On appeal from Superior Court of New Jersey, Law Division, Essex County, L-8382-99.
Before Judges Pressler, Wefing and Fuentes.
The opinion of the court was delivered by: Fuentes, J.S.C., t/a
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Plaintiff Roger Araya appeals the summary judgment dismissing his declaratory judgment action seeking under-insured motorist (UIM) coverage under his employer's business auto policy. We reverse.
Plaintiff was employed as a landscaper by Christopher Mahon, the sole proprietor of Mahon Landscaping. Plaintiff was struck from behind by a car and grievously injured while standing near or on the sidewalk trimming a lawn. He brought suit against the driver. Despite the severity of the injuries the case was settled for $100,000, the limit of the driver's insurance policy.
Thereafter, plaintiff made a claim for UIM coverage under his employer's $500,000 business auto policy issued by defendant Farm Family Casualty Insurance Company (Farm Family). Defendant disclaimed coverage as to plaintiff, finding he was not an insured under the policy. The carrier takes the position that the policy was issued to Mahon personally. The motion judge apparently agreed and dismissed the claim on summary judgment. Therefore, the question of coverage turns on whether the named insured is Mahon or the business entity Mahon Landscaping.
We start our analysis by reaffirming a basic tenet of insurance law: insurance policies, as contracts of adhesion, are subject to special rules of interpretation. Longobardi v. Chubb Insurance Co., 121 N.J. 530, 537 (1990), citing Meier v. New Jersey Life Insurance Co., 101 N.J. 597, 611-12 (1986). Policies must be construed liberally in favor of the insured's reasonable expectations of coverage. Gibson v. Callaghan, 158 N.J. 662, 671 (1999); United Serv. Auto Ass'n v. Turck, 156 N.J. 480, 492-493 (1998); American Motorists Insurance Co., v. L-C-A Sales Co., 155 N.J. 29, 41 (1998); Harr v. Allstate Insurance Co., 54 N.J. 287, 303-304 (1969); Kievit v. Loyal Protective Life Insurance Co., 34 N.J. 475, 482-83 (1961); Donato v. Market Trans. Facility, 299 N.J. Super. 37, 48(App. Div.), certif. den. 151 N.J. 71 (1997).
In Cook-Sauvageau v. PMA Group, 295 N.J. Super. 620 (App. Div. 1996), certif. den., 150 N.J. 695 (1997) we held that an employee who was injured while operating a company vehicle during the course of employment was entitled to UIM coverage under the employer's business auto policy. This holding was premised upon both the plain reading of the policy and an application of fundamental insurance law principles.
[I]t would be manifestly inconsistent with the plain language of the UIM endorsement of [the defendant's] business automobile policy and the reasonable expectations of both the employer and employee to deny the benefits of UIM coverage to an employee injured while operating one of the employer's vehicles during the course of employment.
When as in this case a business automobile policy is issued to a corporate employer, the actual purchaser of the policy cannot itself suffer bodily injury and thus could not maintain a claim for UIM benefits except perhaps in the rather unusual situation where its collision coverage was insufficient to cover the full damages to its vehicle. On the other hand, if the UIM endorsement is construed to extend coverage to the business' employees, it provides a financial benefit not only to the employees but also to the employer. Id. at 627-28.
We find that the named insured here was the business entity of Mahon Landscaping and apply Cook-Sauvageau to hold that plainitff is entitled to UIM coverage under the employer's business auto policy.
Farm Family sold this commercial auto policy to Mahon Landscaping through its authorized agent. In his presentation the agent gave premium quotes that included UIM coverage for each of the vehicles used by Mahon Landscaping. The proposal packaged a number of business-related insurance policies, including commercial general liability, inland marine coverage, worker's compensation insurance and a business auto policy.
The agent's proposal expressly referred to the policy at issue here as a "business auto, commercial auto" policy. In deposition testimony the agent stated that he was aware that Mahon had ...