The issue presented here for resolution is the effect to be given competing excess insurance clauses in two automobile liability insurance policies, one insuring the driver and the other insuring the driver and the car rental company. For the reasons stated hereafter, these mutually repugnant excess coverage clauses are inoperative and the insurances are consequently co-primary.
The facts material to these cross-motions for summary judgment are undisputed. On March 9, 1989, plaintiff Thomas P. Rogers ("Rogers") entered into a written rental agreement with defendant Snappy Car Rental, Inc. ("Snappy") covering a 1987 Plymouth Reliant automobile. On March 22, 1989, Rogers was involved in an automobile accident. The resulting lawsuit was settled by Rogers's personal automobile liability insurance carrier, plaintiff New Jersey Manufacturers Insurance Company ("Manufacturers"), for the sum of $17,500.
Rogers and Manufacturers seek a declaration that Snappy's statutorily required automobile liability insurance coverage provided by defendant Progressive Casualty Insurance Company ("Progressive") is primary and that Manufacturers's coverage is excess. They contend that a car rental company is required by N.J.S.A. 45:21-1 to -8 to provide its customers with certain minimum coverage and that treating such insurance as excess is an illegal escape clause. Snappy and Progressive, on the other hand, contend that both policies contain mutually repugnant excess coverage clauses and must be treated as co-primary. They contend that because they did not seek to completely avoid providing the minimum coverage required by New Jersey's mandatory insurance laws, of which N.J.S.A. 45:21-1 to -8 is a part, they were free to provide such insurance on an excess basis. Having done so, they argue that the policies of Manufacturers and Progressive containing mutually repugnant excess insurance clauses are co-primary.
The Declaratory Judgment Act, N.J.S.A. 2A:16-50 to -62 is a remedial device designed to settle and afford relief from uncertainty and insecurity with respect to private rights and duties and thereby forestall the emergence of costly and cumbersome trial proceedings. National-Ben Franklin Fire Ins. Co. v. Camden Trust Company, 21 N.J. 16, 120 A.2d 754 (1956). The worthy purpose of the Act amply justifies the liberal construction accorded it. Id. at 22; Utility Blade and Razor Co. v. Donovan, 33 N.J. Super. 566, 111 A.2d 300 (App. Div. 1955).
No more fertile ground exists for the use of the declaratory judgment procedure than in the field of insurance. Condenser Service and Engr. Co., Inc. v. American Mut. Liability Ins. Co., 45 N.J. Super. 31, 38, 131 A.2d 409 (App. Div.), certif. den., 24 N.J. 547 (1957). The interpretation of contractual language is precisely the type of situation contemplated by the declaratory judgment statute.
We start then with the insurance policies at issue here. Manufacturers's policy insuring Rogers provides in Part A, Paragraph A, that Manufacturers "will pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident." The policy also provides:
If there is other applicable liability insurance, we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide for a vehicle you do not own shall be excess over any other collectible insurance. (Emphasis added.)
Manufacturers's policy does not purport to insure Snappy.
Progressive acknowledges that its policy insured Snappy with respect to the ownership, maintenance and use of the subject vehicle and that under Section IV(B)(5)(a) the policy was primary with respect to an automobile owned by Snappy, as was the case here. In addition, Rogers, using a covered auto with the permission of Snappy, was an insured under the omnibus clause found in Section II(A)(1) of the Progressive policy. However, Progressive contends in this case that it is entitled to the benefit of Section IV(B)(5)(c) which provides:
When this Coverage Form and any other Coverage Form or policy covers on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the Limit of Insurance of our Coverage Form bears to the total of the limits of all the Coverage Forms and policies covering on the same basis.
Progressive argues that its insurance, like that of Manufacturers, is excess and thus "covers on the same basis" as does Manufacturers. To arrive at excess rather than primary insurance, Progressive turns to the "cut-back" endorsement of its policy. That endorsement reads:
It is hereby agreed that, for the purpose of this policy and any subsequent renewals, the insurance provided by this policy for the lessee, rentee, its servants, agents, or employees or those using the automobile with or without the permission of the lessee or rentee or persons alleged to be legally responsible for the use of the automobile is subject to the terms, including any limit of liability, conditions, restrictions, and limitations contained in the lease or rental agreement, providing our undertaking in this policy is not enlarged or extended.
We thus turn to the rental agreement signed by Rogers. The terms and conditions on the reverse side of the agreement provide in ...