super. 105, 113 (Ch. Div. 1973), aff'd o.b. 126 N.J. Super. 458 (App. Div.), certif. den. 65 N.J. 288 (1974), and Beek v. Ohio Casualty, 127 N.J. Super. 187, 192 (Ch. Div. 1974). However, the specific issues presented in those cases do not

concern us here and we imply no view on the results ...

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