On certification to the Superior Court, Appellate Division.
For reversal and remand -- Chief Justice Wilentz, and Justices Handler, Pollock, O'Hern, Garibaldi and Stein. For affirmance -- Justice Clifford. The opinion of the Court was delivered by Garibaldi, J. Clifford, J., dissenting.
This appeal presents a narrow question regarding the coverage obligations of a company self-insured under N.J.S.A. 39:6-52. Specifically, the issue is whether a self-insurer's coverage obligation to an additional insured during a "loading and unloading" accident is limited to the minimum amounts of compulsory insurance mandated by N.J.S.A. 39:6B-1.
Our analysis has two considerations. We first examine an insurer's obligation to provide coverage to an additional insured in a loading and unloading accident in the context of a liability insurance policy. We then consider whether that obligation is limited when a company, rather than obtaining a liability policy from an insurance company, chooses to retain its own risk of loss by becoming a self-insurer.
The facts are not in dispute. On March 29, 1983, Timothy Rodermond was a truck driver employed by Byrnes Motor Express, a subsidiary of Ryder/P.I.E. Nationwide (Ryder). While Rodermond was making a delivery to Colcon Corporation (Colcon) at Harbor Bay, Inc.'s (Harbor Bay) warehouse, Harbor Bay's forklift operator, assisting in the delivery, injured him. The injury occurred during the "loading and unloading" phase of delivery.
Rodermond brought an action against Harbor Bay, which filed a third-party complaint against Ryder, seeking coverage as an additional insured. Relying on Bellafronte v. General Motors Corp., 151 N.J. Super. 377, 376 A.2d 1294 (App.Div.), certif. denied, 75 N.J. 533, 384 A.2d 513 (1977), the trial court granted Harbor Bay's motion for summary judgment, requiring
Ryder to indemnify and defend Harbor Bay. That ruling has not been challenged by either party.
While the Rodermond suit was pending, Ryder brought a declaratory-judgment action to determine the extent of its liability. Ryder then paid $65,000 in settlement of the Rodermond claim, while retaining its right to continue the declaratory-judgment action. Ryder argued that it was liable on Harbor Bay's behalf for only $15,000, the minimum amount of motor-vehicle liability insurance mandated by N.J.S.A. 39:6B-1, and the amount for which it had posted an indemnity bond to qualify as a self-insurer. Harbor Bay asserted that Ryder must provide coverage for the full $65,000 amount of Rodermond's claim because it had assumed the risk as a self-insurer for claims up to $500,000.
At trial, Howard Flax, vice-president of Ryder, testified that Ryder had been self-insured since 1972. He further testified that in order to qualify as a self-insurer under N.J.S.A. 39:6-52, Ryder had to submit evidence of financial responsibility. According to Flax, Ryder posted an indemnity bond with the Division of Motor Vehicles limiting the obligations of its surety, American Casualty Company, to the minimum amount of security then required by N.J.S.A. 39:6-25 -- $10,000 for injury to one person, $20,000 for injury to more than one person, and $5,000 for property damage. Ryder later increased coverage under the bond to $15,000, $30,000 and $5,000, respectively, to comply with the revised statutory minimums set by the financial-security law, which amounts are the same as required under N.J.S.A. 39:6B-1, the compulsory motor-vehicle insurance law. Flax testified that Ryder also furnished general financial information as part of its application. Additionally, Flax said that in 1983 Ryder was self-insured up to $500,000 and had additional coverage under an insurance policy for the corporation, its officers, directors, and employees in excess of $500,000. Flax was the only witness at trial.
At the conclusion of trial, the court ruled that Ryder was liable for the entire $65,000 settlement. The court rejected Ryder's contention that its status as a self-insurer, the indemnity bond it posted with the Division of Motor Vehicles, or the fact that a third-party's negligence caused the injury limited its liability. Because Ryder was self-insured for claims up to $500,000, the court reasoned that it was liable for all judgments obtained against it for up to that amount.
On appeal, the Appellate Division reversed, holding Ryder liable for $15,000 of the Rodermond settlement. 241 N.J. Super. 453, 575 A.2d 489. The court found that "Ryder undertook to assume the risk of loss only for the mandatory minimum required of it by law . . . the same coverage it would have been required to purchase . . . if the Director had not allowed it to become a self-insured." The court reasoned that there is no "statutory or policy prohibition" against a self-insurer providing coverage only to the extent required by law, and obtaining excess coverage for its own personnel. Having established its willingness to provide that minimum coverage, as further evidenced by its posting an indemnity bond in that amount, the court concluded that Ryder was liable to Harbor Bay only for the minimum statutory amount of $15,000.
The obligation to provide coverage to an additional insured in a loading and unloading case ...