On appeal from Superior Court of New Jersey, Law Division, Middlesex County.
Before Judges Dreier and Villanueva.
The opinion of the court was delivered by
Defendant, New Jersey Automobile Full Insurance Underwriting Association (NJAFIUA), appeals from a declaratory judgment holding it liable for benefits payable to plaintiff Christine Dillard. Plaintiff was injured while a passenger in a car operated by Deborah Dillard, which was struck by a car operated by Esther Kim. Deborah's car had been uninsured and unregistered for the year prior to the accident. However, just prior to the accident, Deborah had applied for insurance through a servicing agent for NJAFIUA and paid for such insurance by a check that was later dishonored for insufficient funds. When the defendant/insurer discovered this dishonor after the accident, it retroactively revoked the policy.
The issue in this case is whether that retroactive revocation affects the rights of the third party plaintiff/passenger.
Plaintiff filed a complaint for damages against her sister, Deborah Dillard, and Esther Kim. Plaintiff also sought benefits from the Unsatisfied Claim and Judgment Fund (UCJF).
Plaintiff then brought this declaratory judgment action against Hertz Claim Management and/or EDS Systems, as servicing agent for the New Jersey Automobile Full Insurance Underwriting Association (NJAFIUA). NJAFIUA's motion to dismiss the complaint against Hertz Claim Management and EDS Systems was granted.
At a bench trial, based upon stipulated facts, the trial Judge found in favor of plaintiff, concluding:
I find that the voidance [of the policy] does not apply to the passenger who's an innocent third party, and therefore she's entitled to PIP coverage, and she's entitled to make a claim against her driver for liability which she has and any verdict in her favor must be paid by the defendant carrier, and she also has a right to make a claim under the UM coverage because I understand the Kim car was not insured . . .
On appeal, defendant argues that under the terms of the application for insurance executed by Deborah Dillard, the insurance contract never went into effect and therefore no policy existed to provide any benefits. It is true that the applicant's statement on the NJAFIUA application includes the following statement: "I agree that no coverage will be in effect if my premium remittance, which accompanies the application and is forwarded to the servicing carrier, is justifiably dishonored by the financial institution." However, that disclaimer does not necessarily preclude actions on the policy by innocent third parties.
The distinction between first and third party claims against a canceled or void policy is of critical importance in determining whether coverage is afforded. In Tucker v. Allstate Insurance Co., 195 N.J. Super. 230, 478 A.2d 1220 (App. Div. 1984), plaintiff was the named insured under a new policy written by a private insurer, but had written a "bum check" to his agent. Id. at 232. Notwithstanding the fact that plaintiff had not received a notice of ...