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Parks v. Colonial Penn Insurance Co.

Decided: November 29, 1984.

DAVID PARKS AND PATRICIA PARKS, PLAINTIFFS-RESPONDENTS,
v.
COLONIAL PENN INSURANCE COMPANY, DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT, V. INSURANCE COMPANY OF NORTH AMERICA, THIRD-PARTY DEFENDANT-RESPONDENT



On certification to the Superior Court, Appellate Division.

For reversal and remandment -- Chief Justice Wilentz, and Justices Clifford, Handler, Pollock, O'Hern and Garibaldi. Concurring in part, dissenting in part -- Justice Schreiber. Schreiber, J., concurring in part and dissenting in part.

Per Curiam

We granted certification, 93 N.J. 270 (1983), to review the Appellate Division's affirmance, in an unreported opinion, of two judgments against Colonial Penn Insurance Company (Colonial Penn). The first judgment was entered on an order dismissing Colonial Penn's third-party complaint against Insurance Company of North America (INA). The second was a summary judgment in plaintiffs' suit against Colonial Penn. The result flowing from the rulings below is that the uninsured motorists (UM) endorsement (N.J.S.A. 17:28-1.1) of plaintiffs' automobile policy with Colonial Penn has been held to be operative and plaintiffs may proceed to arbitration of their claims against Colonial Penn. We reverse.

I

On April 30, 1977, plaintiff David Parks was a passenger in an automobile operated by Robert Ajamian and owned by Robert Skelton. INA was the liability insurer on the Skelton vehicle. Ajamian did not own any motor vehicle and was not an insured under any other automobile policy. Parks had his own automobile insurance policy with Colonial Penn. He suffered personal injuries when Ajamian drove the Skelton vehicle off the road and struck a house. He and his wife, plaintiff Patricia Parks, started suit against Ajamian and Skelton to recover on

account of personal injuries and per quod losses (reference henceforth will be to "plaintiff").

The complaint charged that at the time of the accident Ajamian was acting as the "agent, servant and/or employee" of Skelton. Skelton denied agency. In addition, the defendants filed cross-claims against each other, raising an issue that was irrelevant to any material issue in Parks's simple negligence action, namely, whether Ajamian was using Skelton's automobile with the latter's permission. We assume -- as we must, in the absence of an adequate record on the point -- that at some time INA communicated its refusal to defend Ajamian and disclaimed coverage for the accident, based on the asserted lack of permission for Ajamian to use the insured vehicle. Skelton, INA's named insured, was represented in the Parks trial by counsel assigned by INA. Ajamian was defended by a member of the Somerset-Sussex Legal Services Office.

The trial of Parks's personal injury suit proceeded on the liability issue only, the damage claim having been bifurcated. At the conclusion of the evidence the trial court granted plaintiff's motion for a directed verdict against defendant Ajamian, granted defendant Skelton's motion for judgment against plaintiff on the grounds of no agency, and granted defendant Skelton's motion for judgment on Ajamian's cross-claim for indemnification and contribution. As it stood, then, plaintiff had a judgment on the liability question against Ajamian alone, and Skelton was out of the case. Nevertheless, the trial court submitted to the jury, by way of special interrogatory, the entirely extraneous issue of Ajamian's permissive use of the Skelton vehicle. The jury responded that Skelton had given Ajamian neither express nor implied permission to use his car, and the trial court included in the judgment a paragraph to that effect.

Thereafter, Parks instituted an arbitration proceeding pursuant to the provisions of his automobile policy with Colonial Penn, alleging that Ajamian was without any coverage of his

own and that inasmuch as there was a judicial determination that Skelton had not given permission for Ajamian to use his car (a condition to INA's furnishing coverage to Ajamian), Ajamian was uninsured, wherefore Colonial Penn was obliged to afford coverage to plaintiff. Colonial Penn refused to arbitrate, claiming there was an issue as to INA's coverage. The skirmishing continued, with plaintiff commencing this action for a declaratory judgment that Colonial Penn had to arbitrate his claim. Colonial Penn in turn filed a third-party complaint against INA, seeking a declaration that INA's policy afforded coverage to both Skelton and Ajamian at the time of the accident. The trial court granted INA's motion to dismiss the third-party complaint, on the basis of the res judicata effect of the jury's answer to the special interrogatory in the earlier litigation. Parks then ...


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