On certification to the Superior Court, Appellate Division.
(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).
This case implicates the initial permission rule and the business pursuits exclusion of an insured's automobile insurance policy. Charmaine Panichi was insured by the Proformance Insurance Company. She loaned her pickup truck to Henry Ward with the instructions that he was not to use the truck in his moving business and that he was not to let anyone else drive it. Ward let his employee, Adam Rosario, use the truck to deliver furniture. Rosario fell asleep at the wheel and injured his passenger, Shawn Whelan, and a pedestrian, Stacey Jones. In May of 2001, Jones filed a personal injury action against Panichi, Ward, and Rosario. In July of 2001, Ward brought a similar action in New Jersey against the same defendants. Proformance filed a complaint seeking a declaration that Panichi, Ward and Rosario were not covered under its policy. In the meantime, the New Jersey court confirmed a $50,000 arbitration award in favor of Whelan and against Rosario and Ward.
Jones filed a motion to compel Proformance to provide coverage. Whelan joined in the motion. The trial court granted the motion. Proformance appealed. The Appellate Division affirmed. This Court granted Proformance's petition for certification limited solely to the issue of whether a business pursuits exclusion in an automobile insurance policy is enforceable when the person who is given permission by the insured to operate the vehicle permits another to use it.
The question is whether a permittee user is entitled to liability coverage if he or she uses a vehicle in violation of a business pursuits exclusion in the insurance policy and in disregard of the insurer's direction not to let anyone else drive the vehicle.
HELD: The grant of initial permission requires the insurer to provide coverage for third-party claims; the insurance policy should be construed to provide coverage up to the minimum limits required by statute.
1. The New Jersey statute in effect at the time of the accident required every owner of a registered vehicle to maintain insurance against loss resulting from liability imposed by law for bodily injury sustained by any person arising out of the use of a motor vehicle. The statute mandated minimum limits of $15,000 for one person and $30,000 if more than one person was injured in the accident. Our courts have held that a nearly unlimited range of conduct on the part of the driver or passenger, short of outright theft of the vehicle, is within the scope of the insured's permission. Underlying the initial permission rule is the intent to assure that all persons wrongfully injured have financially responsible persons to look to for damages because a liability contract is for the benefit of the public as well as for the benefit of the insured. (pp. 5-8)
2. It is undisputed that Panichi gave Ward permission to use the pickup truck. Thus, Ward's disregard of Panichi's instruction not to let anyone else drive has no impact on the coverage issue. Coverage should be afforded unless the subsequent use constituted theft. The initial and subsequent permittees' use of the vehicle did not constitute theft. (p. 9)
3. Proformance argues that its business pursuits exclusion is clear and must be enforced. We assume for the purposes of this appeal that the policy provisions are clear. (p. 9)
4. Pursuant to the omnibus liability coverage statute, every registered vehicle owner in New Jersey must have liability insurance. Our comprehensive insurance scheme evinces a strong legislative policy of assuring at least some financial protection for innocent accident victims. An insurer must afford liability coverage in at least the amount mandated by the legislature. A policy provision that conflicts with statutorily mandated coverage will not be enforced. (pp. 10-11)
5. The legislative policy embodied in our statutes of compensating injured third parties by requiring all New Jersey motorists to carry compulsory insurance overrides the business exclusion in the policy. Because the protection of innocent third parties is a primary concern of our personal injury no-fault system and because the business use exclusion in the policy contravenes that concern, the exclusion will not be enforced in respect of innocent third parties. (pp. 11-19)
6. We turn to the question of whether the stated policy limit of $100,000 applies or whether the minimum required statutory limits should be read into the policy. The business pursuits exclusion is contrary to public policy to the extent it denies an injured party the minimum coverage required by law. The Proformance policy must provide the statutorily required minimum limits of coverage for the accident. (19-20)
The judgment of the Appellate Division as MODIFIED is AFFIRMED.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, ALBIN, and RIVERA-SOTO join in JUSTICE WALLACE's opinion
The opinion of the court was delivered by: Justice Wallace
Argued September 12, 2005
This case implicates the initial permission rule and the business pursuits exclusion of an insured's automobile insurance policy. The question is whether a permissive user is entitled to liability coverage if he or she uses a vehicle in violation of a business pursuits exclusion in the insurance policy and in disregard of the insured's direction not to let anyone else drive the vehicle. We hold that the grant of initial permission requires the insurer to provide coverage for third-party claims because the public policy underlying our mandatory insurance statute trumps the business exclusion clause. We also hold that the insurance policy should be construed to provide coverage up to the minimum limits required by statute.
Charmaine Panichi owned a 1997 Ford pickup truck that she loaned to her relative Henry Ward. That was not the first time that Panichi had loaned her truck to Ward. On this occasion, she instructed him not to use the truck in his furniture moving business and not to let anyone else drive it. Ward disregarded those instructions and authorized his employee, Adam Rosario, to use the truck to deliver furniture. While driving the truck with passenger Shawn Whelan, Rosario fell ...