On appeal from the Superior Court, Appellate Division, whose opinion is reported at 248 N.J. Super. 265 (1991).
Chief Justice Wilentz and Justices Handler, Pollock, O'Hern, and Stein join in this opinion. Justice Clifford has filed a separate Dissenting opinion in which Justice Garibaldi joins.
This case comes to us on an appeal as of right, R. 2:2-1(a), one Judge in the Appellate Division having Dissented from that court's judgment that the homeowner's policy issued by the insurer, Salem Group, to its insured, Dallas Newman, obligates the insurer to defend the insured.
We affirm the judgment of the Appellate Division substantially for the reasons set forth in Judge King's thorough opinion reported at 248 N.J. Super. 265 (1991). In affirming, we recognize the concerns of our Dissenting colleagues, who find dispositive the exclusion from coverage "for any loss * * * for bodily injury * * * arising out of * * * operation, ownership, or use of * * * motor vehicles owned * * * by * * * an insured." Having recognized those concerns, however, we are persuaded that the insurer remains obligated to defend the insured on the fifth count of the complaint.
That count alleges social host liability for supplying alcoholic beverages to Carl Oliver, the insured's minor nephew. Those allegations describe acts that fall within the policy provision that the insurer will "pay such sums that arise out of bodily injury * * * caused by an occurrence." Another provision defines an "occurrence" as "an accident."
No one disputes that insurers are generally obligated to defend their insureds on social host claims. The critical question is whether the insurer can avoid that obligation because a separate excluded risk, the operation of an all-terrain vehicle (ATV), constitutes an additional cause of the injury. We find that the insurer remains obligated to defend the covered risk. It may not avoid that obligation simply because the operation of an ATV constitutes an additional cause of the injury. Cooperative Fire Ins. Co. v. Vondrak, 346 N.Y.S.2d 965. 968 (Sup. Ct. 1973).
If, as the Dissent finds, the policy unambiguously excluded coverage for an accident caused concurrently by the operation of a motor vehicle and the provision of alcoholic beverages, the insurer would not be obligated to defend its insured. The policy, however, does not so provide. It is not at all clear that the exclusion for the operation of an ATV is to apply when the insured provides liquor to the victim, who then drives the insured's ATV. Arguably, the exclusion does not apply in that context. When a policy fairly supports an interpretation favorable to both the insured and the insurer, the policy should be interpreted in favor of the insured. Van Orman v. American Ins. Co., 680 F.2d 301, 308 (3d Cir. 1982); DiOrio v. New Jersey Mfrs. Ins. Co., 79 N.J. 257, 269 (1979); Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475, 482 (1961); 13 J.A. Appleman, Insurance Law - Practice, §§ 7426, 7427 (1976).
A contrary Conclusion could defeat the reasonable expectations of the insured, which should be respected to the extent the policy's language allows. DiOrio, supra, 79 N.J. at 269; Allen v. Metropolitan Life Ins. Co., 44 N.J. 294, 305 (1965); Merchants Indem. Corp. v. Eggleston, 37 N.J. 114, 121-22 (1962). In certain contexts, if Newman had provided an ATV, alcoholic beverages, or both, the policy apparently would cover a resulting accident. Arguably, if the accident had occurred while Oliver was driving the ATV on Newman's property, Newman would be covered. Or if Newman had provided Oliver with alcohol and the accident had occurred while Oliver was driving another's ATV, Newman arguably would be covered. Given those possibilities and the wording of the exclusion, Newman could reasonably expect that the policy would cover him when he provided both the ATV and the alcoholic beverages that contributed to the causation of an accident not on Newman's property.
Unlike the Dissent, we are not persuaded by the relevance of two opinions of the Appellate Division, Allstate Ins. Co. v. Moraca, 244 N.J. Super. 5 (1990); Scarfi v. Aetna Casualty & Sur. Co., 233 N.J. Super. 509 (1989), which involved allegations that the insureds had negligently supervised or entrusted their automobiles to others. In Moraca, plaintiff alleged that the insured had "failed to exercise sufficient control and supervision of her son in the operation of his automobile and was negligent in allowing her son to own and operate his automobile because she had reason to know of his reckless and negligent driving habits." 244 N.J. Super. at 7. The plaintiff in Scarfi sued the directors of an insured corporation alleging that they had been negligent in the hiring and training of one of the corporation's drivers. Scarfi, supra, 233 N.J. Super. at 512. Those opinions proceed on the assumption that the negligent entrustment or supervision of a motor vehicle is intertwined with the ownership and operation of the motor vehicle. The negligent entrustment or supervision cannot be isolated from the ownership and operation of the insured automobile. In contrast, the serving of alcohol to a minor does not depend on the insured's ownership of a motor vehicle or its entrustment to another. One need not own a motor vehicle to serve alcohol to another. If Newman had provided alcohol to Oliver knowing that Oliver was about to operate Oliver's own vehicle or that of a third party, Newman could still be exposed to social host liability. In the present case, the fifth count of Oliver's complaint does not allege negligent entrustment or supervision or any other act that depended on Newman's ownership or use of the ATV. Instead, that count alleges a basis for liability in addition to Oliver's use of the ATV.
To hold that Salem Group must defend its insured, we need not go so far as the California Supreme Court did in State Farm Mutual Automobile Insurance Co. v. Partridge, 514 P.2d 123, 128 (1973). Partridge held that "when two such risks constitute concurrent proximate causes of an accident, the insurer is liable so long as one of the causes is covered by the policy." Id. at 129. We hold not that the insurer may ultimately be liable under the policy, but only that it must honor its duty to defend.
To the extent that Vanguard Insurance Co. v. Clarke, 475 N.W.2d 48 (Mich. 1991), rejects dual or Concurring causation as a basis for a finding of an obligation to defend, we disagree with that opinion. In Vanguard, three family members died when the insured continued to operate his car after automatically closing the garage doors. The Vanguard court found that the fumes from the car, and not the garage door, were the cause of death. Consequently, the court found the automobile exclusion clearly applied. Id. at 52. The present case differs because the alcohol and the ATV allegedly were concurrent causes of Oliver's accident. As the Appellate Division stated, "because of the effect of the alcoholic drinks, Oliver said he drove 'harder, faster and recklessly.' He fell off Newman's ATV several times after having these drinks but was unhurt." 248 N.J. Super. at 267-68.
In Vanguard, moreover, the denial of recovery predicated on the automobile exclusion to the homeowner's policy precludes double coverage under that policy and an automobile liability policy. No ...