On appeal from Superior Court of New Jersey, Law Division, Hudson County.
Approved for Publication December 19, 1997.
Before Judges Havey, Landau and Newman. The opinion of the court was delivered by Landau, J.A.D.
The opinion of the court was delivered by: Landau
The opinion of the court was delivered by
Plaintiff Prudential Property and Casualty Insurance Company of New Jersey (Prudential) appeals from a 1996 order awarding summary judgment in favor of defendant State Farm Insurance Company (State Farm) and denying Prudential's cross-motion for judgment. Prudential's complaint had sought indemnification from State Farm for underinsured motorist benefits (UIM) paid to its insured, Donald Kubs (Kubs), and a declaration that a State Farm policy provided primary UIM coverage in the circumstances of this case.
Kubs was injured in an automobile accident on August 10, 1991 while he was a passenger in a car owned by Kelly A. Houlihan (Houlihan). Houlihan was insured by State Farm with $50,000 in UIM coverage. Kubs' Prudential policy provided UIM limits of $100,000 per person/$300,000 per accident. The tortfeasor, Andrew Sheridan, was underinsured and, as his carrier paid Kubs only $15,000 on his behalf, Kubs made a UIM claim against his own carrier, Prudential.
Prudential paid $50,000 in UIM benefits to Kubs, after efforts to secure State Farm's participation in arbitration or settlement of the claims were unsuccessful.
In a written opinion rendered December 13, 1996, the motion Judge concluded that the decision in Aubrey v. Harleysville Ins. Cos., 140 N.J. 397, 658 A.2d 1246 (1995) mandated judgment for State Farm in light of its language linking UIM coverage to "the injured person, not the covered vehicle" and its statement that such coverage is "personal" to the insured. Aubrey, (supra) , 140 N.J. at 403. The Judge also relied upon the "reasonable expectations" rationale set forth and the language associating UIM recovery with the limits "chosen by the insured." Id. at 404-05. It was concluded that Prudential "is not only primarily, but solely responsible to pay UIM benefits to Mr. Kubs." The Judge pointed out, and undertook to resolve, what was perceived to be conflict in some of our reported and unreported UIM decisions after Aubrey.
Since the motion was decided, however, the Supreme Court handed down French v. New Jersey School Board Ass'n. Ins. Group, 149 N.J. 478, 694 A.2d 1008 (1997), recognizing that UIM insurance has "proved to be an infinitely complex and troublesome area for the bar and the insurance industry." Id. at 482. French clarified and limited the Aubrey holding to make it clear that "a policy 'held' by a claimant is not always a policy purchased by a claimant. Others may provide coverage for the claimant." Id. at 487. The Court took note of correcting language in the latest 1996 standard automobile insurance agreement form filed with the Department of Insurance, stating that it
provides that if a person is not a named insured under a UIM policy (as in the case of one who occupies the car of another), that occupant, although an insured under the policy of the host car, is not considered eligible for UIM coverage under the host's policy unless the limits of liability on the vehicle of the negligent operator are less than the limits of liability held by the occupant as a named insured, or as a spouse or family member under the policy of a named insured.
It was noted that under that new language *fn1 , a passenger in the car of another would not be eligible for UIM benefits under the host's policy unless the tortfeasor's limits of liability were less than those under the passenger's personal policy. Id. at 494-95.
However, the French decision makes clear that, subject to compliance with N.J.S.A. 17:28-1.1, courts must enforce the plain language of the applicable insurance contracts as to UIM, id. at 492, and that both the statute and the standard UIM endorsement in effect at the time plainly "contemplate situations in which one could conceivably receive benefits under more than ...