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Malmendier v. Insurance Corp. of Hannover

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 18, 2008

JOHN MALMENDIER, PLAINTIFF-RESPONDENT,
v.
INSURANCE CORPORATION OF HANNOVER, DEFENDANT-THIRD PARTY PLAINTIFF-APPELLANT,
v.
AAA MID-ATLANTIC INSURANCE COMPANY OF NEW JERSEY, THIRD-PARTY DEFENDANT-RESPONDENT.

On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8054-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued April 9, 2008

Before Judges Parker, R. B. Coleman and Lyons.

Plaintiff John Malmendier is a tow truck operator whose employer was insured by Insurance Corporation of Hannover (ICH). Plaintiff was injured when he was struck by a car that he was towing, which was insured by AAA Mid-Atlantic Insurance (AAA). AAA settled with plaintiff for near its liability policy limit. Plaintiff, whose injuries exceeded that amount, sought underinsured motorist (UIM) coverage from his employer's insurer, defendant ICH. ICH denied coverage and, in the alternative, sought contribution from AAA. ICH appeals from a January 24, 2007, order granting summary judgment to AAA and the subsequent March 2, 2007, order denying ICH's motion to reconsider that ruling. After consideration of the issues advanced on appeal, we affirm.

On October 30, 2003, Christine Nobile (Nobile) drove her 1998 Volvo to the Pathmark in Edgewater where her vehicle became disabled. She called a towing service, which dispatched plaintiff, a flatbed tow truck driver from Tumino's Towing. Upon arrival, Nobile instructed plaintiff to tow her vehicle to a local gas station. Once at the gas station, plaintiff began to unload Nobile's vehicle from the flatbed into a gas station parking spot. In the process, plaintiff entered the Nobile vehicle to engage its emergency parking brake. He then drove the tow truck forward. He exited the truck and walked to an area between the tow truck and Nobile's vehicle.

While plaintiff was stowing his towing equipment, Nobile entered her vehicle and inadvertently disengaged the emergency parking brake. Because the car was parked on a grade, the car rolled forward. Plaintiff's right leg was pinned between the vehicle and the flatbed tow truck, causing severe injury to his leg.

Plaintiff commenced a suit against Nobile. Her automobile insurance carrier, AAA, settled the bodily injury claim for $98,000, $2000 less than the AAA policy limit of $100,000. After sending ICH a "Longworth letter," to which ICH did not object, plaintiff gave a general release to Nobile and AAA. See Longworth v. Van Houten, 223 N.J. Super. 174 (App. Div. 1988).

Because his damages exceeded that settlement amount, plaintiff filed this suit against his employer's automobile insurance carrier, ICH, claiming UIM benefits. ICH denied an obligation to afford plaintiff UIM coverage and, in the alternative, filed a third-party complaint for contribution against AAA.

On November 30, 2006, following the exchange of discovery, AAA filed a motion for summary judgment seeking dismissal of the third-party complaint on the grounds that it did not owe contribution to ICH because AAA's UIM limits are not greater than its liability limits and because plaintiff was not "occupying" the Nobile vehicle, insured by AAA. ICH filed a cross-motion for summary judgment on January 9, 2007, on the grounds that it is entitled to contribution from AAA because plaintiff was "using" the Nobile vehicle, insured by AAA, and because the Nobile vehicle was underinsured relative to all of the policies "held" by plaintiff.

The trial court granted summary judgment to AAA and denied ICH's cross-motion. In its written opinion, the court found:

ICH cannot seek contribution from AAA for UIM benefits because the motor vehicle tortfeasor's coverage is identical to AAA's UIM benefits. The controlling language in N.J.S.A. 17:28-1.1(e) is clear in defining what an underinsured is. In this case, Ms. Nobile was covered up to $100,000 under the AAA policy and the UIM per person limit for the named insured (Nobile) was $100,000, with a step-down to $15,000 for strangers to the policy. Thus, even if [plaintiff] were considered an "insured" under the AAA policy, the AAA liability limits, $100,000, when credited against the AAA UIM limits, $100,000, amounts to a zero balance in UIM benefits. Consequently, Ms. Nobile's vehicle was not "underinsured" by statutory and insurance policy language and ICH is not entitled to any contribution from AAA.

On February 12, 2007, ICH filed a motion for reconsideration, which was denied by order dated March 2, 2007.

The matter then proceeded to a bench trial on plaintiff's claims against ICH. The matter was tried to conclusion, resulting in a "net judgment" in plaintiff's favor against ICH in the amount of $150,000, entered on May 3, 2007.*fn1

ICH now appeals from the orders granting AAA's summary judgment motion and denying its cross-motion. On appeal, ICH raised the following points for our consideration:

POINT I

THE MOTION COURT ERRED IN FAILING TO MAKE ANY FINDINGS AS TO THE CONTENTION THAT PLAINTIFF WAS "USING" THE TORTFEASOR'S VEHICLE AND, THEREFORE, WAS AN "INSURED" ENTITLED TO COVERAGE UNDER THE UIM ENDORSEMENT OF THE TORTFEASOR'S INSURANCE POLICY ISSUED BY AAA MID-ATLANTIC INSURANCE COMPANY OF NEW JERSEY.

POINT II

THE MOTION COURT ERRED BY FAILING TO DETERMINE THAT THE TORTFEASOR'S VEHICLE WAS UNDERINSURED RELATIVE TO ALL OF THE POLICIES OF INSURANCE, COMBINED, "HELD" BY PLAINTIFF.

POINT III

THE MOTION COURT SHOULD HAVE FOUND THAT THE ICH AND AAA INSURANCE POLICIES ARE CO-PRIMARY, SO THAT THE INSURERS WOULD SHARE IN ANY JUDGMENT OR SETTLEMENT DOLLAR-FOR-DOLLAR, ON A CONCURRENT BASIS.

ICH appeals the court's ruling on a summary judgment motion. In considering a summary judgment motion, the trial court must not "weigh the evidence and determine the truth of the matter"; it must only decide whether there is a genuine issue for trial. Brill v. Guardian Life Ins. Co., 142 N.J. 520, 540 (1995). Further, the trial judge must decide: whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party in consideration of the applicable evidentiary standard, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party. This assessment of the evidence is to be conducted in the same manner as that required under Rule 4:37-2(b).

Because the case was disposed of in a summary judgment proceeding, our statement of the facts is based on our consideration of the evidence in the light most favorable to the parties opposing summary judgment. [Id. at 523.]

On appeal, we use the same standards. We decide first whether there was a genuine issue of material fact. If there was not, we then decide whether the lower court's ruling on the law was correct. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div. 1998) (citing Antheunisse v. Tiffany & Co., 229 N.J. Super. 399, 402 (App. Div. 1988), certif. denied, 115 N.J. 59 (1989)). We "owe[] no deference to the trial court's interpretation of the law and the legal consequences that flow from established facts and, hence, [our] review of legal issues is de novo." Pressler, Current N.J. Court Rules, comment 3.1 on R. 2:10-2 (2007) (internal quotation omitted).

The trial court did not make conclusions of law regarding whether plaintiff was "occupying" or "using" the Nobile vehicle. Nor did the trial court find whether plaintiff was an "insured" under the AAA policy. Instead, it found that "even if [plaintiff] were considered an 'insured' under the AAA policy, the AAA liability limits, $100,000, when credited against the AAA UIM limits, $100,000, amounts to a zero balance in UIM benefits. Consequently, Nobile's vehicle was not 'underinsured' by statutory and insurance policy language." While the legal conclusions concerning certain facts may be at issue, the pertinent facts do not appear to be contested. We, therefore, "address solely questions of law, and thus are not bound to defer to the legal conclusions of the lower courts." Lewis v. Harris, 188 N.J. 415, 431-32 (2006).

We are required to enforce the clear language of the insurance policy as written, examining the probable intent of the parties. Conduit and Found. Corp. v. Hartford Cas. Ins. Co., 329 N.J. Super. 91, 99 (App. Div.), certif. denied, 165 N.J. 135 (2000). Furthermore, the language of an insurance policy, particularly UM/UIM insurance, is to be liberally construed to afford coverage to accident victims. Handler v. State Farm Mut. Auto. Ins. Co., 253 N.J. Super. 641, 646 (App. Div. 1992).

ICH argues that plaintiff was an insured under the AAA policy because plaintiff was "using" or "occupying" Nobile's vehicle. Furthermore, ICH asserts that plaintiff was entitled to UIM coverage under the AAA policy because N.J.S.A. 17:28-1.1(e) requires a comparison of the total amount of liability coverage available to the tortfeasor from all policies he or she has, to the total amount of all UIM coverage from all policies "held" by a claimant.

ICH claims that the trial court erred in failing to find that plaintiff was "using" Nobile's vehicle as referred to in the underinsured motorist statute and the AAA policy. ICH looks to N.J.S.A. 17:28-1.1(e) for support, which states:

For the purpose of this section, (1) "underinsured motorist coverage" means insurance for damages because of bodily injury and property damage resulting from an accident arising out of the ownership, maintenance, operation or use of an underinsured motor vehicle. . . .

[N.J.S.A. 17:28-1.1(e) (emphasis added).]

ICH contends that UIM coverage constitutes "insurance for damages because of bodily injury and property damage resulting from an accident arising out of the ownership, maintenance, operation or use of an underinsured motor vehicle," and that plaintiff was a permissive user of the Nobile vehicle. Therefore, ICH alleges, plaintiff was "using" the Nobile vehicle and is entitled to coverage under the statute.

ICH also maintains that because plaintiff was "using" Nobile's vehicle, he was an "insured" entitled to coverage under the UIM endorsement of the AAA insurance policy. ICH states that the AAA policy "defines 'insured' as 'Any person using "your covered auto."'" Accordingly, ICH proposes that, under the AAA policy, plaintiff must have been "using" the Nobile vehicle "within the statutory meaning of the word 'use.'" ICH argues at length, citing several cases, that plaintiff was, in fact, "using" the Nobile vehicle when he was injured and that the trial court's failure to make such a finding was erroneous. ICH makes a similar argument that plaintiff was "occupying" the Nobile vehicle.

ICH's second point is that the trial court "erred by failing to determine that the tortfeasor's vehicle was underinsured relative to all of the combined policies of insurance, 'held' by plaintiff." ICH again looks to the elements of the statutory definition of underinsured motorist.

A motor vehicle is underinsured when the sum of the limits of liability under all bodily injury and property damage liability bonds and insurance policies available to a person against whom recovery is sought for bodily injury or property damage is, at the time of the accident, less than the applicable limits for underinsured motorist coverage afforded under the motor vehicle insurance policy held by the person seeking that recovery. . . .

[N.J.S.A. 17:28-1.1(e) (emphasis added).]

ICH argues:

[Plaintiff] John Malmendier was an employee of Tumino's Towing, which in turn was insured by ICH. Thus, there is no question that he "held" that policy of insurance. See French v. N.J. School Bd. Ins. Group, 149 N.J. 478, 481 (1997) (holding that "when an automobile accident occurs in the course of employment, a policy 'held' by a regular employee of a business enterprise includes the policy of the enterprise that covers the employee in the course of employment.").

ICH asserts that plaintiff is an "insured" under the AAA policy and entitled to UIM coverage as he was "using" or "occupying" Nobile's vehicle. So, according to ICH, plaintiff also "held" the AAA policy. Therefore, according to ICH, plaintiff "held" the ICH policy, with UIM limits of $500,000, and the AAA policy, with UIM limits of $100,000. Comparing the sum of these two policies, $600,000, to the limits of Nobile's liability insurance, $100,000, ICH argues that the Nobile vehicle was underinsured under the AAA policy.

ICH contends that because plaintiff was underinsured, he can seek coverage from all policies under which he is insured. Accordingly, ICH contends that "it stands to reason that the determination whether a tortfeasor's vehicle is underinsured must be accomplished by comparison of the tortfeasor's limits to ALL of the UIM limits, combined, available to the UIM claimant." ICH urges us to compare "the total of all policy limits 'held' by the UIM claimant" to "the total of all of the tortfeasor's limits." Therefore, ICH alleges that plaintiff is underinsured under the AAA policy because AAA's policy limit of $100,000 does not exceed the total of all UIM benefits available to plaintiff, $500,000 under the ICH UIM policy and $100,000 under the AAA UIM policy.

ICH's third and final point urges us to find error in the trial court's failure to find that the ICH and AAA insurance policies are co-primary. ICH submits that the total of all applicable limits under both policies equals $600,000. Thus, it argues pursuant to N.J.S.A. 17:28-1.1(c), "each insurer's share of the loss is calculated as a percentage of the individual policy limit divided by the total applicable limits." Therefore, ICH argues, AAA should be responsible for one-sixth of the $150,000 judgment awarded to plaintiff against ICH.

We disagree with all of ICH's arguments. ICH ignores critical provisions of the AAA policy, such as the UIM endorsement and the policy limits provisions. It misinterprets the UIM statute and relevant case law. Lastly, ICH entirely fails to address the effect of its failure to respond to the Longworth letter sent by AAA.

We do not have a finding before us by the trial court whether plaintiff was "using" or "occupying" the Nobile vehicle. For the sake of our analysis, we assume, arguendo, that plaintiff met the requirements of "occupying" or "using" the Nobile vehicle under the definition of "use" in the UIM statute, N.J.S.A. 17:28-1.1(e), and "occupying" in the AAA policy.

Turning to the AAA insurance policy, ICH argues that the definition of "insured" in the AAA policy is found in the Part A - Liability Coverage section of the policy. In the UM/UIM endorsement,*fn2 however, which "changes the policy," "'insured' as used in this endorsement means: You or any 'family member'." Plaintiff was not "You," defined as the named insured or spouse, or a family member.

While plaintiff was not an "insured" as defined in the UM/UIM endorsement, he may still be entitled to coverage. The policy continues:

Note: Strangers to this policy, not the "named insured" or "family member" on this policy, who are injured while occupying a car covered by this policy get the Uninsured and Under-Insured Motorists limits they have chosen on the policy that covers them as "named insureds" or "family members" (or none if they have a basic policy). If the stranger is not covered by any policy, he/she may receive the statutory minimum for a Standard Policy which is 15/30/5 under this policy.

Because we assume, arguendo, that plaintiff was "occupying" the vehicle, he would be entitled to coverage under this provision of the policy up to either $500,000 if he is a "named insured" or "family member" under the ICH policy,*fn3 or $15,000 if he is not covered by any policy.

Even if plaintiff were entitled to UIM coverage under the AAA policy, however, the limit of liability provisions in the AAA policy sets the maximum recovery under the policy. Section B of the AAA UIM policy limits recovery as follows:

B. With respect to an accident with an "underinsured motor vehicle", the limit of liability shall be reduced by all sums:

1. Paid because of the "bodily injury" or "property damage" by or on behalf of persons or organizations who may be legally responsible. This includes all sums paid under Part A of this policy . . . .

On the Declarations Page of the AAA policy, the bodily injury limitation, regarding Part A, is listed as $100,000. The limitation provision in Section B, above, limits the maximum amount of recovery for all "bodily injury" arising out of an accident with an underinsured motor vehicle to $100,000 less sums paid under Part A of the policy, the direct bodily injury provisions of the policy. Therefore, the amount of coverage available for a UIM claim in this case was reduced by the amount recovered in the settlement for bodily injury: $100,000.*fn4 Thus, the $100,000 limit available for UIM claims is reduced by the $100,000 paid under Part A, which results in no moneys available for UIM benefits under the AAA policy.

Furthermore, Sections C and D of the Limits of Liability provision of the UIM endorsement militate against recovery by ICH. Section C states that:

C. No one will be entitled to receive duplicate payments for the same elements of loss under this coverage and:

1. Part A [Liability Coverage] or Part B of this policy; or

2. Any Personal Injury Protection Coverage provided by this policy.

As plaintiff recovered for bodily injury under Part A of the policy, he, or ICH in his place, cannot recover for the same bodily injury under the UIM coverage. Section D states:

D. We will not make a duplicate payment under this [UIM] coverage for any element of loss for which payment has been made by or on behalf of persons or organizations who may be legally responsible.

Similar to Section C, Section D bars recovery for bodily injury that has already been paid out by AAA.

Turning to ICH's next point, we recognize that a claimant may seek UIM coverage under other policies, not necessarily purchased by the claimant. Grant v. Amica Mut. Ins. Co., 153 N.J. 433, 436 (1998).

However, the claimant must first meet the statutory threshold test, which is a comparison of the "limits of all bodily injury liability insurance" held by the tortfeasor with the amount of UIM coverage under each policy. N.J.S.A. 17:28-1.1(e)(1).

N.J.S.A. 17:28-1.1(e)(1), states in applicable part:

A motor vehicle is underinsured when the sum of the limits of liability under all bodily injury and property damage liability bonds and insurance policies available to a person against whom recovery is sought for bodily injury or property damage is, at the time of the accident, less than the applicable limits for underinsured motorist coverage afforded under the motor vehicle insurance policy held by the person seeking that recovery.

[(Emphasis added).]

Here, all policies available to Nobile, "the person against whom recovery [was] sought," total $100,000, the limits of the AAA policy. Plaintiff, who sought the recovery, held $500,000 of UIM insurance through ICH. See CNA Ins. Co. v. Canning, 327 N.J. Super. 388, 392 (App. Div.) (holding that the threshold test was comparison of the policy "'actually purchased by or purchased for the benefit of the prospective UIM claimant'"), certif. denied, 163 N.J. 398 (2000). Because the limits of liability under the AAA policy are less than the UIM benefits available under the ICH policy, the Nobile vehicle is underinsured with respect to the ICH policy.

But ICH argues that the Nobile vehicle is also underinsured under the AAA policy by comparing its $100,000 limits to the combined limits of ICH and AAA, $600,000, as opposed to the AAA $100,000 liability limit standing alone. To compare the limit of the AAA policy to the sum of all the policies "held" by plaintiff, as urged by ICH, would be contrary to the statute because the language of the statute clearly calls for a comparison of the tortfeasor's policies with "the motor vehicle policy held by the person seeking that recovery." N.J.S.A. 17:28-1.1(e). The comparison is between all policies available by the tortfeasor with "the motor vehicle policy," in the singular, "held" by the claimant.

The statute continues:

A motor vehicle shall not be considered an underinsured motor vehicle under this section unless the limits of all bodily injury liability insurance or bonds applicable at the time of the accident have been exhausted by payment of settlements or judgments.

[N.J.S.A. 17:28-1.1(e)(1).]

This portion of the statute requires the exhaustion of bodily injury liability insurance coverage by plaintiff before any recovery may be made by plaintiff for UIM benefits. This section of the statute confirms that UIM is "gap-filler" insurance, only to be used subsequent to exhausting all bodily injury insurance available. See also Riccio v. Prudential Prop. & Cas. Ins. Co., 108 N.J. 493, 499 (1987). Here, ICH provided the "gap-filler" UIM coverage after AAA provided the direct bodily injury liability insurance up to its policy's limits. Moreover, to find UIM benefits available under a policy where its limits have been exhausted would result in a double recovery under the policy, violating the aggregate limits of the policy.

We note that the trial court pointed out that plaintiff's settlement with AAA "was on notice to ICH, which did not object." This notification complied with the Longworth requirement:

[U]ntil a definitive response comes from the Legislature, the Commissioner or the industry, that, as a matter of future conduct, an insured receiving an acceptable settlement offer from the tortfeasor should notify his UIM carrier. The carrier may then promptly offer its insured that sum in exchange for assignment to it by the insured of the claim against the tortfeasor. While promptness is to be ultimately determined by the circumstances, 30 days should be regarded as the presumptive time period if the insured notices his carrier prior to assignment of a trial date.

[Longworth, supra, 223 N.J. Super. at 194-95.]

The Supreme Court in Rutgers Cas. Ins. Co., supra, expressly approved the procedure set forth in Longworth, finding that it "reflects a fair balance between the competing interests of the parties involved[,]" and has been followed "almost universally by the bar and insurance industry." 139 N.J. at 172-74 (quoting Craig & Pomeroy, New Jersey Insurance Law, § 28:3 (2005)). There is no indication in the record that ICH responded at all, much less within the thirty days required by Longworth.

The subsequent release, signed by plaintiff on August 31, 2005, released both Nobile and AAA from "[a]ny and all claims arising from" the October 30, 2003, accident. ICH's acquiescence to the Longworth letter regarding the settlement release between plaintiff and AAA had a preclusive effect on their pursuit of further claims under the AAA policy. See Rutgers Cas. Ins. Co., supra, 139 N.J. at 167.

While we have carefully considered ICH's third argument, we find that the ICH and AAA insurance policies are not co-primary. Because plaintiff was provided direct coverage by the AAA policy to its policy limits and UIM "gap-filler" coverage by the ICH policy, we find that plaintiff is not entitled to any additional UIM coverage under the AAA policy. See Riccio, supra, 108 N.J. at 499. We deem this third argument, therefore, to be without sufficient merit to warrant further discussion. See R. 2:11-3(e)(1)(E).

Affirmed.


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