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Chavez v. Proformance Insurance Co.

August 14, 2008

JOSE L. CHAVEZ, MARIA CHAVEZ AND MARIANA CHAVEZ, A MINOR BY HER GUARDIAN AD LITEM, MARIA CHAVEZ, PLAINTIFFS-APPELLANTS,
v.
THE PROFORMANCE INSURANCE COMPANY, DEFENDANT-RESPONDENT, AND EXECUTIVE RISK INDEMNITY, INC., AS SUBSIDIARY OF CHUBB GROUP OF INSURANCE COMPANIES, AND MARK T. MOOTY, DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-0532-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted January 16, 2008

Before Judges Sapp-Peterson and Messano.

Plaintiffs,*fn1 Jose Chavez, his spouse Maria, and daughter Marianna, appeal the grant of summary judgment to defendant, Proformance Insurance Company (Proformance), the insurer from whom plaintiffs sought uninsured motorists' benefits (UM). We affirm.

The operative facts are not disputed. Plaintiffs were involved in a motor vehicle accident with a vehicle that was uninsured. The vehicle operated by Jose was insured by Executive Risk Indemnity Company (Exeuctive), a California insurance company licensed to do business in New Jersey. The policy did not provide for personal injury protection (PIP) or UM benefits. However, because Executive was licensed to do business in New Jersey, it was obligated under N.J.S.A. 17:28-1.4, commonly known as the "deemer" statute, to provide minimum coverage for PIP and UM benefits whenever a vehicle insured under a policy it issued was involved in a motor vehicle accident in New Jersey.

When Executive issued the policy to Jose, he and his family had been living in California. At the time of the accident, however, they had relocated to New Jersey and were living with Maria's brother, Sergio Cartagena (Cartagena). Cartagena was insured under an auto policy issued by Proformance which provided liability coverage and mandatory PIP and UM coverage. Following the accident, plaintiffs received PIP benefits as well as the statutory minimum UM benefits of $15,000/$30,000*fn2 under the Executive policy. Plaintiffs, as members of Cartagena's household, also sought recovery of UM benefits from Proformance. The Proformance policy provided $100,000/$300,000 in UM benefits to members of its insured's household who sustain injuries caused by the operator of an uninsured motor vehicle. However, it contained a step-down provision that lowered benefits available to an injured party who was directly insured by that party's own policy. In such situations, the step-down provision limited coverage available to the injured party to the maximum available coverage under a similar policy. Because plaintiffs were insured by Executive and, under that policy, were subject to the statutory minimum coverage for UM benefits, Proformance denied UM benefits to plaintiffs.

Plaintiffs commenced a personal injury action in Superior Court against the driver of the uninsured vehicle, Executive and Proformance. In the fourth through the seventh counts of the complaint, plaintiffs sought various relief against Executive and Proformance, including a declaration that they were entitled to UM benefits and UM arbitration as well as compensatory damages and punitive damages resulting from the carriers' gross misconduct, bad faith, breach of their duty of good faith and fair dealing owed to plaintiffs," and their "unfair and deceptive acts and practices involving unfair claim settlement practices[.]"

Thereafter, plaintiffs moved for summary judgment against Proformance only, seeking an order requiring it to pay UM benefits. Plaintiffs urged that the step-down provisions of the Proformance policy did not apply because the coverage under their Executive policy did not contain "similar coverage." Proformance cross-moved for summary judgment, arguing that the deemer statute rewrites policies issued by out-of-state insurance companies authorized to do business in New Jersey to conform the policy to New Jersey law. In addition, Proformance argued that its policy issued to Cartagena contained an enforceable step-down provision.

In an oral decision placed on the record on May 16, and 22, 2007, the motion judge noted that "[b]oth sides agree that the deemer statute is in force and effect and has been utilized for the PIP coverage benefits and will be utilized for the uninsured motorist coverage by Executive" and therefore concluded that the only question before the court was whether the Executive policy, which concededly did not provide any PIP and UM coverage, should be construed to include New Jersey's statutorily mandated PIP and UM coverage. The judge found that the Executive policy was automatically reformed, in accordance with the deemer statute, to provide the minimum statutory UM and PIP benefits to plaintiffs, which benefits the court noted plaintiffs had already accepted. The court rejected plaintiffs' argument that they were also entitled to receive additional PIP and UM benefits under the Proformance policy and characterized plaintiffs' position as one that allowed plaintiffs to take advantage of our [deemer] statute and then say, but now that we've taken advantage of your statute, and we've received all of these benefits that we did not pay for, because no premium was ever paid for this.

But because the Legislature created an . . . automatic reformation[,] I should say of the contract, now we should be allowed to discard that reformation after we've obtained the benefits and utilized the language from California, because its advantageous to our position in order to avoid the step[-]down provision.

The judge denied plaintiffs' motion but granted defendant's cross-motion for summary judgment and dismissed the complaint against Proformance with prejudice. The present appeal followed.

On appeal plaintiffs contend the motion judge erred in finding that the step-down provision in the Proformance policy applies to them because they did not have similar coverage under the Executive policy. We reject this contention and affirm substantially for the reasons expressed by Judge ...


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