On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket Number ESX-L-4061-01.
Before Judges Alley, Parker and R. B. Coleman.*fn1
The opinion of the court was delivered by: Parker, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This case involves an auto insurance policy issued by Prudential Insurance Company (Prudential) and subsequently amended to include a step-down in uninsured/underinsured motorists (UM/UIM) coverage. Plaintiff and Prudential cross-moved for summary judgment on the UIM coverage issue. Plaintiff's motion was denied and Prudential's motion was granted dismissing plaintiff's claim. We reverse and remand.
On June 5, 2000, plaintiff was a passenger in a vehicle owned and operated by Queenie Thomas and insured by Prudential. Thomas' vehicle was struck by a vehicle owned and operated by defendant Chaisner Dorvius. Plaintiff, who was seriously injured, instituted suit against Dorvius, which was tried to a jury on the issue of liability. The jury rendered a verdict in favor of plaintiff, but Dorvius' insurance policy was limited to $25,000/$50,000. The Dorvius policy was insufficient to cover plaintiff's injuries and plaintiff settled for the policy amount with notice to and authorization from Prudential.
Plaintiff did not own a motor vehicle, have auto insurance, reside with Thomas or in a household where any member had auto insurance coverage. Plaintiff, therefore, was entitled to Personal Injury Protection (PIP) and UIM coverage through Thomas' Prudential policy. Prudential paid certain medical bills under the PIP coverage in Thomas' policy, but declined to honor plaintiff's claim for UIM benefits.
When the complaint was dismissed, plaintiff appealed, arguing (1) the doctrine of reasonable expectations mandates coverage in the amount of $100,000/$300,000; and (2) the UM/UIM step-down provision should be set aside because Prudential did not act in good faith and fair dealing in notifying Thomas of the policy change. Defendant responds, arguing that (1) there is no ambiguity in the step-down provision; and (2) Prudential complied with all regulations in notifying Thomas of the policy changes.
Thomas initially obtained the Prudential policy in June 1997. She specifically elected UM/UIM coverage in the amount of $100,000/$300,000, and paid an additional premium of $23 for it. On her application for the policy, she stated "there are no additional driver or non-driver relatives living with me. I am the only person at home." At six-month intervals, Thomas received policy renewals with the same UM/UIM coverage shown on the declaration page.
On May 25, 1999, Thomas received two packages of material from Prudential. The first package of eighty-three pages advised of changes in the policy as a result of the Auto Insurance Cost Reduction Act of 1998 (AICRA), N.J.S.A. 39:6A-1.1. The second package, also dated May 25, 1999, contained another thirty pages of material. The 113 pages in the two May 25 packages included a New Standard Auto Policy Booklet Parts 1, 2, 3, 4, a separate Part 5, a renewal declaration page, a bill, insurance identification cards, Notice of Policy Changes, PIP Pre-Certification Requirements, Endorsements PAC 4220 and PAC 236, standard coverage selection forms, a Buyer's Guide, and Rating Information Form. A cover letter included with the May 25, 1999 materials stated:
This renewal offer includes important policy changes and the rate reduction mandated by the 1998 Automobile Cost Reduction Act.... Significant changes have been made to your policy. We have enclosed an Important Notice to New Jersey policy holders which highlights the changes and how they will affect your policy. We have also included a detailed summary of the Personal Injury Protection (PIP) pre-certification requirements under your Prudential automobile policy. We urge you to carefully read these important notices, along with your policy booklets for a complete examination of the changes.
The declaration page in the eighty-three page package stated coverage, limits and premiums:
Uninsured Motorists-Bodily Injury