The opinion of the court was delivered by: Pisaneky
This is a case of first impression brought before the court on defendant USAA Property and Casualty Insurance Company's (USAA) motion for summary judgment and plaintiff, Maria Lemos's, cross-motion for a declaratory judgment. The issue is whether USAA is required to provide underinsured motorist (UIM) coverage to a non-licensed wife under her husband's insurance policy, which provides coverage to a spouse residing in the marital residence, when the couple has separated and the named insured husband no longer resides in the same household. This precise issue has been addressed by the Legislature in the context of uninsured motorist (UM) coverage. Specifically, N.J.S.A. 39:6A2(g), together with N.J.S.A. 39:6A-14, which makes UM coverage mandatory, provides that UM coverage shall continue for a spouse covered under the other spouse's insurance policy, even if they separate and no longer reside in the marital residence together.
In July, 1993, Ronald Moreno, Plaintiff Maria Lemos's husband at that time, purchased automobile insurance from USAA. As Moreno was the only licensed driver in the household, he was the only named individual in the Declaration sheet. Lemos was covered under the spousal provision which stated:
Throughout this policy 'you' and 'your' refer to:
1. The 'named insured' shown in the Declarations; and
2. The spouse, if a resident of the same household.
At the time, the Morenos resided at 74 Main Street, Newark. On August 1, 1993, the couple, along with their two children, moved to 41-51 Wilson Ave, Newark. Soon thereafter, the couple separated and Mr. Moreno moved out of the Wilson Avenue apartment.
On October 3, 1993, Lemos, while a passenger in an automobile owned by Jose A. Sousa, was involved in an automobile accident. Lemos settled with Sousa's carrier for $25,000.00, the policy limits of his insurance. Lemos then sought the balance of her damages pursuant to the UIM provisions of Moreno's policy. USAA now moves for summary judgment, arguing that it is not required to provide coverage since Lemos no longer resided in Moreno's "household" as he had moved out prior to the accident. It is further argued that because UIM coverage is optional, it cannot be treated as UM coverage, where, because of statute (N.J.S.A. 39:6A-2(g)), there is coverage despite the separation of the husband and wife.
The question, then, is whether Lemos ceased to be covered for UIM when Moreno left the marital residence. It is undisputed that the second marital address would constitute the "residence" for coverage inclusion. Had Moreno been living with his family at the time of the accident, there is no question that Lemos would be entitled to UIM coverage under Moreno's policy. However, USAA now argues that because Moreno left the family residence, Lemos ceased to be "a resident of the same household," and is thereby excluded from coverage.
A well-established principle concerning the construction of an insurance contract is that, when interpreting its terms, any ambiguities will normally be construed against the insurer. Meier v. New Jersey Life Ins. Co., 101 N.J. 597, 611-613, 503 A.2d 862 (1986). If the policy language is capable of two interpretations, "courts invariably accept the interpretation under which coverage will be found and reject the interpretation under which the injured person would be left without protection." Craig and Pomeroy, New Jersey Auto Insurance Law, § 2:3-1 (1996). In the instant matter, the language, "the spouse, if a resident of the same household" is capable of an interpretation other than the one put forth by USAA. It is reasonable that a layman would conclude that Lemos still resided in the "household" as intended by the policy to include coverage, since that was the residence where Moreno and Lemos had resided with their children as a family. The fact that Moreno left and not Lemos, coupled with the facts that his departure prior to the accident was of short duration and no formal separation proceedings were commenced, could lead a reasonable person to conclude that Moreno's residence remained the same under the policy where Lemos was still a resident of such household.
The courts have already accepted dual residency for the purpose of obtaining UIM coverage. See Arents v. General Acc. Ins. Co., 280 N.J. Super. 423, 428, 655 A.2d 936 (App. Div. 1995). In Arents, an adult child had an apartment in New York City, but registered, garaged and insured his car under the address of his parent's house in New Jersey. He stayed in a room at his parent's home about two days a week, did some of the household chores in New Jersey and was involved in community service in New Jersey. The court found that the son was a member of the New Jersey household and therefore the father was covered for UIM under his son's policy. See also Garrison v. Travelers Ins. Co., 261 N.J. Super. 209, 618 A.2d 387 (Law Div. 1992) (a child recovered benefits under the UIM provisions of his father's automobile policy, even though the parents were separated and the child lived with the wife).
It follows that the subject insurance policy should be construed strictly against USAA. The insurer is in the best position to sustain a loss in this case. USAA is required to cover no more than it had initially bargained to cover. Both UIM and UM were bought in one package, with one premium for both coverages. Lemos sustained serious injuries that allegedly totalled in excess of the $25,000 limits of Mr. Sousa's liability insurance policy. While Lemos would be left with physical injury and economic losses, USAA will have provided coverage for no more than it bargained for originally. Construing the policy strictly against the insurer dictates coverage in the ...