On appeal from the Superior Court of New Jersey, Law Division, Morris County.
O'Brien, Scalera and Stern. The opinion of the court was delivered by Scalera, J.A.D.
[233 NJSuper Page 272] This case centers on whether the provisions of the underinsured motorist endorsement in plaintiffs' automobile insurance policy require submission to arbitration to determine its applicability where plaintiffs have settled with three alleged tortfeasors
for less than the limits of the latter's insurance coverage.
On November 19, 1984, plaintiff Robert F. Gold, whose wife Amelia sues per quod, was involved in a chain car accident while traveling eastbound on Route 10 in Morris Plains. An unidentified car in front of his car allegedly came abruptly to a halt and as plaintiff came to a stop, his car was struck in the rear by the cars in line behind him. The first car behind plaintiff was driven by Peter Przybysewski, the second by Carolyn Kendall and the third by Mary Garvey. Plaintiff allegedly suffered severe bodily injuries as a result of the accident.
Plaintiffs negotiated a settlement with the insurance companies for these three other drivers for a total sum of $112,500 which plaintiffs allege to be less than the total actual damages which they sustained in the accident. Garvey, with a liability insurance policy limit of $300,000, settled for $70,000. Kendall, with a liability insurance policy limit of $25,000, settled for $20,000. After this suit was instituted Przybysewski, a party defendant with a liability insurance policy limit of $25,000, settled for $22,500.
At the time of the accident, the car driven by Robert was insured by defendant Aetna Life & Casualty Insurance Company (Aetna) with an underinsured motorist coverage limit of $250,000. The dispute in this suit involves the interpretation of that coverage in the insurance policy and whether it is implicated in this situation.*fn1
An underinsured motor vehicle is defined in the policy as a
"vehicle . . . to which a liability bond or policy applies at the time of the accident but its limit for liability is less than the limit of liability for this coverage, . . ."
It also provides that Aetna
"will pay damages under this coverage caused by an accident with an underinsured motor vehicle only after the limits of liability under any applicable
liability bonds or policies have been exhausted by payment of ...