On appeal from the Superior Court of New Jersey, Law Division, Essex County.
Approved for Publication by the Court November 19, 1996.
Before Judges Havey, Brochin and Kestin. The opinion of the court was delivered by Brochin, J.A.D.
The opinion of the court was delivered by: Brochin
The opinion of the court was delivered by
Rene Hernandez was employed by International Terminal Operators at Port Newark, New Jersey. On December 27, 1987, he was working inside a truck trailer operated by F.W. Clukey Trucking Company, preparing to load it with crates of bananas. While Mr. Hernandez was working inside the trailer, Clukey's driver moved it away from the loading dock. The movement caused Hernandez to fall out of the trailer. He was seriously injured. Mr. Hernandez and his wife sued Clukey and its driver to recover for his injuries.
At the time of the accident, F.W. Clukey Trucking Company was the named insured under a $1,000,000 automobile liability policy issued by Canal Insurance Company. While Mr. and Mrs. Hernandez's action was pending, Canal commenced a separate action against them, the trucking company and its driver. Canal sought a declaratory judgment that it was not obligated to defend against Mr. and Mrs. Hernandez's claim or to pay any judgment in their favor because coverage for the accident was excluded by the "Occupant Hazard Excluded" endorsement of the policy; alternatively, that if there was coverage, Canal was entitled to be fully reimbursed by Clukey for any costs of defense or payments to Mr. and Mrs. Hernandez, and that its coverage obligation was limited to the amount of the minimum liability insurance required by law.
After a non-jury trial and the submission of an agreed statement of facts, the trial court rejected Canal's contentions. A judgment was entered which declared that the "Occupant Hazard Excluded" endorsement was "null and void as a matter of law because it is against public policy;" that Canal was obligated to defend Clukey and its driver against the personal injury action and to fully indemnify them against costs and any adverse judgment up to the $1,000,000 limit of the policy; and that Canal was liable to Mr. and Mrs. Hernandez and to Clukey and its driver for the full amount of the attorneys' fees which they had incurred in the declaratory judgment action. Canal has appealed, challenging each of these rulings.
The "Occupant Hazard Excluded" endorsement on which Canal relies for its denial of coverage reads as follows:
It is agreed that such insurance as is afforded by the policy for Bodily Injury Liability does not apply to Bodily Injury including death at any time resulting therefrom, sustained by any person while in or upon, entering or alighting from the [covered vehicle].
It is further agreed that, in the event the company shall, because of provision of the Federal or State statutes become obligated to pay any sum or sums of money because of such bodily injury or death resulting therefrom, the insured agrees to reimburse the company for any and all loss, costs and expenses paid or incurred by the company.
The parties do not dispute that Mr. and Mrs. Hernandez's claim falls within the terms of this endorsement.
Three reported decisions have considered the validity of Canal's "Occupant Hazard Excluded" endorsement. Canal Ins. Co. v. Benner, 980 F.2d 23 (1st Cir. 1992); Great West Casualty Co. v. Canal Ins. Co., 901 F.2d 1525 (10th Cir. 1990); Powers v. Meyers, 101 Ohio App. 3d 504, 655 N.E.2d 1358 (Ohio App.), appeal not allowed, 651 N.E. 2d 1311 (Ohio 1995). All three hold that the endorsement is void, but only to the extent that it conflicts with a specific state or federal statute or regulation. In Canal Insurance Co. v. Benner, (supra) , the endorsement was held to be contrary to public policy and therefore void because it conflicted with Maine's Financial Responsibility Law, which required that "'every operator or owner of a motor vehicle . . . registered in this State shall maintain at all times the amounts of motor vehicle liability insurance or financial responsibility specified in Section 787,'" i.e., a minimum of $20,000 for one person and $40,000 for two or more persons injured in the same accident. 980 F.2d at 25, n.1. The court rejected the insured's contention that the insurer's obligation was the $750,000 maximum limit of the policy, and held that it was liable only to the extent of the minimum coverage requirements imposed by the statute. Id. at 27. In Great West Casualty Co. v. Canal Insurance Co., (supra) , the endorsement was voided because it "could not abrogate Canal's responsibility under the clear and mandatory requirements of the KAIRA [Kansas Automobile Injury Reparations Act]" for the statutory minimum coverage of $100,000. 901 F.2d at 1527, 1528. In Powers v. Meyers, (supra) , the court held that the "Occupant Hazard Excluded" endorsement was void because it conflicted with an endorsement whose terms and inclusion in the policy were prescribed by Interstate Commerce Commission regulations, 49 C.F.R. § 387.15, pursuant to 49 U.S.C.A. § 10927 (now 49 U.S.C.A. § 31139 as amended). The Powers court did not discuss what the limits of coverage would be, presumably because everyone assumed that if the insured was held liable to the injured party, the insurer would be responsible up to the $750,000 of coverage provided by the I.C.C. endorsement.
These cases voiding the "Occupant Hazard Excluded" endorsement are analogous to New Jersey decisions which have voided clauses of truckers' automobile liability policies that purport to exclude coverage for injuries sustained in the course of truckers' "loading and unloading" operations. Parkway Iron & Metal Co. v. New Jersey Mfrs. Ins. Co., 266 N.J. Super. 386, 629 A.2d 1352 (App. Div. 1993), certif. denied, 135 N.J. 302, 639 A.2d 301 (1994); Bellafronte v. General Motors Corp., 151 N.J. Super. 377, 376 A.2d 1294 (App. Div.), certif. denied, 75 N.J. 533 (1977). See Ryder/P.I.E. Nationwide, Inc. v. Harbor Bay Corp., 119 N.J. 402, 575 A.2d 416 (1990). In Parkway, the motor vehicle liability policy at issue contained an exclusion for "Bodily injury or property damage resulting from the movement of property by a mechanical device (other than a hand truck) not attached to the covered auto." 266 N.J. Super. at 389. Relying on the language of Ryder/P.I.E., (supra) , 119 N.J. at 407, that "the ...