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Fernandez v. Selected Risks Insurance Co.

Decided: March 18, 1980.


On certification to Superior Court, Appellate Division, whose opinion is reported at 163 N.J. Super. 270 (1979).

For affirmance -- Chief Justice Wilentz and Justices Sullivan, Pashman, Clifford, Schreiber and Handler. For reversal -- None. The opinion of the Court was delivered by Handler, J.


[82 NJ Page 237] This case raises once again the validity of an owned-but-uninsured exclusion clause contained in the endorsement for uninsured motorist (UM) coverage provided in an automobile insurance policy written in this State. The exclusion clause is sought to be applied to deny coverage to the named insureds, who were riding in an uninsured vehicle when injured, on the grounds that the insureds were not then domiciled in New Jersey and that the accident giving rise to their claim occurred outside of this State.

The facts are not in dispute. In March 1974 Jose Fernandez, one of the plaintiffs, obtained an automobile liability insurance policy from Selected Risks Insurance Company (hereinafter "Selected"). Fernandez at the time resided in New Jersey and the one-year policy covered his two automobiles which were garaged at his residence. The policy included an uninsured motorist endorsement as required by N.J.S.A. 17:28-1.1.

After the policy had been issued, Fernandez and his wife, Paulina, moved to Atlanta, Georgia. There, Eugenio Berovides, Paulina's brother, joined the Fernandez household. On February 19, 1975, while Berovides was driving his own automobile in Georgia with Paulina as a passenger, an uninsured vehicle struck his car. Berovides' vehicle was also uninsured at the time of the accident. Berovides and Paulina suffered injuries for which both they and Jose sought compensation from Selected under the uninsured motorist coverage of Jose Fernandez's policy. Selected disclaimed coverage on the basis of the owned-but-uninsured exclusion clause in the agreement.

Plaintiffs filed an action in Superior Court, Chancery Division for a declaratory judgment seeking confirmation that coverage existed and for an order directing defendant to submit the dispute to arbitration. The trial court, and subsequently the Appellate Division, ruled that the owned-but-uninsured exclusion was invalid as a violation of the intendment of N.J.S.A. 17:28-1.1, which provides for mandatory coverage of accidents involving uninsured motor vehicles. We granted certification, 79 N.J. 488 (1979), to review that determination and now affirm.

Statutes mandate the inclusion of uninsured motorist protection in insurance policies written in this State. N.J.S.A. 39:6A-14 provides:

Every owner or registrant of an automobile registered or principally garaged in this State shall maintain uninsured motorist coverage as provided in P.L. 1968, c. 385 (C. 17:28-1.1).

N.J.S.A. 17:28-1.1, which is specifically referred to in N.J.S.A. 39:6A-14, states:

No automobile liability policy or renewal of such policy, of insurance insuring against loss resulting from liability imposed by law for bodily injury or death, sustained by any person arising out of the ownership, maintenance or use of a motor vehicle shall be issued in this State with respect to any motor vehicle registered or principally garaged in this State unless it includes coverage, in [specified] limits for bodily injury or death . . .. All such automobile liability policies shall also include coverage for the payment of all or part of the sums which persons insured thereunder shall be legally entitled to recover as damages from owners or operators of uninsured automobiles, other than hit and run automobiles, because of injury to or destruction to the personal property of such insured with a limit in the aggregate for all insureds involved in any one accident of $5,000.00, and subject, for each insured, to an exclusion of the first $100.00 of such damages.

The liability insurance contract in this case defined the insured as "the named insured and any designated insured and, while resident of the same household, the spouse and relatives of either." Defendant Selected has conceded that Paulina Fernandez and Eugenio Berovides were both insureds under the policy. The insurance contract also contained an exclusion provision with respect to any owned-but-uninsured vehicles of the insured. The enforceability of that clause forms the crux of this appeal.

The exclusionary clause here provides that the insurance protection does not apply "to bodily injury to an insured while occupying a highway vehicle (other than an insured highway vehicle) owned by the named insured . . . or any relative resident in the same household as the named or designated insured. . . ." Selected contends that since the Berovides vehicle was itself not insured on this policy, notwithstanding the status of Paulina and Berovides as individual ...

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