On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket Number L-162-02.
Before Judges Havey, Fall and Hoens.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: November 10, 2003
The issue posed by this appeal is whether the underinsured motorists (UIM) benefits claim of an employee, injured while operating a motor vehicle owned and insured by his employer, is effectively reduced by the"step-down" coverage clause contained in the UIM endorsement of the employer's business auto policy to the limit of UIM coverage contained in the employee's personal auto policy when that employee is listed as an individual"named insured" in his personal auto policy but is not listed as an individual named insured under the employer's business auto policy.
Here, plaintiff Raymond Pinto, Jr. was injured in an auto accident while operating a vehicle owned by his employer that was insured by defendant New Jersey Manufacturers Insurance Company (NJM) under a business auto policy. The NJM policy contained a $1 million UM/UIM coverage limit, and a step-down clause in its UM/UIM endorsement that limited UM/UIM claims to the UM/UIM coverage limit contained in any other policy having similar coverage that listed the claimant as an individual named insured when that claimant was not an individual named insured under the NJM policy. The tortfeasor's auto policy had $300,000 in auto liability coverage. Plaintiff had a personal auto policy naming him as a named insured with $100,000 in UIM coverage.
We conclude that because plaintiff was a"named insured" under his personal auto policy and was not a named insured under his employer's business auto policy issued by NJM, his claim for UIM coverage under the business auto policy was limited by the step-down clause contained in that policy's UM/UIM endorsement to the amount of UIM coverage he elected in his personal auto policy. We find the language of the step-down, coverage limitation clause to be clear, unambiguous and uncontroverted by any other provisions contained in the business auto policy issued by NJM. Furthermore, because the limit of liability coverage contained in the tortfeasor's policy exceeded the limit of UIM coverage contained in plaintiff's personal auto policy, plaintiff was not an"underinsured motorist" as defined in the NJM policy. We therefore reverse the November 22, 2002 order entered in the Law Division that had granted summary judgment in favor of plaintiff and remand for entry of judgment in favor of NJM on the UIM coverage issue.
In reaching these conclusions, we discern no bright-line test or rule for determining competing UIM claims in the context of multiple policies that contain UIM coverage. The critical factor in resolving competing claims for UIM coverage is the language of the policies. If clear, unambiguous and uncontroverted by any other provisions contained in the policy, courts should apply the policy language to the peculiar facts and circumstances of each case in determining coverage issues.
In this case, the following factual and procedural history is relevant to our consideration of the arguments advanced on appeal. Plaintiff was employed by R.W. Vogel, Inc. (Vogel). Environmentally Clean Naturally, Inc. (ECN) was engaged in a street-cleaning project on the northbound lanes of Route 9 in Howell Township pursuant to its subcontract with Reilly Sweeping, Inc. Because of a manpower shortage, ECN prevailed upon Vogel to work on the street-cleaning job. On December 22, 1997, plaintiff was driving the lead truck in a three-vehicle street-cleaning convoy. The vehicle being operated by plaintiff was owned by Holgate Property Associates (Holgate), another company owned and operated by the owners of Vogel, and had been rented by ECN.
At that time and place, a Ford Expedition vehicle being operated by Theresa Trotter struck plaintiff's vehicle from the rear, resulting in severe personal injuries to plaintiff. The Trotter vehicle was insured by New Jersey Re-Insurance Company, which provided liability coverage of $300,000 on a combined, single-limit basis.
Plaintiff was a"named insured" under a personal auto policy he had purchased from Liberty Mutual/Liberty Guard (Liberty Mutual), under which he had selected UM/UIM coverage protection in the amount of $100,000 per person and $300,000 per accident. Vogel and Holgate were"named insureds" under the business auto policy issued by NJM which provided UIM coverage limits of up to $1 million. At the time of the December 22, 1997 accident, the NJM business auto policy identified no natural persons as"named insureds."
The NJM business auto policy contained a"step-down" clause in the policy's UM/UIM endorsement, limiting its UIM coverage to"the highest applicable limit of insurance under any coverage form or policy providing coverage to that insured as an individual named insured." Plaintiff filed a claim with NJM, seeking UIM coverage for his injuries up to the policy limit of $1 million. NJM denied coverage based upon the step-down clause in its policy pertaining to UIM coverage.
The following appeared on the first page of the NJM business auto policy in effect at the time of the December 22, 1997 accident:
BUSINESS AUTO COVERAGE FORM
Various provisions in this policy restrict coverage. Read the entire policy carefully to determine rights, duties and what is and is not covered.
Throughout this policy the words you and your refer to the Named Insured shown in the Declarations. The words we, us, and our refer to the Company providing this insurance.
Under its policy, NJM agreed to"pay all sums the insured [was] legally entitled to recover as compensatory damages from the owner or driver of an uninsured motor vehicle or an underinsured motor vehicle [.]" The definition of"insured" includes"[a]nyone else occupying a covered auto [.]"
The step-down clause in dispute in the NJM business auto policy provided in pertinent part:
1. Regardless of the number of covered autos, insureds, premiums paid, claims made or vehicles involved in the accident, the LIMIT OF INSURANCE shown in the Declarations for Uninsured Motorists Coverage and Underinsured Motorists Coverage is the most we will pay for all damages resulting from any one accident with an uninsured motor vehicle or an underinsured motor vehicle.
a. However, subject to our maximum Limit Of Insurance for this coverage, if:
(1) An insured is not the individual named insured under this policy;
(2) That insured is an individual named insured under one or more other policies providing similar coverage; and
(3) All such other policies have a limit of insurance for similar coverage which is less than the Limit Of Insurance for this coverage;
then the most we will pay for all damages resulting from any one accident with an uninsured motor vehicle or an underinsured motor vehicle shall not exceed the highest applicable limit of insurance under any coverage form or policy providing coverage to that insured as an individual named insured.
Section F.4 of the NJM policy contained the following definition of an"underinsured motor vehicle:"
4. Underinsured motor vehicle means the following:
a. With respect to an insured who is:
(1) Not the individual named insured under this policy, and
(2) An individual named insured under one or more other policies providing similar coverage, underinsured motor vehicle means a land motor vehicle or trailer of any type to which a liability bond or policy applies at the time of an accident but its limit of liability is less than the highest applicable limit of liability under any coverage form or policy providing coverage to that insured as an individual named insured.
The insurance needs of Vogel and Holgate were handled by insurance brokerage companies with which Arthur Nelson and Karen Jessie were associated. Jessie was employed by Capacity Coverage Company, Vogel's broker. Nelson had several conversations with Roger Vogel (Roger) about the Vogel/Holgate business automobile policy, which usually took place when Nelson would attempt to convince Roger to consider quotes from other insurers."[S]ometime around" 1996, Nelson specifically discussed with Vogel how the UM/UIM provision of the business auto policy worked. At the time of this conversation, NJM had changed its UM/UIM coverage to include the subject step-down coverage clause. Roger understood the UM/UIM coverage changes, he was happy with NJM and he wanted to stay with the company.
In August 1997, Jessie placed a renewal policy with NJM without either Capacity Coverage Company or the insureds having completed and returned the yearly commercial automobile renewal questionnaire (which NJM had provided to Jessie in early July 1997, a month before the renewal policy took effect), or discussing the policy with NJM. On July 24, 1997, NJM had written to Jessie again and asked that she"carefully review the enclosed contract for accuracy" in light of the absence of a completed questionnaire. In both July letters, NJM offered to meet with Jessie or the insureds at any time to discuss the policy.
Enclosed with NJM's July 24th letter was a document called"IMPORTANT CHANGES IN YOUR AUTO INSURANCE POLICY." One of the changes was identified and described as follows:
A NEW COVERAGE RESTRICTION
The "Other Insurance" section of NJM's Uninsured and Underinsured Motorists Coverage now imposes a limit on the total damages that an NJM policyholder can recover if he or she is injured in an accident and more than one policy can provide Uninsured and Underinsured Motorists Coverage. Under the new limit, the injured person can receive no more than the highest applicable limit provided by any one policy, either on a primary or excess basis.
Plaintiff never reviewed nor inquired about any business auto policy insuring Vogel or Holgate. At no time prior to the accident did plaintiff have any understanding of the coverages, terms, conditions, or limitations contained in Vogel's and Holgate's business auto policy with NJM.
The parties disagree over whether plaintiff was acting within his duties as a Vogel employee at the time of the accident and whether the GMC truck being operated by plaintiff was owned and insured by Vogel and Holgate, or simply Vogel. However, this factual dispute is not material because the truck was clearly insured by the NJM policy, and NJM did not disclaim coverage on the grounds that plaintiff was not acting in the course of employment or that he was employed by an entity to which the business auto policy did not apply.
On or about December 26, 2001, plaintiff filed a declaratory judgment complaint in the Law Division against NJM, seeking an order requiring NJM to provide him with UIM coverage up to the $1 million limit in the Vogel business auto policy. NJM answered, contending that the step-down clause contained in the UM/UIM endorsement of its policy with Vogel limited plaintiff's coverage to the UIM policy limit in plaintiff's personal automobile policy with Liberty Mutual, under which plaintiff was a"named insured." After discovery was completed, the parties filed cross-motions for summary judgment.
The motions were argued in the Law Division on November 22, 2002. Citing to the rationale set forth in Macchi v. Connecticut Gen. Ins. Co., 354 N.J. Super. 64 (App. Div.), certif. denied, 175 N.J. 79 (2002), and Araya v. Farm Family Cas. Ins. Co., 353 N.J. Super. 203 (App. Div.), certif. denied, 175 N.J. 77 (2002), the motion judge denied NJM's motion, and granted summary judgment in favor of plaintiff. Although the record is not clear, apparently the motion judge had concluded that the UIM coverage provided by NJM would be"illusory" if denied to plaintiff because the"named insured" under its policy was a business entity, not a natural person, and an entity could not sustain personal injuries. Under that rationale, plaintiff would be considered a"named insured" under the NJM business auto policy, entitled to compensation for his injuries up to the full limit of its UIM coverage.
On appeal, NJM presents the following argument for our consideration:
NJM IS ENTITLED TO REVERSAL AND JUDGMENT IN ITS FAVOR SINCE THE TRIAL COURT ERRED WHEN IT DETERMINED THAT PLAINTIFF MAY PURSUE UNDERINSURED MOTORIST COVERAGE UNDER THE NJM BUSINESS AUTO POLICY.
We begin our analysis of this argument with a review of well-established principles involving the construction of insurance policies. When the terms of an insurance contract are clear, they will be enforced as written. Weedo v. Stone-E Brick, Inc., 81 N.J. 233, 245-50 (1979); Botti v. CNA Ins. Co., 361 N.J. Super. 217, 225 (App. Div. 2003); Christafano v. New Jersey Mfrs. Ins. Co., 361 N.J. Super. 228, 235 (App. Div. 2003). However, because insurance contracts are contracts of adhesion, ambiguous language will be construed liberally and resolved against the insurer and in favor of coverage. Botti, supra, 361 N.J. Super. at 224; Christafano, supra, 361 N.J. Super. at 234."A'genuine ambiguity' exists only'where the phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage.'" Botti, supra, 361 N.J. Super. at 224 (quoting Weedo, supra, 81 N.J. at 247).
Thus, when an insurance policy"does not make clear its intention to exclude a class of claimants or claims otherwise allowed thereunder, coverage will be found to exist," Botti, supra, 361 N.J. Super. at 224-25, so as"to comport with the insured's objectively reasonable expectations of coverage." Christafano, supra, 361 N.J. Super. at 234.
N.J.S.A. 17:28-1.1 governs UM/UIM coverage. Specifically, all motor vehicle liability policies, except for basic automobile insurance policies, must include minimum UM coverage. N.J.S.A. 17:28-1.1(a). Although insurers must offer UIM coverage to their policyholders, the statute does not require any motor vehicle liability policy to include UIM coverage. Ibid.; N.J.S.A. 17:28-1.1(b); Aubrey v. Harleysville Ins. Cos., 140 N.J. 397, 404 ...