Cass, Peter J., J.s.c. (temporarily assigned).
In this declaratory judgment action plaintiffs seek a determination as to the applicability and effect of an underinsured motorist's endorsement in an automobile insurance policy issued by defendant insurance company. An arbitration proceeding has been stayed pending resolution of this dispute, which is now before the court on plaintiffs' motion for summary judgment.
The facts admitted for purposes of this action are that plaintiff Franklin D. Wert, Jr. was operating an employer-leased vehicle northbound on Grove Street, Montclair, on August 22, 1977, when he was struck by a vehicle negligently operated southbound on the same street by codefendant Eugene C. Picciano. Picciano's insurance carrier, Safeco Insurance Co., which insured him for bodily injury of $15,000 per person, per occurrence, has deposited the full limits of his coverage in court for payment to Wert.
Wert also maintained an automobile insurance policy issued by defendant United Services Automobile Association Insurance
Co. (U.S.A.A.). This policy covered Wert while driving a nonowned vehicle and provided liability coverage of $100,000 each person, per occurrence, to others injured by the insured's negligence. It further provided standard uninsured motorists (UM) coverage required by N.J.S.A. 17:28-1.1 if involved in an accident with a negligent uninsured motorist, in the amount of $25,000 per person. Moreover, the policy provided a new form of coverage under an endorsement called the underinsured motorists (UIM) coverage, which afforded to the insured coverage up to his UM limits of $25,000 per person for those situations where another tortfeasor carried a lesser liability coverage.
Plaintiffs contend that because of the UIM endorsement U.S.A.A. is liable to them for the full $25,000 of this coverage in addition to the $15,000 deposited in court by Safeco, a total of $40,000, provided only they show their entitlement in an arbitration proceeding to damages at least equal to that combined amount. U.S.A.A. argues that its liability under the endorsement is limited to the face amount of $25,000 less the $15,000 paid into court by Safeco, or $10,000. Solely for the purposes of the declaratory judgment action, U.S.A.A. concedes that Wert's claims exceed the sum of $40,000.
The coverage afforded is provided in two endorsements to the main policy. The first endorsement, designated "PROTECTION AGAINST UNINSURED MOTORISTS INSURANCE -- NEW JERSEY," provides in paragraph I as follows:
The company will pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle because of bodily injury . . . caused by accident and arising out of the ownership, maintenance or use of such uninsured highway vehicle. . .
"uninsured highway vehicle" means:
(a) a highway vehicle with respect to the ownership, maintenance or use of which there is, in at least the amounts specified by the financial responsibility law of the state in which the insured highway vehicle is principally garaged, no bodily injury and property damage liability bond or insurance policy applicable at the time of the accident with respect to any person or organization legally responsible for the use of such vehicle, or with respect to which there is a bodily injury and property damage liability bond or insurance policy applicable at the
time of the accident but the company writing the same denies coverage thereunder or is or ...