On certification to the Superior Court, Appellate Division, whose opinion is reported at 388 N.J. Super. 303 (2006).
(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).
The issue before the Court is whether the amount of insurance coverage available in a commercial automobile policy, in which the exclusion for loading and unloading activities was void as contrary to the omnibus automobile statute, is the statutory minimum or the policy limit.
Gary Potenzone, an employee of Apollo Flag Company (Apollo Flag), was standing near an Apollo Flag truck when Le Tran, an employee of Annin Flag Company (Annin Flag), struck Potenzone in the back with either the forklift or a pallet on the forklift. As a result of injuries he suffered, Potenzone filed a personal injury action against Annin Flag. Annin Flag was insured by Atlantic Mutual Insurance Company (Atlantic Mutual) with policy limits of $1 million. Annin Flag also sought coverage from Apollo Flag's business automobile insurance policy issued by Pennsylvania National Mutual Casualty Insurance Company (Penn National) with policy limits of $500,000. Penn National denied coverage under its policy exclusion for injuries arising out of loading or unloading accidents to Apollo Flag, its employees, or persons who operate Apollo Flag vehicles with permission.
Annin Flag filed a third-party complaint against Penn National, seeking a declaration that Penn National had a duty to defend and indemnify it against Potenzone's lawsuit. Penn National filed an answer denying that it owed a duty of coverage. Both Penn National and Annin Flag sought summary judgment. Penn National sought alternative relief, requesting that if it did owe a duty to Annin Flag, its liability limit was the statutory minimum of $15,000 and not the contractual policy limit of $500,000. The trial court granted Annin Flag's motion for summary judgment and required Penn National to provide coverage up to the full policy limit of $500,000.
Penn National appealed. In that appeal, Penn National did not contest that its moving property exclusion was unenforceable in New Jersey, which requires coverage for loading and unloading activities. The Appellate Division reversed the decision of the trial court, concluding that Proformance Insurance Co. v. Jones controlled and, therefore, Penn National was required to provide coverage only up to the statutory minimum of $15,000.
The Supreme Court granted Annin Flag's petition for certification.
HELD: Based on long-standing case law invalidating the exclusion for loading and unloading activities, that exclusion in the Penn National's policy is treated as if it were not part of the policy; therefore, the insurer is responsible for coverage up to its full policy limit.
1. A policy exclusion that conflicts with statutorily mandated coverage will not be enforced. New Jersey courts have long recognized that the obligation to provide coverage for loading and unloading accidents arises from statute and cannot be limited by contract. In Ryder/P.I.E. Nationwide, Inc. v. Harbor Bay Corp., this Court held that under the terms of an ordinary liability policy, an insurer would be required to provide coverage in a loading and unloading accident to the limits of its policy, which is often an amount greater than the statutory minimum. There is no justification to alter that statement here. Ryder was decided over sixteen years ago and the insurance industry has had sufficient time to adjust its premiums and policies to provide either step-down or full coverage for loading and unloading accidents. (Pp. 6-10)
2. A policy exclusion may not override statutory mandates to provide insurance coverage and the attempt to do so in a loading and unloading accident is void. Thus, Penn National's insurance policy should be read as if that clause was not part of the policy and, therefore, Penn National is required to provide coverage up to its full policy limit. (P. 10)
3. The Court's decision in Proformance could be fairly read in this case to reach a different result. However, in Proformance, the Court addressed for the first time whether, in light of the omnibus statute, an otherwise valid business exclusion should bar a third party from coverage under the policy. The Court chooses a different path here. Following the decision in Ryder, insureds, insurers, and self-insurers should have reasonably expected that the full policy limit for an accident during a loading or unloading activity was required. If Penn National intended to provide the statutory minimum coverage for loading and unloading accidents, it should have amended its policy to expressly provide for such step-down coverage. The failure to provide such language requires coverage up to the full policy limits and, thus, Penn National must provide coverage up to $500,000. (Pp. 10-12)
Judgment of the Appellate Division is REVERSED and the judgment of the trial court is REINSTATED.
CHIEF JUSTICE ZAZZALI and JUSTICES LONG, LaVECCHIA, ALBIN, RIVERA-SOTO and HOENS join in ...