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Failach v. New Jersey Property Liability Insurance Guaranty Association

August 9, 2007

DIANE FAILACH, PLAINTIFF,
v.
NEW JERSEY PROPERTY LIABILITY INSURANCE GUARANTY ASSOCIATION, DEFENDANT-APPELLANT/THIRD-PARTY PLAINTIFF, AND ALLSTATE INSURANCE COMPANY, DEFENDANT-RESPONDENT/THIRD-PARTY DEFENDANT.



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-6314-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued April 17, 2007

Before Judges Coburn, Axelrad and R. B. Coleman.

Defendant, New Jersey Property Liability Insurance Guaranty Association (NJPLIGA), appeals from a June 8, 2006, order deciding cross-motions for summary judgment. That order determined that defendant Allstate New Jersey Insurance Company (Allstate) shall not owe plaintiff underinsured motorist (UIM) benefits or personal injury protection (PIP) benefits but that claims for such benefits shall be made to NJPLIGA. For the reasons that follow, we affirm.

Plaintiff, Diane Failach, who was insured by Security Indemnity, was injured in an automobile accident on January 24, 2002, when her car was struck by Jose Feliciano. Plaintiff sued and settled with Feliciano for his $15,000 policy limit and presented UIM and PIP claims to her carrier. Thereafter, on June 30, 2004, the Chancery Division of the Superior Court of New Jersey entered an order declaring Security Indemnity to be insolvent. Consequently, plaintiff filed a complaint against Security Indemnity and NJPLIGA on August 24, 2005, asking the court to require NJPLIGA to provide UIM coverage and PIP benefits.

At the time of the accident, plaintiff resided with her father, Juan Failach. Juan was the named insured under an automobile insurance policy issued by Allstate. This policy provided UIM coverage in the amount of $250,000 per person and $500,000 per accident. This policy also contained an Automobile Amendatory Endorsement. Subsection VII, Part 4, subsection C of the endorsement provided:

The following is added as Section C. under Exclusions-What is Not Covered:

C. [Allstate] will not provide underinsured motorists coverage to any resident relatives who are not occupants of the insured auto described on the Policy Declarations, including a replacement auto and an additional auto, and who are insured under another auto policy.

The Allstate policy also provided that PIP coverage does not apply to "bodily injury to any relative of the named insured, if that person is entitled to New Jersey Personal Injury Protection Coverage as a named insured under the terms of another policy."

NJPLIGA denied plaintiff's claim on the ground that she must first exhaust UIM and PIP benefits available to her from her father's Allstate policy, pursuant to the exhaustion requirements of the New Jersey Property-Liability Insurance Guaranty Association Act, N.J.S.A. 17:30A-1 to -20. However, Allstate denied her claims based on the "other insurance" exclusion to coverage contained in its policy. Both parties then moved for summary judgment.

The motion judge, in considering the summary judgment motions, framed the question before him as whether plaintiff was insured under a second automobile policy at the time of the accident. The judge found that Allstate's contract did not provide coverage to plaintiff because she was driving a vehicle not covered by her father's policy and that was insured under another policy, plaintiff's Security Indemnity policy, in which plaintiff was a named insured. The judge also found that the Allstate policy did not provide coverage for plaintiff's PIP claims, as N.J.S.A. 39:6A-7 provides an exclusion from providing PIP coverage to "a member of the named insured's family residing in the named insured's household, if that person is entitled to coverage . . . as a named insured under the terms of another policy." Consequently, the court denied NJPLIGA's motion for summary judgment and granted Allstate's motion requiring NJPLIGA to cover plaintiff's claims. On appeal, NJPLIGA argues that plaintiff was required to exhaust her coverage with Allstate as a resident relative of her father, the policyholder.

The New Jersey Property-Liability Insurance Guaranty Association Act, N.J.S.A. 17:30A-1 to -20,*fn1 was adopted "to protect policyholders of insurance companies which became insolvent." Lehmann v. O'Brien, 240 N.J. Super. 242, 246 (App. Div. 1989). The mechanism by which the Act effectuates this goal is the NJPLIGA, a private, nonprofit, unincorporated, legal entity. N.J.S.A. 17:30A-6. Under the Act, NJPLIGA "is required to assume the contractual obligations of an insolvent insurer and to pay certain claims of the insurer's policyholders up to the limit of a policyholder's contract, but subject to a maximum liability of $300,000." Lehmann, supra, 240 N.J. Super. at 246 (citing N.J.S.A. 17:30A-8).

NJPLIGA's "responsibility to pay claims under an insolvent insurer's policy is limited to the payment of 'covered claims.'" Ibid. A ...


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