On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, L-0459-04.
The opinion of the court was delivered by: Sapp-peterson, P.J.Cv. (temporarily assigned).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 26, 2005
Before Judges Fall, Grall and Sapp-Peterson.
In this appeal, we are asked to determine whether the doctrine of reasonable expectations should be applied to set aside the step-down clause contained in an insurance policy issued by defendant, American International Insurance Company (AIIC), or alternatively, whether the manner in which the step-down clause amendment was issued breached defendant's duty of good faith and fair dealing.
On October 28, 2002, plaintiff was a permissive driver operating an auto owned and insured by her parents, Louise and Martin Haefele. She became involved in an accident with Thanh Tran from which she sustained injuries. At the time of the accident, plaintiff did not live with her parents and was not a named insured on any automobile insurance policy. When the Haefeles purchased their policy, they elected the no limitation on liability option with limits of $100,000 per person, $300,000 per accident, and underinsured motorist coverage with the same liability limits. These elections were reflected on the declaration page.
Plaintiff sued Tran for her personal injuries and settled for $50,000, the maximum liability under Tran's insurance policy. Plaintiff then filed an underinsured motorist claim with AIIC. AIIC denied the claim because plaintiff was neither a named insured nor a resident family member. In addition, the policy's step-down clause limited recovery to the statutory minimum for persons other than the named insured or resident family members. At the time of the accident, the statutory minimum coverage required for a claimant seeking underinsured motorist benefits was $15,000 per person, $30,000 per accident. N.J.S.A. 17:28-1.1. Since plaintiff was neither a named insured nor resident family member, and had received greater than the statutory minimum in her settlement with Tran, AIIC determined plaintiff was not entitled to any recovery.
Plaintiff filed a single-count declaratory judgment action against AIIC seeking an order declaring that plaintiff was a "family member" pursuant to the terms of the policy and was therefore not subject to the step-down provision. Plaintiff later amended the complaint to include a second count seeking a declaration that the terms of the policy were ambiguous and therefore the limits of underinsured motorist coverage should be the same as those afforded to the named insured.
Defendant moved for summary judgment, arguing that plaintiff, as a non-resident relative, was subject to the step-down provision, and because the settlement with Tran exceeded the statutory minimum limits for coverage, plaintiff was not entitled to receive any recovery under the Haefeles' policy. Plaintiff opposed the motion arguing that the terms of the policy were ambiguous, first, because the step-down clause was hidden in the fine print of the uninsured motorist endorsement and was not included on the policy's declaration page, and second, because the step-down clause referenced only uninsured motorists and not underinsured motorists.
Judge William C. Todd, III, rejected plaintiff's argument. Although he acknowledged some facial ambiguity or confusion on the title page of the "Uninsured Motorist" endorsement, he noted that the terms "uninsured" and "underinsured" were referenced throughout the endorsement. He concluded there was no meaningful ambiguity or confusion. He also noted there had been no suggestion that the Haefeles "were given some specific advice or representation" that the scope of coverage extended to all occupants of their vehicles. Finally, Judge Todd found the provisions of the step-down clause "clearly appear[ed] to apply to someone in the plaintiff's position," that is, the provisions applied to a driver who was neither a named insured nor resident family member.
The disputed language in the step-down clause was part of a four-page endorsement to the fifteen-page policy. The endorsement section was captioned, "UNINSURED MOTORISTS COVERAGE -- NEW JERSEY." Just above this caption, the language read, "This endorsement changes the policy. Please Read It Carefully."
The step-down language was set forth on the second page of the endorsement under Section A entitled "LIMIT OF LIABILITY."
The specific language set forth in this section stated, "[w]ith respect to any 'insured' who is not a named insured or 'family member' under this policy, our maximum limit of liability for 'bodily injury' is the minimum limit required by N.J.S.A. 17:28-1.1." A family member under the policy was defined as "a person related to you by blood, ...