The opinion of the court was delivered by: Goldman
On July 10, 1995, the court heard summary judgment motions brought by CSC Insurance Services (CSC) and Ida Graves (Graves) as to CSC's liability for personal injury protection (PIP) benefits claimed by Graves. The court deconsolidated this case from the underlying negligence action brought by Graves against Paul Williams. The court granted summary judgment to Graves and denied CSC's motion. CSC appealed and moved to supplement the record and remand, which the Appellate Division granted on December 12, 1995. On remand, the court heard oral argument on CSC's motion to reconsider based upon the supplemental materials. The court reaffirms its order granting summary judgment to Graves and denying it to CSC.
This is a case of first impression in New Jersey. It requires interpretation of a form exclusion clause regarding PIP benefits, which most, if not all, automobile insurance policies contain. In fact, the prototype insurance policy reproduced in Cynthia M. Craig & Daniel J. Pomeroy, New Jersey Auto Insurance Law app. C-1 at 535, 539 (1995) includes the clause in dispute.
On November 22, 1991, Graves' passenger van was allegedly rear-ended by Williams' vehicle. Traveling with Graves were several children, including Eddie Mills, a customer of her day care center. Graves and those children related to her received substantial PIP benefits from CSC, which now seeks to recoup those benefits previously paid to Graves and her relatives. CSC argues that Graves was being paid to care for Eddie Mills and was therefore, directly or indirectly, receiving a fee for transportation, which would bar PIP coverage under the policy. The clause reads: "we do not provide Medical Payments Coverage for any person for 'bodily injury' . . . 2. Sustained while 'occupying your covered auto' when it is being used to carry persons or property for a fee."
To decide the issues, I must decide what the "used to carry persons or property for a fee" language in the exclusion clause means. For three independent reasons explained below, these words must not be taken literally, but must be taken to mean the same as "used as a public or livery conveyance" in N.J.S.A. 39:6A-2a. This law defines an automobile for PIP purposes as: "a private passenger automobile of a private passenger or station wagon type that is owned or hired and is neither used as a public or livery conveyance for passengers nor rented to others with a driver. . . ." Ibid. CSC does not claim that the passenger van is "a motor vehicle with a pickup body, a delivery sedan, a van, or a panel truck or a camper type vehicle . . ." Ibid. The passenger van contained rows of seats and was designed for conveying passengers and not cargo. Giordano v. Allstate Insurance Co., 260 N.J. Super. 329, 332, 2616 A.2d 936 (App. Div. 1992). If the passenger van were used as a public or livery conveyance or rented to others with a driver, it would not be an automobile under the statute, and there would be no PIP coverage. Commercial use is not the test. "We perceive no legislative design to exclude [from PIP coverage] private passenger vehicles commercially owned and used in business pursuits." Wagner v. Transamerica Insurance Company, 167 N.J. Super. 25, 31, 400 A.2d 497 (App. Div. 1979), certif. denied, 81 N.J. 60 (1979) (finding PIP coverage for car salesman driving passenger vehicle owned by car dealer to show to potential buyer). The undisputed facts show that Graves' passenger van was neither used as a public or livery conveyance nor rented to others with a driver, so there is PIP coverage.
First, to extend the meaning of the policy exclusion beyond that of the "public livery or conveyance" exclusion in the statute would create another exclusion beyond N.J.S.A. 39:6A-7, which narrowly defines the permitted PIP exclusions:
a. Insurers may exclude a person from benefits under section 4 and section 10 [of N.J.S.A. 39:6A] where such person's conduct contributed to his personal injuries or death occurred in any of the following ways: (1) while committing a high misdemeanor or felony or seeking to avoid lawful apprehension or arrest by a police officer; or (2) while acting with specific intent of causing injury or damage to himself or others.
Hermann v. Rutgers Casualty Insurance Co., 221 N.J. Super. 162, 165-66, 534 A.2d 51 (App. Div. 1987), held that the PIP statute controls when it conflicts with an insurance policy, even though the Commissioner of Insurance approved the policy language. There, the policy limited PIP coverage to accidents occurring in the fifty states, Canada and Puerto Rico. Injuries were sustained in an accident in Hungary. The court held that "'an insurer is permitted to exclude a person from benefits under the required coverage, but such exclusions are limited to specified instances' enumerated in N.J.S.A. 39:6A-7." Id. at 167 (quoting Fellippello v. Allstate Insurance Co., 172 N.J. Super. 249, 261, 411 A.2d 1137 (App. Div. 1987)). Thus, PIP coverage was mandated for the accident in Hungary because the policy limitation did not apply.
If an exclusion was interpreted to go beyond those permitted by statute, the exclusion would be unenforceable. Selected Risks Insurance Co. v. Zullo, 48 N.J. 362, 373, 225 A.2d 570 (1966); Fellippello, supra, 172 N.J. Super. at 262 (holding that contractual exclusions under PIP that go beyond the exclusions enumerated in the statute, such as a limitation to New Jersey accidents, are unenforceable). Interpreting the CSC exclusion narrowly so that it does not extend beyond the statutory exclusions fulfills this principle of construction.
Second, exclusionary clauses are construed strictly against the insurer. Fellippello, (supra) , 172 N.J. Super. at 261. When interpreting an auto insurance policy, a court should interpret the policy language liberally in favor of the insured. Id. at 257. "Courts are bound to protect the insured to the full extent that any fair interpretation will allow." Ibid. (quoting Mazzilli v. Accident & Casualty Insurance Co. of Winterthur, 35 N.J. 1, 7, 170 A.2d 800 (1961)). 6C Appleman, Insurance Law & Practice, § 4434 at 427-28 (Buckley ed. 1979), discusses exclusionary language very similar to the CSC exclusion clause. Rather than interpreting the clause literally, Appleman construes it strictly against the insurer and suggests an interpretation analogous to the "used as a public or livery conveyance" exclusion:
the modern test [under exclusion "where passenger is carried for consideration"] is whether transportation is generally available to the public rather than whether any money has been or will be paid. On this basis, use of the insured vehicle to transport fellow employees, children home from private day camp, a high school band, or by an ...