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Prudential Property & Casualty Insurance Co. v. Johnson

Decided: October 11, 1989.


On appeal from the Superior Court of New Jersey, Law Division, Camden County.

Michels, Deighan and Brochin. The opinion of the court was delivered by Michels, P.J.A.D.


Defendants Michael Johnson (Johnson) and Dorothy Johnson appeal from a judgment of the Law Division that declared that plaintiff Prudential Property & Casualty Co. (Prudential) was not obligated to pay Johnson underinsured motorist benefits under Prudential's family automobile policy.

The facts giving rise to this appeal are not in dispute. Johnson was travelling on Route 42 in the Borough of Bellmawr, New Jersey when he came upon an accident involving an automobile driven by Jeffrey Adams (Adams) and owned by Robert Atkins (Atkins). Adams apparently lost control of the automobile which ran head-on into the center median barrier, causing severe personal injury to the passengers, one of whom eventually died. When Johnson saw several people trying to extricate the injured parties from the Adams' automobile, he parked his automobile approximately 50 yards south of the accident and returned to the Adams' automobile to help the victims. While attempting to aid the accident victims, Johnson was struck by another motor vehicle driven by Scott Wilkie (Wilkie) and thrown approximately 75 feet in the air. As a result, Johnson suffered severe personal injuries.

Johnson sued Wilkie, Adams and Atkins to recover damages for the personal injuries he sustained in that accident. The claims against these tortfeasors were settled by Wilkie's insurance carrier paying Johnson the full policy limits of $100,000 and Atkins' insurance carrier paying Johnson $8,500. The Atkins' policy provided coverage in the amount of $15,000 for

one person and $30,000 for more than one person. In addition to the $8,500 paid to Johnson, Atkins' insurance carrier paid out the full amount of coverage available under the policy by paying $15,000 to the representative of the victim who had been killed in the accident and $6,500 to the other person in the accident.

Johnson claimed that he had sustained damages in the amount of $200,000, and made demand upon Prudential to arbitrate the claim under the latter's family automobile policy. Johnson argued that because Atkins' automobile was underinsured, he was entitled to coverage under Prudential's Underinsured Motorist (UIM) policy. Prudential denied that it was under any obligation to pay Johnson underinsured motorist benefits. Prudential instituted this declaratory judgment action, claiming that because Johnson had already recovered an amount in excess of his UIM limits of $100,000, he was not entitled to collect UIM benefits from it. Following argument on the cross-motions for summary judgment, Judge Davis in the Law Division held that under N.J.S.A. 17:28-1.1(e), Johnson's recovery of his UIM benefits under Prudential's policy was statutorily barred to the extent that he had recovered from the tortfeasors' insurance carriers. We agree and affirm.

In 1983, the Legislature amended the uninsured motorist coverage statute (UM) to include optional underinsured motorist coverage (UIM), as well. N.J.S.A. 17:28-1.1. The statute describes the UIM coverage as follows:

For the purpose of this section, (1) "underinsured motorist coverage" means insurance for damages because of bodily injury and property damage resulting from an accident arising out of the ownership, maintenance or use of an underinsured motor vehicle. . . . A motor 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 or bonds. [ N.J.S.A. 17:28-1.1(e) (emphasis added).]

Under the explicit and unambiguous language of this statute, the insureds' underinsured motorist coverage is to be reduced by the amount that he or she has recovered under all bodily injury insurance or bonds. This statute compels accumulation of all liability insurance recovery against the insured's own UIM policy limits of recovery. Here, Johnson had $100,000 UIM coverage under his Prudential policy. He settled his personal injury claims against Wilkie and Atkins for a total of $108,500. Since Johnson received an amount greater than his UIM limits, he cannot collect UIM benefits from Prudential. Thus, the decision reached by the trial court in this matter was legally correct and consistent with our construction of N.J.S.A. 17:28-1.1(e) in such cases as Nikiper v. Motor Club of America Cos., 232 N.J. Super. 393, 398-399, 557 A.2d 332 ...

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