On appeal from the Superior Court, Appellate Division, whose opinion is reported at 369 N.J. Super. 336 (2004).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
(NOTE: This Court wrote no full opinion in this case. Rather, the Court's reversal of the judgment of the Appellate Division is based substantially on the reasons expressed in the dissenting opinion below.)
The matter before the Court concerns the respective obligations of an insurer on a personal policy of automobile insurance and a self-insured car rental company for injuries sustained by a third-party in an accident involving a rented vehicle.
On April 12, 1999, a vehicle operated by Dominick Coia, Jr., and owned by James O'Connell, was traveling west on the Atlantic City expressway. Coia, slowing in an attempt to make an illegal u-turn after missing an exit, was struck from behind by a car owned by Avis Rent A Car Systems, Inc. (Avis) and operated by Richard Brown, Jr. Patricia Robinson was a passenger in the Brown vehicle. Two other cars also were involved in the accident.
Brown rented the car at an Avis facility in Cherry Hill, New Jersey but the vehicle was registered in Pennsylvania where Avis is self-insured. Brown declined to purchase additional coverage from Avis when it was offered as part of the rental agreement. At the time of the rental, Brown had a personal automobile insurance policy from Farmers Insurance Exchange, which contained an excess insurance clause that made its coverage excess to all other collectible coverage. Under his policy of insurance with Farmers, Brown had liability coverage with limits of $100,000 per occurrence and $300,000 per accident.
Pursuant to Paragraph 18 of the rental agreement signed by Brown, he agreed that the coverage provided by Avis would be excess of any applicable insurance available to him or any other driver, from any other source, whether primary, excess, secondary or contingent in any way. Had Brown purchased additional insurance offered by Avis, then the coverage provided by Avis according to Paragraph 18 would be primary and the combined limits of liability protection would be $1 million per person/$1 million per accident.
Robinson sued Coia, Brown, and Avis for personal injuries sustained in the accident. Brown, through attorneys assigned by Farmers, answered the complaint. He later filed a cross-claim, seeking a declaration that Avis, as self-insured, was required to provide primary coverage to him, to assume his defenses, and to reimburse him for counsel fees. Avis and Brown filed summary judgment motions on the cross-claim, with Avis contending that its insurance was only secondary to Farmers and that, therefore, it was not obligated to assume Brown's defense.
The trial court determined that Avis' was the primary insurer, with Farmers providing excess coverage only. In reaching that conclusion, the judge found that the rental agreement between Brown and Avis was not part of Avis' self-insurance and the terms of that rental agreement did not apply to render the Avis coverage excess. Avis was required to assume Brown's defense in the personal injury action.
At the conclusion of the personal injury action, Avis appealed to the Appellate Division, contending that, pursuant to Paragraph 18 of the rental agreement, its coverage is only excess to that of Brown's personal insurer (Farmers) and that it should be reimbursed for all fees and costs, for the work of its attorneys in defending Brown, and for the settlement money paid on behalf of Brown. A majority of the Appellate Division disagreed, finding that Avis' effort to avoid providing insurance coverage through the terms of its rental agreement violates public policy. The majority noted that Avis, as self-insured, has no policy of insurance, relying instead on the language of its rental agreement and that such language is ineffective to restrict or avoid the mandatory omnibus coverage required by the State. Thus, the majority concluded that when acting as self-insured in the circumstances of this case, Avis must provide primary coverage to it lessee, Brown, and cannot avoid doing so by relying on the terms contained in its rental contract, which does not constitute an insurance policy for purposes of comparison with a policy covering its lessee personally that contains an excess provision.
Judge Wecker dissented, concluding that Avis, as a self-insured car-rental company, owes its rental customer, Brown, the minimum mandatory liability coverage as set forth in its rental agreement, the same coverage required for all New Jersey auto insurance policies pursuant to statute. Judge Wecker further concluded that the "other insurance" clause of Avis' rental agreement is effective. Because Brown's contracts with both Avis and Farmers contain "other insurance" clauses, making Avis coverage excess when the driver is insured under another policy, the two carriers are co-primary and share liability equally between them. Judge Wecker reasoned that so long as New Jersey permits car rental companies to self-insure for their renters' liability to third parties, and so long as the State does not require auto insurance policies issued to New Jersey car rental companies to provide primary coverage for their renters' liability, there is no reason to invalidate the coverage limits of the rental agreement and to impose on Avis an obligation to provide more than would be required if the company had purchased a minimum insurance policy.
The matter is on appeal to the Supreme Court based on the dissent in the Appellate Division.
HELD: Judgment of the Appellate Division is reversed substantially for the reasons expressed by Judge Wecker in her dissenting opinion below. The "other insurance" clause in Avis' rental agreement renders Avis' coverage excess to Brown's personal automobile liability insurance. Nevertheless, since both the rental agreement and Brown's personal automobile policy have "other insurance" clauses, the two-carriers are coprimary and should share liability equally.
1. Had Avis rented a car registered in New Jersey to Brown, the same result would pertain vis-à-vis the personal automobile insurance policy held by Brown. The policy of business automobile insurance coverage Avis purchased to cover its New Jersey registered vehicles required the renter's personal automobile insurance to be primary and the Avis policy to be excess to the renter's policy. Only when the renter purchased additional liability insurance when executing the rental agreement would the Avis policy be primary. Under either the self-insurance program or the purchased policy, Avis as the "named insured" maintains insurance covering liability ...