April 16, 2008
MICHELLE MANGIARACINA AND GEORGE MANGIARACINA, PLAINTIFFS-RESPONDENTS,
AMERICAN CASUALTY COMPANY OF READING, PA., DEFENDANT-APPELLANT, AND CLARK & MORRISON INSURANCE AGENCY, INC., DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-424-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 16, 2008
Before Judges Wefing, Parker and R. B. Coleman.
Defendant American Casualty Company (American)*fn1 was granted leave to appeal from an order entered on January 5, 2007 denying its motion for summary judgment and an order entered on April 10, 2007 denying its motion for reconsideration. We affirm.
At issue here is American's underinsured motorist (UIM) step-down provision in an employer's business auto policy. The employer's UIM coverage was limited to the amount provided by the employee's personal auto insurance.
Plaintiff Michelle Mangiaracina was involved in an automobile accident on January 8, 2002. She claimed to have suffered injuries and economic damages exceeding $1 million. The tortfeasor settled through its carrier, State Farm, for his policy limit of $250,000.
At the time of the accident, plaintiff was driving a 2001 Chevy Suburban owned by her employer, Rockledge Nursery, Inc. (Rockledge), and insured under the American policy. Rockledge is wholly owned by plaintiff's husband, George. Plaintiff worked part-time for the business and the Chevy Suburban was purchased for her use going to and from the business and making deliveries for the business. It was principally garaged at plaintiff's home. Rockledge was the only "named insured" on the policy. The policy provided for $1 million in UM/UIM coverage. Plaintiff handled the insurance for the business and used defendant Clark & Morrison as an agent. Morrison, one of the owners of the agency, testified that he believed the policy provided $1 million in UIM coverage. Plaintiff also had a Prudential policy covering personal family vehicles in the amount of $100,000/$300,000.
American declined coverage for plaintiff's accident based upon the step-down provision, which plaintiff claims is "hidden" in the policy. The step-down provision capped UIM coverage at the amount of plaintiff's personal policy.
After hearing arguments, the trial court denied defendant's summary judgment motion, finding that there was no evidence to support American's position that plaintiff's Prudential policy would provide coverage or limits on coverage for the Chevy Suburban insured by American.
In this appeal, defendant argues that the trial court erred in its determination that plaintiff was a "named insured" under the American policy because (1) it "overlooked the controlling Supreme Court directive in Pinto v. New Jersey Mfrs. Ins. Co., 365 N.J. Super. 378 (App. Div. 2004), aff'd, 183 N.J. 405, 417 (2005);" (2) plaintiff is not a "named insured" because she is not individually named on the policy; and (3) plaintiff "does not meet the narrow and limited fact pattern to transform an 'insured' into a 'named insured' as enunciated by the Supreme Court in [Pinto]." Plaintiff responds that, under both Pinto and Macchi v. Connecticut General Ins., Co., 354 N.J. Super. 64 (App. Div. 2002), she is a named insured, entitled to UIM coverage under the policy.
In Pinto, the Court held that motor vehicle liability insurance policies, which name a business or corporate entity as a named insured, may include a step-down provision limiting UM and UIM coverage for employees who are not individually named on the corporate policy and who are named individually on a personal policy. 183 N.J. at 417. The Court held these step-down provisions valid and enforceable, limiting an employee's coverage under an employer's business auto policy to the lower limits of the UM/UIM coverage in the employee's individual auto policy, even if the employee is injured in a covered vehicle in a work-related accident. Id. at 412.
In Macchi, we considered whether the plaintiff, who was injured while driving a vehicle owned by her husband or his business and insured under her husband's business auto policy, was covered under the policy, and whether the step-down provision in the UM/UIM endorsement applied to her. 354 N.J. Super. at 67-76. At the time of the accident, the plaintiff and her husband were separated and living apart. Id. at 68. The vehicle she was driving, a Corvette, was considered her car, and she used it daily to commute to and from her job in Pennsylvania. Id. at 68-69. The plaintiff's husband owned the business, the named insured on the policy, which provided $1 million in both UM and UIM coverage. Id. at 73. The policy also included a step-down provision limiting the available UM/UIM coverage to an insured not designated as a named insured to the UM/UIM coverage available in the individual personal or family auto policy. Id. at 73-74.
"Our interpretation of the . . . policy [began] with the understanding that plaintiff [was] for all intents and purposes an individual named insured under that policy." Id. at 74. We reasoned that "if the only individual named insured were deemed to be [the corporate entity], then no claim of the full extent of the personal injury benefit provided by the policy's UM/UIM provisions would ever be possible, because an entity cannot suffer the predicate personal injury." Id. at 75. We concluded that an interpretation in accordance with the carrier's position would render illusory the $1 million UM/UIM limit. Ibid.
We found "common sense reasons" to consider the plaintiff a named insured. Ibid. First, the plaintiff was not a permissive or occasional user of the insured vehicle; rather, she was the "designated primary user." Ibid. Second, the court suggested that "it is not uncommon for businesses to include the personal vehicles of the company principals and their families within the coverage of business auto insurance policies." Ibid. It was, therefore, "fair to consider the carrier to be on sufficient notice to be required to express any limitations in coverage with greater precision than was employed." Ibid.
In interpreting the business auto policy in Macchi, we restated the rationale articulated in Araya v. Farm Family Cas. Ins. Co., 353 N.J. Super. 203, 211 (App. Div. 2002):
[W]hen a business auto policy fails to designate the insured business entity's human agent or agents entitled to receive UIM benefits, we will look to the declarations page as the best indicator of the insured's reasonable expectations of coverage. Any ambiguity created by boilerplate provisions found elsewhere in the policy will be resolved against the drafters of the policy and in favor or coverage.
[Macchi, supra, 353 N.J. Super. at 76 (quoting Araya, supra, 353 N.J. Super. at 211).]
We determined that the plaintiff had reasonable expectations that she was a named insured under the vehicle and was entitled to the full extent of the business policy's UM/UIM coverage. Ibid.
In Botti v. CNA Ins. Co., 361 N.J. Super. 217, 221-22 (App. Div. 2003), the plaintiff was seriously injured while driving a Jeep owned by his employer who allowed the plaintiff to take the vehicle home on a regular basis for personal and business purposes. In return, the plaintiff paid the employer $15 per week, deducted from his paycheck, for insurance. Id. at 222. The employer and two affiliated corporations were designated as "named insureds" on their business auto policy. Ibid. The business auto policy had UM limits of $1,000,000. Id. at 222-23. The plaintiff, however, had a personal auto policy with UM limits of $100,000. Ibid.
When confronted with whether the plaintiff was a "named insured" under the business auto policy, we distinguished the meaning of "named insured" from that of "insured." Id. at 226. We observed that a "named insured" is a self-defining term referring only to the names appearing in the declarations. Ibid. We concluded that the fact that the named insureds were corporations did not render the policy language ambiguous. Id. at 226. The plaintiff "could not have had an objectively reasonable expectation of being a named insured in the [business auto] policy." Id. at 227.
Despite our holdings in Pinto and Botti, we recognized "that a reasonable expectation of coverage can overcome even the plain meaning of a policy and, further, that an insured who has a reasonable belief that he or she has purchased certain coverage will not be denied that coverage if the boilerplate language negates it." Pinto, supra, 365 N.J. Super. at 401 (citing Botti, supra, 361 N.J. Super. at 227).
In Christafano v. New Jersey Mfrs. Ins. Co., 361 N.J. Super. 228, 231 (App. Div. 2003), the plaintiff was injured when his vehicle was forced off the road by an unidentified vehicle. The plaintiff was insured for UM benefits under three separate policies: his personal auto policy with limits of $25,000; his sister's auto policy, as a "family member", with limits of $100,000; and his mother's auto policy with limits of $300,000. Id. at 231-32.
In determining that the step-down provision in the mother's auto policy applied to the plaintiff, we found that the step-down provision was clear and unambiguous and limits [the mother's carrier's] UM coverage to that afforded by the [plaintiff's] policy because the three enumerated conditions are met. Namely, plaintiff is not the named insured under the [mother's] policy, but is a named insured under [his] policy, which provides UM coverage with lesser limits of liability than the [mother's] policy.
Id. at 235.
Here, defendant maintains that plaintiff does not meet the narrow definition of named insured as set forth in Pinto. Defendant argues that Pinto still recognizes Macchi as good law but only to the extent of the facts in Macchi.
Here, the trial court relied on both Pinto and Macchi to determine that plaintiff had a reasonable expectation she was a named insured under the American policy. The trial court found it significant that the policy language in Pinto was not ambiguous and did not designate Pinto as a named insured either by name or by implication. Moreover, Pinto had no expectation that he would be a named insured under his employer's business policy.
The trial court found this expectation reasonable because
(1) plaintiff testified she thought she had $1 million coverage under the Rockledge policy; (2) the owner of the policy, plaintiff's husband, would have had some expectation that when he had a policy for his business that covered a vehicle driven by his wife, that vehicle would be covered under the policy; and (3) plaintiff did not operate either of the vehicles covered under the Prudential policy. The trial court raised only one question when considering plaintiff's reasonable expectation: "Who was the owner of the business[,] George Mangiaracina[,] buying increased UIM protections [for], if not for himself and his family?" In Pinto, the owner had no intention of providing UIM coverage for its employee. 365 N.J. Super. at 406.
Here, the facts are closer to those in Macchi than in Pinto, Botti or Christafano. Plaintiffs here and in Macchi drove vehicles covered under their husbands' business automobile policy. Macchi, supra, 354 N.J. Super. at 72. Both husbands were owners of their businesses, but only the name of the business entity was identified as a named insured on the auto policy; neither plaintiff was "merely a permissive, occasional, or errand-specific user" of the vehicle; both plaintiffs were the designated primary drivers of the vehicle involved in the accident; and neither plaintiff drove the vehicles identified on the family auto policy.
Here, plaintiff had a reasonable expectation that she was a named insured under the American policy. The step-down provision does not apply to her.
Defendant further contends that it was not required to send plaintiff notice of the inclusion of the step-down provision upon renewal of the policy under Skeete v. Dorvius, 368 N.J. Super. 311 (App. Div. 2004), aff'd, 184 N.J. 5 (2005). Specifically, defendant maintains that (1) a Skeete notice does not apply to commercial policies; (2) a lack of a Skeete notice did not result in loss of plaintiff's reasonable expectations in UIM limits; and (3) a Skeete notice is not required under N.J.A.C. 11:1-20(c).
Upon renewal, "[a]bsent notification that there have been changes in the restrictions, conditions or limitations of the policy, the insured is justly entitled to assume that they remain the same and that his coverage has not in any[way] been lessened." Bauman v. Royal Indem. Co., 36 N.J. 12, 25 (1961). "[I]t is immaterial that he did not examine the renewal policy until after the event insured against had occurred. In the absence of any agreement for an alteration of the original terms, a renewal contract containing alterations may be reformed." Id. at 24. When the policy terms for renewal coverage are made apparent to the insured, "the company can be certain that the renewal will be valid." McClellan v. Feit, 376 N.J. Super. 305, 315 (App. Div. 2005). When the insured, however, "is not specifically and clearly informed of the change, the renewal will be ineffective." Ibid.
Moreover, "unless specific changes in the limits of coverage are noted on the declaration page, the carrier's notice of changes in coverage is inadequate." Skeete, supra, 368 N.J. Super. at 319. Skeete involved a Prudential Insurance Company personal auto insurance policy that was amended upon renewal to include a step-down provision in the UM/UIM coverage. Id. at 313. The plaintiff, who had been injured as a passenger in an automobile accident, was denied coverage under the step-down provision. Id. at 314. On appeal, the plaintiff argued that Prudential did not act in good faith and fair dealing in notifying the policyholder of the policy change. Ibid.
At the time the step-down provision was adopted in the policy owner's renewal policy, Prudential had sent almost 200 pages of material to the policyholder in a two-week period to inform her of various policy changes. Id. at 317. The court noted that buried within these 200 pages were only a few paragraphs addressing the step-down limits for UM/UIM coverage. Ibid. The declaration page, however, listed the coverage as $100,000 per person and $300,000 for each accident, without mention of the step-down in coverage. Ibid.
We found that it was "neither unreasonable nor cost-prohibitive for an insurance carrier to highlight specific changes in coverage -- particularly those resulting in a step-down of coverage -- on the declaration page of the policy." Id. at 318. We concluded that it was "insufficient for the carrier to simply state in a cover letter that policy changes are enclosed without specifically highlighting those changes on the declaration page." Ibid. We emphasized that the public is "entitled to the broad measure of protection necessary to fulfill their reasonable expectations" when purchasing insurance. Ibid.
Here, defendant does not claim that it sent a notice to plaintiff or Rockledge Nursery of the inclusion of the step-down provision in the renewal of the CNA policy. Rather, defendant argues that Skeete does not apply in the commercial context because the purpose of the notice requirement is to "directly notify the person who is the policyholder (contracting party) of a change in UIM coverage." In the commercial context, a notice would not go directly to the individual employees.
Defendant overlooks the fact that in Skeete, the injured plaintiff was a passenger in a vehicle owned and operated by another individual. Skeete, supra, 368 N.J. Super. at 313. The Skeete plaintiff would not have received the notice; nevertheless, we held that the carrier had a duty to notify the policy owner of inclusion of the step-down. Id. at 319-20. Nothing in either Bauman or Skeete suggests that the holdings are limited to personal automobile liability policies.
Defendant also argues that plaintiff "failed to demonstrate [that] the lack of a Skeete notice resulted in a loss of plaintiff's reasonable expectation in UIM limits." As the trial court noted, however, plaintiff testified in her deposition that although she was not familiar with the insurance terms and she may not have read specific parts of the policy, she would have responded if she received notice indicating that her coverage was significantly reduced.
Defendant's argument that it is not required to provide notice under N.J.A.C. 11:1-20.2(c) is equally without merit. In Skeete, Prudential argued that it complied with N.J.A.C. 11:3-15.1 to 15.7, Standards For Written Notice: Buyer's Guide and Coverage Selection Form. We rejected that argument, noting that "[t]he Administrative Code, by its own terms, defines minimum standards for the Buyer's Guide and Coverage Selection Form. The code does not address a standard for the declaration page." Skeete, supra, 368 N.J. Super. at 319 (citation omitted).
N.J.A.C. 11:1-20 addresses renewal, cancellation and non-renewal of commercial and homeowners insurance policies.
Pursuant to N.J.A.C. 11:1-20.2(c), "notice of the amount of the renewal premium and any change in contract terms shall be given to the insured in writing not more than 120 days nor less than 30 days prior to the due date of the premium." Moreover, N.J.A.C. 11:1-20.2(c) states that these rules are not exclusive, and other provisions of statues and regulations may be applicable to the circumstances addressed therein.
Defendant was required to provide notice of the adoption of a step-down provision reducing the UM/UIM limits available to some insureds.