On appeal from Superior Court, Law Division, Monmouth County.
Deighan and A.m. Stein. The opinion of the court was delivered by Deighan, J.A.D.
Plaintiff Robert W. Bauter seeks to recover under an underinsured motorist (UIM) provision of an insurance policy issued to him by defendant Hanover Insurance Company (Hanover). After discovery was completed, the parties cross-moved for summary judgment. On October 27, 1989, Judge Peskoe denied plaintiff's motion and granted defendant's motion for summary judgment. We affirm.
The facts are not in dispute. In March 1986, plaintiff's wife, Kathleen Bauter, was killed in a motor vehicle collision while a passenger in an automobile operated by plaintiff. Plaintiff brought a personal injury and wrongful death action against the intoxicated driver of the other car and settled that claim for $25,000, the proceeds of the intoxicated driver's automobile liability policy. Plaintiff also settled a dram shop action against Ralph's Tavern & Liquors, the liquor establishment that served the intoxicated driver, for $500,000, the proceeds of a dram shop liability policy issued to Ralph's Tavern & Liquors.
Plaintiff's insurance policy with Hanover provided for UIM coverage in the amount of $300,000. He made a claim against Hanover for $275,000, the policy limits on the UIM coverage less the $25,000 recovered from the other driver. Hanover denies liability and contends that since the dram shop action was settled in excess of the $300,000 UIM coverage, it has no obligation to pay plaintiff under the UIM coverage provision of his automobile policy.
N.J.S.A. 17:28-1.1(e) defines UIM coverage as follows:
For the purposes 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. Underinsured motorist coverage shall not apply to an uninsured 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. [Emphasis added.]
Plaintiff argues that the legislative intent was to trigger UIM coverage when all of the tortfeasor's automobile liability coverage is exhausted and that a dram shop policy may not be set off against UIM coverage. Hanover maintains that the statute clearly and unambiguously requires a set off against all liability policies of the parties and not merely automobile liability policies.
This case presents a novel issue as no New Jersey case to date has considered whether the statutory language, "all bodily injury and property damage liability bonds and insurance policies," includes non-automobile insurance policies such as dram shop insurance. In interpreting N.J.S.A. 17:28-1.1(e), it is important to keep in mind the purpose behind New Jersey's UIM statute. The states are split in their approach to underinsurance. M. Bender, No-Fault & Uninsured Motorist Automobile Insurance § 30:40(2)(c) (1984). In some states, the coverage is designed and interpreted to compensate an injured party only for the amount of UIM coverage purchased. In other states, however, the coverage is designed to compensate the plaintiff for the full value of the injuries, allowing plaintiff to collect UIM benefits above and beyond recovery under other liability policies. Id. The purpose of New Jersey's statute is to protect the insured up to the UIM limits purchased and not to make an injured person whole again. See Nikiper v. Motor Club of America Cos., 232 N.J. Super. 393, 399, 557 A.2d 332
(App.Div.1989). In Nikiper, this court stated that "the purpose of the UIM feature is to provide as much coverage as the insured is willing to purchase, up to the available limits, against the risk of an underinsured claim." Id. at 399, 557 A.2d 332. Referring to the provision of the statute requiring a setoff of prior recoveries against the UIM limits, the court noted that the theory behind UIM coverage is that "there is underinsurance relative to the limits for which the injured party has contracted for as opposed to protecting the individual against any particular tortfeasor." Id.
Several New Jersey decisions that involved only automobile insurance proceeds have concluded that the statutory language, "all bodily injury and property damage liability bonds and insurance policies," is clear and unambiguous and should be read literally to require an offset of all available automobile insurance policies. See Prudential Ins. v. Johnson, 238 N.J. Super. 1, 568 A.2d 1193 (App.Div.1989); Nikiper, 232 N.J. Super. 393, 557 A.2d 332; Tyler v. New Jersey Auto. Full Ins. Underwriting Ass'n, 228 N.J. Super. 463, 465-67, 550 A.2d 168 (App.Div.1988); Longworth v. Van Houten, 223 N.J. Super. 174, 176-78, 538 A.2d 414 (App.Div.1988). ...