On certification to the Superior Court, Appellate Division.
The opinion of the Court was delivered by O'hern, J. Chief Justice Poritz and Justices Handler, Pollock, Garibaldi, Stein, and Coleman join in Justice O'HERN's opinion.
The opinion of the court was delivered by: O'hern
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
Diana French v. New Jersey School Board Association Insurance Group, etc., et al. (A-96-96)
Argued February 3, 1997 -- Decided June 25, 1997
O'HERN, J., writing for a unanimous Court.
This appeal concerns the rights and obligations of parties under the underinsured motorist (UIM) provision of an automobile insurance policy. The question presented is whether a school bus driver, injured by an underinsured driver while driving the bus, may recover UIM benefits under the policy purchased by the school district to cover the bus.
On April 23, 1991, Diana French was driving a bus for her employer, the Hudson County Area Vocational Technical School. A taxi cab struck the bus in the rear. Ms. French was severely injured. She sued the taxi company, which settled for the $25,000 limit on its auto insurance policy. Ms. French then sought UIM benefits under the insurance policy issued to the school district by the New Jersey School Board Insurance Group. That policy provides UIM coverage of one million dollars. At the time, Ms. French had a personal auto insurance policy with Allstate Insurance with a UIM limit of $25,000.
Relying on the Court's prior decision in Aubrey v. Harleysville Insurance Companies, 140 N.J. 397 (1995), the trial court and the Appellate Division held that Ms. French was limited to the $25,000 in UIM benefits provided for in her own insurance policy. The Court granted Ms. French's petition for certification.
HELD: To qualify for underinsured motorist benefits under any policy that insures the injured person, that person must demonstrate that the limits of the policy "held" by him or her are greater than the aggregate liability limits insuring the allegedly underinsured tortfeasor. When an auto accident occurs in the course of employment, a regular employee "holds" the policy of the enterprise that covers the employee in the course of employment.
1. Underinsured motorist (UIM) coverage is optional. It covers injury or damage caused by the negligent operation of a motor vehicle whose liability insurance coverage is insufficient to pay for all losses suffered. A tortfeasor is "underinsured" only when all the liability coverage insuring his or her vehicle is less than the UIM benefits "held" by the person claiming UIM benefits. Once that threshold is met, recovery against UIM coverage results only when the insured demonstrates that his or her damages exceed the liability limits involved. (pp. 3-7)
2. An insurance policy is "held" under the statute when it is actually purchased by or is purchased for the benefit of the prospective UIM claimant. (pp.7-10)
3. Some courts have read the decision in Aubrey too broadly by limiting the injured person to the UIM policy that he or she purchased. The Court believes that the Legislature clearly would have intended that a policy "held" by a claimant would include a policy provided for the claimant by an employer even if coverage under the personal policy of the employee were not triggered. (pp. 11-15)
4. Uninsured motorist (UM) coverage is treated differently by the Legislature than underinsured motorist coverage. Although the availability of UM coverage affects all ratepayers, the availability of UIM coverage affects only the parties insured under the specific contract. So long as the terms and conditions of coverage are fairly disclosed, no public policy or statute prevents the exclusion of UIM coverage when it is the underinsured vehicle of a resident family member that causes the injury. In addition, no public policy or statute prevents an insurance company from providing greater coverage to an insured person than is provided under the personal policy of that insured. (pp. 16-20)
5. The plain language of the policy in this matter and the undoubted common intent of the parties to the UIM contract is that the policy covers Ms. French as an employee of the school district. (pp. 20-22)
6. The Court expects that many cases involving UIM coverage will be resolved by clear policy language. Still, other complexities remain. Questions on the effect of the standard "other insurance" clause and the "anti-stacking" provision of the statute will be considered in Magnifico v. Rutgers Casualty Insurance Company, which will be argued next term. (pp. 22-23)
The judgment of the Appellate Division is REVERSED and the matter is REMANDED for arbitration of plaintiff's underinsured motorists claim.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN, and COLEMAN join in JUSTICE O'HERN's opinion.
The opinion of the Court was delivered by
This appeal concerns the rights and obligations of parties under an insurance endorsement defining an increasingly vexatious subject -- underinsured motorist (UIM) benefits. Simply stated, UIM coverage provides to an insured a measure of added protection against the risk of being injured by a negligent driver having an inadequate limit of liability insurance to cover the extent of the insured's injuries. The question here is whether a bus driver from a school district, injured by an underinsured driver while operating a school district bus, may recover UIM benefits under the policy purchased by the school district to cover the bus, or whether she is limited to the amount of UIM coverage purchased under her personal automobile insurance policy.
On April 23, 1991, plaintiff, Diana French, was driving a school bus for her employer, Hudson County Area Vocational Technical School (Hudson). A taxi cab struck the school bus in the rear and caused severe injuries to Ms. French. She has undergone multiple surgeries and has been unable to return to work since the accident. She brought an action in the Law Division against the taxi company, which ultimately settled for $25,000, the liability limits of the policy insuring the taxi. Plaintiff then sought benefits under the UIM coverage contained in the insurance policy issued to Hudson by the New Jersey School Board Insurance Group. That policy provided UIM coverage in the amount of one million dollars. At the time, plaintiff had personal automobile insurance through Allstate Insurance Company with UIM coverage in the amount of $25,000. Relying on our decision in Aubrey v. Harleysville Insurance Companies, 140 N.J. 397 (1995), the trial court held that any UIM recovery by plaintiff was limited to the $25,000 available under her personal Allstate policy; and that because no UIM coverage was created when that policy was compared with the tortfeasor's liability limit, summary judgment in Allstate's behalf was appropriate. The Appellate Division affirmed in an unreported opinion. We granted plaintiff's petition for certification, 146 N.J. 500 (1996). In order to qualify for UIM benefits under any UIM policy "insuring" the injured person, that person must demonstrate that the limits of the policy "held" by him or her are greater than the aggregate liability limits insuring the allegedly underinsured tortfeasor. We hold that when an automobile accident occurs in the course of employment, a policy "held" by a regular employee of a business enterprise includes the policy of the enterprise that covers the employee in the course of employment. We therefore reverse.
Having been characterized as a "sleeping giant," Green v. Selective Insurance Company, 144 N.J. 344, 349 (1996), and a "legal iceberg," Cynthia M. Craig and Daniel J. Pomeroy, New Jersey Auto Insurance Law § 26.1 at 339 (1997) (hereinafter Craig & Pomeroy), UIM insurance has assumed an ever-increasing importance in automobile-claims reparation. It has also proved to be an infinitely complex and troublesome area for the bar and the insurance industry. In Riccio v. Prudential Property & Casualty Insurance Company, 108 N.J. 493, 498 (1987), the Court observed that the subject of uninsured (and by clear implication, underinsured) motorist coverage, which the parties had characterized as "really quite simple," was anything but that. Having declined the opportunity in Riccio to "plumb the intricacies" of this area of insurance law, ibid., we now undertake to review again the basic principles of UIM coverage. Our Discussion of these principles is not intended to be a definitive digest of the law, see Craig & Pomeroy, (supra) , but only to provide the background for our decision.
UIM coverage is optional first party coverage insuring the policy holder, and others, against the possibility of injury or property damage caused by the negligent operation of a motor vehicle whose liability insurance coverage is insufficient to pay for all losses suffered. The nature of the coverage is defined by N.J.S.A. 17:28-1.1e. The fact that it must be offered by insurers as a mandatory option is dictated by N.J.S.A. 17:28-1.1b. N.J.S.A. 17:28-1.1c prohibits the stacking of UIM benefits on either an intra-policy (i.e., where an "insured" in a single policy that covers many cars may recover under UM coverage of each car) or ...