July 19, 2007
DIONISIO "DANNY" PEREZ, PLAINTIFF-RESPONDENT,
STATE FARM INDEMNITY COMPANY,*FN1 DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Law Division, Middlesex County, L-7470-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 17, 2007
Before Judges Payne and Lihotz.
Plaintiff, Dionisio Perez, was injured in an auto accident when riding as a passenger in a truck owned by Perez's employer, Union Pipe, Inc. Following settlement with the tortfeasor for $14,500, an amount that was $500 less than the tortfeasor's policy limits, Perez sought underinsured motorist (UIM) coverage from defendant, State Farm Indemnity Company, claiming coverage pursuant to the terms of a policy issued to Union Pipe and its owner, Ronald Desclafani. When coverage was denied, Perez filed suit. State Farm thereupon moved for summary judgment. This appeal arises from the denial of State Farm's motion by the motion judge and his determination that Perez was entitled to coverage under the State Farm policy under the doctrine of reasonable expectations. We reverse.
State Farm's standard car policy was issued to named insureds Union Pipe Inc. and Ronald Desclafani for the period of December 1, 2000 to June 1, 2001 and later extended to cover the period in which the accident occurred. The policy afforded coverage to four Ford vans that included uninsured and underinsured motorist (UM/UIM) benefits, in the amount of $250,000 per person and $500,000 per accident, at a total premium of $33.20 per vehicle. A definitional section at the front of the policy included a definition of "insured," as follows:
Insured -- means the person, persons or organization defined as insureds in the specific coverage. After stating various other terms and conditions applicable to the policy as a whole, the policy then contained sections denominated "SECTION I -- LIABILITY -- COVERAGE A," "SECTION II -- PERSONAL INJURY PROTECTION -- COVERAGE P AND MEDICAL PAYMENTS -- COVERAGE C," "SECTION III -- UNINSURED AND UNDERINSURED MOTORIST COVERAGE U," "SECTION IV -- PHYSICAL DAMAGE COVERAGES," "SECTION V -- DEATH, DISMEMBERMENT AND LOSS OF SIGHT -- COVERAGE S," and a concluding section labeled "CONDITIONS."
Section III, containing the terms of the UM/UIM coverage afforded by State Farm, commenced with an insuring clause that provided:
We will pay damages for bodily injury or property damage an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle or an underinsured motor vehicle. The bodily injury or property damage must be caused by accident arising out of the ownership, maintenance or use of an uninsured motor vehicle or an underinsured motor vehicle. The bodily injury must be sustained by an insured.
The Section then defined who was an insured separately under the UM and UIM coverages, stating:
Who Is an Insured
1. When the bodily injury or property damage arises out of the ownership, maintenance or use of an uninsured motor vehicle, Insured means:
b. your spouse;
c. your relatives;
d. any other person while occupying:
(1) your car . . .
e. any person entitled to recover damages because of bodily injury to an insured under a through d above.
2. When the bodily injury or property damage arises out of the ownership, maintenance or use of an underinsured motor vehicle, Insured means:
b. your spouse;
c. your relatives . . .
d. any person entitled to recover damages because of bodily injury to an insured under a through c above.
Thus, UM coverage was extended by State Farm to persons occupying a covered vehicle, which would have included Perez, whereas UIM coverage did not contain coverage for vehicle occupants such as Perez.
The terms of State Farm's UM coverage are consistent with this State's insurance law, N.J.S.A. 17:28-1.1a, and with endorsements approved by the Commissioner of Insurance. See Cynthia M. Craig and Daniel J. Pomeroy, New Jersey Auto Insurance Law § 19.3 at 326-27 (2007 ed.). UIM coverage is not statutorily mandated, but "shall be provided as an option by an insurer to the named insured." N.J.S.A. 17:28-1.1b.
The principles governing the interpretation of insurance contracts were set forth by the Supreme Court in Zacarias v. Allstate Ins. Co., 168 N.J. 590 (2001). There, the Court stated:
We give special scrutiny to insurance contracts because of the stark imbalance between insurance companies and insureds in their respective understanding of the terms and conditions of insurance policies. In the first instance, the words of an insurance policy are to be given their plain, ordinary meaning. "In the absence of any ambiguity, courts should not write for the insured a better policy of insurance than the one purchased." [Gibson v. Callaghan, 158 N.J. 662,] 670 [(1999)].
However, "[i]nsurance policies are contracts of adhesion and as such, are subject to special rules of interpretation." Ibid.
When there is ambiguity in an insurance contract, courts interpret the contract to comport with the reasonable expectations of the insured, even if a close reading of the written text reveals a contrary meaning.
"'The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even through painstaking study of the policy provisions would have negated those expectation.'" [Id. at 594-95 (additional citations omitted).]
In the present case, the motion judge did not find the definition of who was an insured under the UM/UIM coverages of State Farm's policy to be ambiguous. However, the judge found that "one has to hunt way into [the policy] language to ascertain that there is a difference in the definition of insured between uninsured and underinsured," and that it took "strenuous study of this policy to comprehend the fact that uninsured and underinsured vehicles result in different coverage for employees of the named insured company." As a consequence, the judge employed the doctrine of reasonable expectations to find UIM coverage for Perez's injuries. In addition, the judge based his opinion on our decision in Cook-Sauvageau v. PMA Group, 295 N.J. Super. 620 (App. Div. 1996), certif. denied, 150 N.J. 29 (1997), a case in which we extended UM/UIM coverage to a corporate employee, noting that coverage would be illusory if applied only to the corporate entity that was the sole named insured. Id. at 627. Although the motion judge recognized that Cook was not directly applicable, because UIM coverage in the present case was extended to Desclafani, his spouse, and under specified conditions, his relatives, he nonetheless concluded that Desclafani would reasonably have sought inclusion of his employees, as well.
Finding State Farm's coverage to be both unambiguous and comprehensible, we are unable to agree with the motion judge's conclusion that State Farm's policy should be interpreted to provide coverage to Perez in this circumstance. As our summary of the policy's provisions discloses, the policyholder was directed, on page three of the contract, to refer to the specific coverage at issue to determine who was insured under it. The coverages then followed, each titled clearly to disclose the nature of the insurance afforded. The terms of the policy's UM/UIM coverage commenced, in Section III, on page 24 of the policy. That coverage, like the other coverage provisions, was clearly titled. The section contained a provision, captioned in bold lettering. that stated "Who Is an Insured." The provision, in turn, was divided into two numbered paragraphs, one defining who was an insured under the policy's UM coverage, and the second defining who was an insured under its UIM coverage. Although those provisions appeared on pages twenty-five and twenty-six of the policy, and were to that extent "buried," their placement within the policy's structure was wholly logical and easily comprehensible by anyone reading the policy's terms.
In these circumstances, we fail to discern any ambiguity, Progressive Cas. Ins. Co. v. Hurley, 166 N.J. 260, 273-74 (2001), any provision requiring professional interpretation to establish its meaning, Zacarias, supra, 168 N.J. at 601, or any technical or hidden language that could reasonably be found to obscure the insurer's intent with respect to coverage. Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475, 482 (1961). To accept the motion judge's contrary reasoning would be to conclude, unreasonably in our view, that any language, no matter how clear, appearing after the introductory pages of an insurance policy, could be disregarded with impunity because it was "buried."
Nor do we find Cook, supra, to control our decision in this matter. As we have already noted, the UM coverage afforded by State Farm provided coverage in an amount greater than statutorily mandated not only to Desclafani, his wife and relatives, but also to any person riding in a covered Union Pipe van. The policy's optional UIM coverage was less generous, but not illusory, since it provided benefits, as N.J.S.A. 17:28-1.1b specified, to the "named insured," Desclafani, and his family.*fn2
The record does not support a claim that Desclafani sought anything more.