On appeal from the Superior Court of New Jersey, Law Division, Camden County, L-4396-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges S.L. Reisner, Seltzer and C.L. Miniman.
This insurance coverage and choice-of-law case arises from an accident that occurred in Philadelphia, between a vehicle owned and insured in New Jersey and a vehicle owned and insured in Pennsylvania. Rutgers Casualty Insurance Company (RCIC), appeals from a trial court order dated July 21, 2006, granting summary judgment in favor of the accident victim, Andrew McAdams, who was driving the car covered by RCIC's New Jersey policy. The trial court ordered that Pennsylvania law applied to McAdams' claim for underinsured motorist (UIM) coverage under the RCIC policy and that McAdams was, therefore, entitled to $25,000 in UIM coverage, which would be stacked above McAdams' $90,000 recovery from the Pennsylvania tortfeasor's insurance policy. We reverse, based on our conclusion that New Jersey law should be applied to McAdams' claim.
In 2003, McAdams, a Pennsylvania resident, was involved in an accident in Philadelphia, while driving a vehicle owned by Megan Reeves, a New Jersey resident who had obtained automobile insurance for the vehicle from RCIC in New Jersey. The McAdams vehicle was struck from the rear by a car operated by David Scott McQuate. The McQuate vehicle was covered by a $100,000 liability policy, and McAdams settled his claim against McQuate for $90,000. He then sought UIM benefits under Reeves' RCIC policy.
Reeves' policy provided $25,000 in bodily injury liability coverage and $25,000 in UIM coverage per person. The policy defined "underinsured motor vehicle" as "a land motor vehicle . . . to which a liability bond or policy applies at the time of the accident but its limit for liability is less than the limit of liability for this coverage." This contractual definition is consistent with New Jersey's statutory definition of "underinsured":
A motor vehicle is underinsured when the sum of the limits of liability under all bodily injury and property damage liability bonds and insurance policies available to a person against whom recovery is sought for bodily injury or property damage is, at the time of the accident, less than the applicable limits for underinsured motorist coverage afforded under the motor vehicle insurance policy held by the person seeking that recovery. [N.J.S.A. 17:28-1.1e.]
Under both definitions, the McQuate vehicle was not "underinsured" because it was covered by a $100,000 liability policy which exceeded the $25,000 coverage on the Reaves vehicle.*fn1
On the other hand, Pennsylvania law does not restrict UIM coverage to situations in which the tortfeasor's liability coverage limits are lower than the limits of the policy covering the accident victim. Pennsylvania law defines "underinsured motor vehicle" simply as "[a] motor vehicle for which the limits of available liability insurance and self-insurance are insufficient to pay losses and damages." 75 PA. CONS. STAT. § 1702. See Kmonk-Sullivan v. State Farm Mut. Auto. Ins. Co., 788 A.2d 955, 962 (Pa. 2001) (referring to "the broad coverage required by the statute"). Moreover, Pennsylvania would probably invalidate a UIM provision in a Pennsylvania insurance policy that was more restrictive than the statute permitted. For example, in Kmonk-Sullivan, supra, the Pennsylvania Supreme Court declined to enforce a provision in a policy that excluded government-owned vehicles from the definition of an "underinsured" motor vehicle. Ibid. Therefore, under Pennsylvania law, the McQuate vehicle would be considered underinsured if McAdams' damages exceeded the $100,000 available under McQuates' liability policy. If the RCIC policy had been written in Pennsylvania, the more restrictive definition of UIM in the policy would likely be unenforceable under Pennsylvania law.
The trial judge concluded that there was a conflict-of-law issue and resolved it in favor of applying Pennsylvania law. While the judge recognized that ordinarily "a contract will be construed in accordance with the laws of the state in which it was written," in this case "[t]he overwhelming [factual] connections are to the State of Pennsylvania." He also reasoned that since Reeves lived in South Jersey and worked in Pennsylvania, the insurer could have reasonably expected that her car would be driven in Pennsylvania and should have expected Pennsylvania law to be applied in case of an accident occurring there.
Our review of the trial court's grant of summary judgment is plenary, applying the Brill standard. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
In deciding conflict-of-law issues, our courts first determine whether there is a conflict and, if so, use the "governmental-interests" test to resolve the conflict. See Rowe v. Hoffman-LaRoche, Inc., ___ N.J. ___ (2007). Where the issue concerns an insurance contract, our Court has articulated the test in the following language:
[T]he proper approach in resolving conflict-of-law issues in liability insurance contract controversies . . . calls for recognition of the rule that the law of the place of the contract ordinarily governs the choice of law because this rule will generally comport with the reasonable expectations of the parties concerning the principal situs of the insured risk during the term of the policy and will furnish needed certainty and consistency in the selection of the applicable law. At the same time, this choice-of-law rule should not be given controlling or dispositive effect. It should not be applied without a full comparison of the significant relationship of each state with the parties and the transaction. That ...