On appeal from Superior Court, Law Division, Camden County.
Gaulkin, Robert Muir, Jr. and Landau. The opinion of the court was delivered by Landau, J.A.D.
The opinion by the court was delivered by LANDAU, J.A.D.
This appeal requires us to determine an issue respecting proration of underinsured motorist ("UIM") coverage where the insured owner of one car, his spouse and an independently insured passenger suffered damages resulting from an accident with an underinsured vehicle, and each policy required proration of UIM benefits under defined circumstances.
Our opinion affirms a Law Division determination which required that UIM coverage under the owner's policy be applied first against the shortfall in recovery suffered by him and his wife before proration with the passenger's own UIM policy coverage.
On November 18, 1989, plaintiff Carol Clegg ("Carol") was driving a motor vehicle registered in the name of her husband, plaintiff Robert J. Clegg ("Robert"), when it was struck by another vehicle owned and operated by William Kovalski, now deceased. Defendant Mary Smeltzer ("Smeltzer") was a passenger in the Clegg vehicle at the time of the accident. The parties appear to concur that Kovalski's negligence was the sole cause of the accident, although the record does not confirm whether such a determination has been conclusively made. Carol and Smeltzer were seriously injured. Robert was deprived of Carol's services.
Kovalski's automobile insurance policy issued by Liberty Mutual Insurance Company provided for $100,000 combined single limit coverage. The Cleggs and Smeltzer recovered $43,688.33 respectively from the Kovalski policy, representing an equal allocation of the available benefits under that policy after payment to the lessor for damage to the Kovalski vehicle.
At the time of the accident, Robert and Smeltzer each were insured for single limit UIM coverage of $500,000 under their respective automobile policies. Since the institution of this action, an arbitration panel has determined Carol's damages to be $575,000, and Robert's loss of consortium damages to be $75,000. Smeltzer's insurance carrier has stipulated that her damages exceed $500,000.
Robert Clegg, individually and t/a Smeltzer Realty Co., is the insured named on the Declarations sheet of a policy issued by defendant Camden Fire Insurance Association ("Camden"). As we note infra, Carol is treated identically in the Camden policy with the named insured shown in the Declarations, because she is a spouse resident in the same household. By contrast, Smeltzer is an insured person under the Camden policy because of her status as an occupant of a covered auto. Smeltzer's own UIM coverage is written under a policy issued by defendant New Jersey Full Insurance Underwriting Association ("JUA").
The present controversy arose when the Cleggs and Smeltzer presented UIM claims to their own carriers for the full amount of their respective UIM coverages. The claims of each would exhaust their own UIM coverage. Because of proration provisions in the two policies, however, a question arose whether Smeltzer was entitled to share equally in the UIM coverage provided under the Clegg policy.
The Cleggs sought arbitration with Camden pursuant to a clause in their contract of insurance. Unsuccessful in effecting arbitration, the Cleggs filed an Order to Show Cause and Verified Complaint in the Law Division naming as defendants Camden, JUA and Smeltzer. After hearing, the trial Judge entered an Order for Judgment which, among other things, compelled arbitration of the Cleggs' claim and declared that JUA was not entitled to pro rata or other contribution from the Camden policy. Finding UIM coverage to be "personal" to the insured, the Judge ruled that each policyholder should recover under his own policy and thereby receive what he had bargained and paid for. In the Judge's view, the proration provisions were not ...