On appeal from the Superior Court, Law Division, Essex County.
Pressler, Brody and Cohen. The opinion of the court was delivered by Pressler, P.J.A.D.
This appeal raises questions relating to "other insurance" clauses in the context of uninsured motorist (UM) endorsements. The primary issue is whether uninsured motorist coverage which contains an illegal excess-escape clause should be construed as providing primary coverage in accordance with the holding of Motor Club of America Ins. Co. v. Phillips, 66 N.J. 277 (1974), or whether it should be reformed and read as providing ordinary excess coverage. The subsidiary question is whether, if the coverage is construed as primary, it is available on a pro tanto or a pro rata basis where the insured has settled with the other primary UM carrier for less than that carrier's pro rata share of the loss. For the reasons hereafter stated, we conclude that the consequence of the illegal escape-excess clause is to render the coverage primary and that the liability of each of the primary carriers remains pro rata, irrespective of the settlement with one of them.
The "other" insurer here is defendant New Jersey Manufacturers Insurance Company (NJM). Plaintiff Nicholas Childs instituted this declaratory action against NJM seeking a declaration that it was liable to him on its UM endorsement. He
appeals from a judgment of the Law Division granting NJM's motion for summary judgment dismissing the complaint.
The facts are not in substantial dispute. In 1979 plaintiff was a passenger in a vehicle operated by Claus Rademacher and owned by his father, Robert Rademacher. Claus Rademacher, in order to avoid a collision with an unidentified vehicle, had swerved his car, causing it to be hit by a third vehicle driven by Christopher Milowic and owned by his father, Walter Milowic. Plaintiff was injured in the collision between the Rademacher and Milowic vehicles.
At the time of the collision, the Rademacher vehicle was insured by Allstate Insurance Company (Allstate) by a policy containing the UM endorsement, subject to a $15,000/$30,000 coverage limitation. Plaintiff was also an insured under the NJM policy covering his father's two automobiles. That policy also contained the statutory UM endorsement. Both UM endorsements contained the same "other insurance" clause, each providing that
With respect to bodily injury to an insured while occupying a vehicle not owned by the named insured this coverage 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.
Plaintiff engaged in settlement negotiations with Allstate, NJM and the Milowic carrier, Aetna Life and Casualty Company (Aetna). NJM took the position that since its UM endorsement provided excess coverage, it had no obligation thereon to plaintiff. It therefore declined to participate in the settlement plaintiff effected with Allstate and Aetna. Under the terms of that settlement, plaintiff released the Rademachers and the Milowics from all liability claims in consideration of the sum of $23,400, to which both Aetna and Allstate contributed. In addition, plaintiff released Allstate in respect of its UM coverage for the sum of $2,000. Claiming that his injuries exceeded the total recovery of $25,400, plaintiff then instituted this action to recover under NJM's UM endorsement.
In response to the original motion and cross-motion of these parties for summary judgment, the trial judge stayed the action, directing arbitration of plaintiff's uninsured motorist claim. The questions to be addressed by the arbitrator were whether there had been an uninsured driver whose negligence contributed to the accident and, if so, the percentage of negligence of each of the three drivers and the total amount of plaintiff's damages. The eventual arbitration award, based on the conclusion that there had been a negligent uninsured driver, apportioned liability as follows: 25% to Rademacher, 50% to Milowic and 25% to the unidentified driver. Plaintiff's damages were fixed at $55,000.
Based on the foregoing, the trial judge concluded that only $13,750 of plaintiff's damages were assessable against the available UM coverage. He also concluded that since NJM was only an excess carrier in respect of UM coverage, plaintiff would be entitled to recourse against that coverage only if his uninsured motorist claim exceeded the $15,000 limitation of Allstate, the primary UM carrier. Since the uninsured ...