On certification to the Superior Court, Appellate Division, whose opinion is reported at 344 N.J. Super. 319 (2001).
In this appeal, the Court considers whether an insured's wife, who resides with her husband (the insured) but intentionally is not named on his policy of automobile liability insurance, may receive PIP benefits for injuries sustained while driving one of the insured vehicles.
In November 1996, Leonel Bastien ("Leonel") applied for automobile liability insurance from Palisades Safety & Insurance Company ("Palisades"). On the application for insurance, Leonel falsely represented that he was single and the sole driver of the two vehicles he sought to insure. In fact, Leonel resided with his wife, Paule, who held a license to drive issued by the State of New York.
Based on the information Leonel provided, Palisades issued a policy for an annual premium of $2,201.00, which would have been more costly, but for the misrepresentations. The policy contained a provision for denial of coverage "for any person who has knowingly concealed or misrepresented any material fact or circumstance related to [the] insurance" at the time the application was made, at any time during the policy period, or in connection with the presentation or settlement of a claim.
Over the course of the following several months, Leonel twice submitted required documents to Palisades, each time continuing the misrepresentation. Moreover, in July 1997, he added coverage for a third car (Mazda), premised on the same misrepresentation.
On October 3, 1997, Paula was involved in an accident while driving the Mazda. Both she and her passenger (her mother, Mary LaRoche) were injured. Each filed a claim for Personal Injury Protection (PIP) benefits under Leonel's policy. In response, Palisades filed a declaratory judgment action to declare the policy void ab initio and to avoid any PIP liability for Paule as an additional insured under the policy. The action also sought to limit LaRoche's third-party PIP benefits to the statutory minimum.
The trial court subsequently granted Palisades' motion for summary judgment, finding that Leonel had made material misrepresentations to the company. The court observed that although an insurer is liable to third parties for minimum PIP benefits notwithstanding that a policy later may have been declared void, that did not compel payment of Paule's claim, who as Leonel's wife and resident of his household, was an "additional insured" member of the household seeking first party coverage. The court found that, as a first-party insured, Paule was not entitled to recover under the void policy.
The Appellate Division affirmed, agreeing that Paule's claim, made by a resident spouse, properly was viewed as a claim for first-party PIP benefits, which Palisades was not required to honor.
The Supreme Court granted the Bastiens' petition for certification.
HELD: Unlike innocent third parties injured in automobile accidents, an insured's resident wife, who intentionally was not named on the husband's automobile liability policy, is not entitled to receive minimum PIP benefits for injuries sustained while driving one of the insured vehicles.
1. The PIP statute, as remedial legislation that is protective of automobile accident victims, is given liberal construction to provide such victims with the broadest possible coverage. That notwithstanding, PIP coverage is unavailable when it is sought as part of an insured's first-party claim for benefits under his or her own policy of insurance declared void because of material misrepresentations made to the insurer. (pp. 5-6)
2. A misrepresentation made in connection with an insurance policy is material if, when made, a reasonable insurer would have considered the misrepresented fact relevant to its concerns and important in determining its course of action. Materiality is judged according to a test of prospective reasonable relevancy. (p. 6)
3. Leonel made material misrepresentations to the insurer commencing with his application and continuing through the insurer/insured relationship, which indisputably affected Palisades' assessment of the risk and the premium charged. Therefore, Palisades was entitled to an order declaring the policy void. (p. 7)
4. Although Paule claimed to have been unaware of her husband's misrepresentations, other considerations militate against treating her differently from her husband. A spouse, licensed to drive and living in the same household as the other spouse, is in a unique position to be aware of the other spouse's interactions with the insurer of the household's vehicles. Thus, even assuming Paule's lack of knowledge of her husband's misrepresentations, the strong public policy against the proliferation of insurance fraud favors treating a resident ...