On appeal from the Superior Court, Law Division, Atlantic County.
Gaulkin, Bilder and R. S. Cohen. The opinion of the court was delivered by Cohen, R.s., J.A.D.
[228 NJSuper Page 464] This case involves the nature and extent of the protection provided to the Tyler family by the underinsured motorist
provisions of an automobile insurance policy issued to plaintiff Mary Tyler.*fn1
This is what happened. Plaintiffs, four members of the Tyler family, were injured in a collision with the auto of Russell Boggs. Boggs' insurance policy had a per-accident liability limit of $50,000. His carrier offered the entire policy in settlement. The Tylers accepted, dividing the available proceeds $19,000 to one, $16,500 to another, $9,500 to a third and $5,000 to the fourth injured plaintiff.
The Tylers' policy had uninsured and underinsured motorist coverage with limits of $15,000 per person and $30,000 per accident. The Tylers brought this action against Liberty Mutual and its agent, only one aspect of which is involved in this appeal. It is the claim by the two Tylers who settled with Boggs for $9,500 and $5,000 that, because Boggs had insufficient insurance to pay all of their damages, their policy provided $15,000 underinsured motorist protection for each of them against Boggs' negligence less the amounts they received from him in settlement. The trial court ruled that the policy provided such coverage. Defendant appealed, and we now reverse.
N.J.S.A. 17:28-1.1a requires all motor vehicle liability policies issued in New Jersey to include bodily injury coverage with limits of $15,000/$30,000 for injury to the insured by a uninsured motorist. See also N.J.S.A. 39:6A-14. In addition, carriers must offer as an option underinsured motorist coverage and further uninsured motorist coverage up to the policy's liability limits, but not more than $500,000 per accident. N.J.S.A. 17:28-1.1b.
A vehicle is underinsured when
the sum of the limits of liability under all bodily injury and property damage liability bonds and insurance policies available to a person against whom recovery is sought for bodily injury or property damage is, at the time of the accident, less than the applicable limits for underinsured motorist coverage afforded under the motor vehicle insurance policy held by the person seeking that recovery. A motor vehicle shall not be considered an underinsured motor vehicle under this section unless the limits of all bodily injury liability insurance or bonds applicable at the time of the accident have been exhausted by payment of settlements or judgments. The limits of underinsured motorist coverage available to an injured person shall be reduced by the amount he has recovered under all bodily injury liability insurance bonds. [ N.J.S.A. 17:28-1.1e].
The plain meaning of the statute is that underinsured motorist benefits are available if (and to the extent that) the tortfeasor's liability limits are lower than the limits of the underinsured motorist coverage contained in the plaintiff's policy. Here, the tortfeasor's liability limits were $25/50,000 while plaintiffs' underinsured motorist limits were $15/30,000. For that reason, plaintiffs' underinsured motorist coverage did not apply.
The statute produces the same result if there is one injured claimant or many, or if the amount of damages exceed the tortfeasor's liability limits, or even if multiple claims against one tortfeasor are, because of his liability limits, settled for amounts which are individually less than the underinsured motorist coverage available from the claimants' policy. A tortfeasor is not underinsured relative to plaintiffs' damages, or relative to the judgment or judgments against him, but rather relative to the limits of the underinsured motorist coverage purchased by or for the person seeking recovery.
Our decision is consistent with Longworth v. Van Houten, 223 N.J. Super. 174 (App.Div.1988), where this court ruled that a claimant may recover under his own underinsured motorist coverage, less the full amount of the tortfeasor's liability limits, even if the claimant settled with the tortfeasor's carrier for less. There, plaintiff's underinsured motorist coverage was higher than the tortfeasor's liability coverage. A necessary corollary of ...