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Pinto v. New Jersey Manufacturers Insurance Co.

June 6, 2005

RAYMOND PINTO, JR., PLAINTIFF-APPELLANT,
v.
NEW JERSEY MANUFACTURERS INSURANCE COMPANY, DEFENDANT-RESPONDENT, AND R.W. VOGEL, INC., DEFENDANT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 365 N.J. Super. 378 (2004).

SYLLABUS BY THE COURT

(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 is a companion case to Murawski v. CNA, also decided today.]

This appeal involves the application of an underinsured motorist (UIM) step-down clause in an employer's business automobile policy to a case in which an employee has been injured in a covered vehicle in a work-related accident. The issue here is whether the denomination of a corporate entity as the "named insured" in the employer's policy is so ambiguous as to allow any employee to be characterized as a "named insured" and thus avoid the step-down.

On December 22, 1997, Raymond Pinto sustained severe personal injuries when the truck he was driving was struck from behind by a vehicle driven by Theresa Trotter. Pinto was an employee of R.W. Vogel, Inc. (Vogel), a company owned by Roger and Anita Vogel, and was driving a truck owned by Holgate Property Associates (Holgate), another company owned by the Vogels. The truck was insured by Vogel through a business insurance automobile policy issued by New Jersey Manufacturers Insurance Company (NJM).

The policy named only the two corporate entities, Vogel and Holgate, as the "named insureds." The policy included an endorsement providing uninsured motorist (UM/underinsured motorist (UIM) coverage with a limit of one million dollars per accident. The policy covered any employee "occupying" a covered vehicle and established a one million dollar limit to such an employee provided he or she was neither a "named insured" nor insured as a "family member" on another policy. In those cases, coverage was stepped down to the cap in the relevant policies. Pinto was a named insured under a personal automobile insurance policy issued by Liberty Mutual that included UM/UIM coverage of up to $100,000 per person for bodily injuries. Pinto received $30,000 of the available $300,000 from Trotter's liability insurance coverage. Pinto's damages exceeded that amount so he submitted a claim for the one million dollar maximum of UIM coverage under the NJM policy. NJM denied the claim based on operation of the step-down provision. Pinto then brought an action to compel NJM to provide the one million dollar limit of UIM coverage.

NJM asserted that the step-down provision limited Pinto to the amount of UM/UIM coverage available pursuant to his own policy of insurance and that limit was satisfied upon Pinto's receipt of the $30,000 from Trotter's insurer. The trial court held that when a business automobile insurance policy fails to designate a business entity's human agent as the "named insured," any employee is covered under the policy's maximum UIM coverage. The Appellate Division reversed, holding that Pinto was a named insured under his own automobile insurance policy and that he was not a named insured under the NJM business auto insurance policy; therefore, his claim was limited by operation of the step-down provision to the amount of UIM coverage he elected in his personal automobile insurance policy. Accordingly, the court held that Pinto was not entitled to UIM coverage from NJM because his limit of coverage had been satisfied by the payment from Trotter's insurer. The panel determined that Pinto's UIM recovery was limited to $100,000, the UIM limit contained in his personal auto policy.

This Court granted Pinto's petition for certification.

Held: The NJM policy language is not ambiguous. It does not designate Pinto by name, or by implication, as a "named insured." Like the Appellate Division, we find the language of the step-down clause enforceable. An employer can cover employees as "named insureds" provided appropriate language is added stating such an intention. We impose on insurers, their agents, and brokers, a duty to inform employers about the necessity for such language so that employers may make informed decisions about whether their employees will have the status of "named insureds" under the employers' business automobile insurance policies.

1. Our case law has established that when an automobile accident occurs in the course of employment, a policy held by a regular employee of a business enterprise includes the policy of the enterprise that covers the employee in the course of employment. The UIM statute applies to all UIM insurance coverage held by the individual. Thus, an insurance policy held by an individual may include the UIM insurance coverage purchased by that person's employer to cover its employees. (p.10)

2. In earlier decisions, we already clearly stated that insurers are free to modify insurance policy language to limit the UIM coverage of passengers and others who are named insureds under other insurance policies and that insurers were free to modify the language of insurance policies to incorporate step-down clauses limiting the amount of UIM coverage available to individuals. (pp. 11-13)

3. Here, coverage is not disputed. Only the discrete application of a step-down provision is at issue. The policy covers any employee "occupying" a covered vehicle and establishes a one million dollar limit to such an employee provided he or she is neither a "named insured" nor insured as a "family member" on another policy. Even in those cases, coverage is not eliminated but simply stepped down to the cap in the relevant policies. As the Appellate Division noted, there is nothing unclear, ambiguous or unfair about those provisions. (p. 16)

4. The NJM policy language is not ambiguous. It does not designate Pinto by name, or by implication, as a "named insured." An employer can cover employees as "named insureds" provided appropriate language is added stating such an intention. To avoid having an employer misapprehend whether there is a need to include specific language incorporating employees as "named insureds" on business automobile policies, we impose on insurers, their agents, and brokers, a duty to inform employers about the necessity for such language so that employers may make informed decisions about whether their employees will have the statute of "named insureds" under the employers' business automobile insurance policies. (p. 18)

Judgment of the Appellate Division is AFFIRMED.

JUSTICE ZAZZALI filed a separate opinion in which JUSTICE ALBIN joins, CONCURRING in part and DISSENTING in part. Justice Zazzali agreeswith the majority's prospective imposition of a duty on insurers and their agents and brokers to advise employers of the need to provide specific language in the policy that reflects the employer's intent to include employees as named insureds and dissents from the denial of relief to Pinto.

CHIEF JUSTICE PORITZ and JUSTICES WALLACE and RIVERA-SOTO join in JUSTICE LaVECCHIA'S opinion. JUSTICE ZAZZALI filed a separate opinion concurring in part and dissenting in part in which JUSTICE ALBIN joins. JUSTICE LONG did not participate.

The opinion of the court was delivered by: Justice LaVECCHIA

Argued October 27, 2004

This insurance appeal involves the application of an underinsured motorist (UIM) step-down clause in an employer's business automobile policy to a case in which an employee has been injured in a covered vehicle in a work-related accident. The step-down provision capped the employer's UIM exposure at the limit provided by the employee's own automobile insurance policy or that of a resident family member, except that the step-down would be inapplicable if the employee qualified as a "named insured" under the employer's policy. Because the Court's earlier opinions have expressed its clear willingness to enforce unambiguous step-down provisions as a matter of contract between insurers and insureds, see Magnifico v. Rutgers Cas. Ins. Co., 153 N.J. 406 (1998), the issue here is one of insurance contract interpretation. Specifically, the question is whether the denomination of a corporate entity as the "named insured" in the employer's policy is so ambiguous as to allow any employee to be characterized as a "named insured" and thus avoid the step-down. The Appellate Division answered that question in the negative. Pinto v. New Jersey Mfrs. Ins. Co., 365 N.J. Super. 378, 381 (2004). We now affirm the thorough and thoughtful opinion by Judge Fall.

I.

On December 22, 1997, plaintiff Raymond Pinto sustained severe personal injuries when the truck he was driving was struck from behind by a vehicle driven by Theresa Trotter. At the time of the accident, Pinto was an employee of R.W. Vogel, Inc. (Vogel), a company owned and controlled by Roger and Anita Vogel, and was driving a truck owned by Holgate Property Associates (Holgate), another company also owned by Roger and Anita. The truck operated by Pinto on the date of the accident was the same truck regularly assigned to him for his work with Vogel. On that day, however, he was assigned to work on a street cleaning job for Environmentally Clean Naturally, Inc. (ECN), a corporation owned by the Vogels' son, Jeffrey. Both Roger and Jeffrey had given Pinto permission to use the truck to perform the street cleaning operation that day.

The truck was insured by Vogel through a business insurance automobile policy issued by New Jersey Manufacturers Insurance Company (NJM). The policy named the two corporate entities of Vogel and Holgate as the "named insureds." No natural person was so listed; however, Roger and Anita were identified as individuals insured for "Drive Other Car" coverage and "Broadened Personal Injury Protection" coverage provided through endorsements.

The policy also included an endorsement providing uninsured motorist (UM)/ underinsured motorist (UIM) coverage with a limit of one million dollars per accident. The UM/UIM endorsement stated that it provided coverage for "all sums the insured is legally entitled to recover as compensatory damages from the owner or driver of an uninsured motor vehicle or an underinsured motor vehicle." The endorsement contained two step-down provisions that lessened the limit of UM/UIM coverage available in certain circumstances for persons who were not "named insureds" under the NJM policy. The first provision applied 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.

In that case, "the most" the NJM policy "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 ...


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