September 30, 2008
ROSARIO AGUIRRE AND THOMAS AGUIRRE, HER HUSBAND, ZENAIDA GONZAGA AND FERNANDO GONZAGA, HER HUSBAND, AND ROSALINA LIM, INDIVIDUALLY AND AS ADMINISTRATRIX AND ADMINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF ALBERTO D. LIM, PLAINTIFFS-APPELLANTS,
IFA INSURANCE COMPANY, AIG CENTENNIAL INSURANCE COMPANY, F/K/A GE PROPERTY AND CASUALTY INSURANCE COMPANY, AND LIBERTY MUTUAL INSURANCE COMPANY, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Middlesex County, No. L-3546-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 9, 2008
Before Judges Wefing, Yannotti and LeWinn.
Rosario Aguirre and her husband Thomas, Zenaida Gonzaga and her husband Fernando, and Rosalina Lim ("plaintiffs") appeal from a trial court order granting summary judgment to defendants IFA Insurance Company, AIG Centennial Insurance Company (formerly known as GE Property and Casualty Insurance Company), and Liberty Mutual Insurance Company and dismissing plaintiffs' complaint. After reviewing the record in light of the contentions advanced on appeal, we affirm.
On July 15, 2003, Rosario Aguirre and Zenaida Gonzaga, together with Rosalina Lim and her husband Alberto, were passengers in a motor vehicle which was involved in a one-car accident in the Philippines. The three women were seriously injured in the accident and Alberto Lim was killed. Plaintiffs settled their claims with the driver of the vehicle, who had an insurance policy with liability coverage of 50,000 Philippine pesos. We are informed that sum is the equivalent of less than $1,000 in United States currency. Plaintiffs then sought to recover underinsured motorist ("UIM") benefits under their own respective policies. The Aguirres held an automobile insurance policy with defendant IFA that provided UIM coverage of $100,000 per person and $300,000 per accident. The Gonzagas were insured by AIG Centennial's predecessor, GE Property and Casualty Insurance Company; their policy provided UIM coverage in the amounts of $15,000 per person and $30,000 per accident. The Lims were insured by defendant Libery Mutual; their policy provided UIM coverage, with a limit of $100,000 per person and $300,000 per accident. Each of the insurers denied coverage on the basis that the respective policies did not provide UIM coverage for an accident which occurred in the Philippines. This litigation resulted. The trial court held in favor of the insurers, and this appeal followed.
Each of the respective policies contained a clause setting forth the geographic scope of the coverage it provided. Part F of the Aguirres' IFA policy set forth the policy's general provisions. It included the following language:
The policy territory is:
1. The United States of America, its territories or possessions;
2. Puerto Rico; or
The Gonzagas' policy stated, under the heading "When and Where Your Coverages Apply," "This policy applies only to accidents, occurrences and losses that happen during the policy period within the United States and Canada." Finally, the Lims' policy with Liberty Mutual defined the policy period and territory in Part F-General Provisions.
Policy Period and Territory
A. This policy applies only to accidents and losses which occur:
1. During the policy period as shown in the Declarations; and
2. Within the policy territory.
B. The policy territory is:
1. The United States of America, its Territories or possessions;
2. Puerto Rico; or
Plaintiffs present several arguments in support of their position that the trial court incorrectly granted summary judgment to the insurers: they contend that these territorial restrictions defeat their reasonable expectations of coverage; that they are ambiguous and should be construed in their favor; that the restrictions violate the remedial purpose underlying UIM coverage and are against public policy and, finally, that the restrictions are not authorized by statute and thus are void. For the reasons that follow, we reject these arguments.
Plaintiffs repeat throughout their brief, and contended at oral argument, that this geographical limitation on their UIM coverage defeats their reasonable expectations. The doctrine of reasonable expectations is firmly rooted in New Jersey's jurisprudence. Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001) (stating that "the doctrine of reasonable expectations  has long been a part of our law").
When members of the public purchase policies of insurance they are entitled to the broad measure of protection necessary to fulfill their reasonable expectations. They should not be subjected to technical encumbrances or to hidden pitfalls and their polices should be construed liberally in their favor to the end that coverage is afforded "to the full extent that any fair interpretation will allow." [Kievit v. Loyal Protect. Life Ins. Co., 34 N.J. 475, 482 (1961).]
The Supreme Court has only recently restated its adherence to the doctrine of reasonable expectations. Villa v. Short, 195 N.J. 15, 23 (2008) (stating "[I]f the policy language is ambiguous, we construe the language to'comport with the reasonable expectations of the insured.'" (quoting Zacarias, supra, 168 N.J. at 595)).
In considering the doctrine of reasonable expectations, however, a reviewing court looks to those expectations which are objectively reasonable. Progressive Cas. Ins. v. Hurley, 166 N.J. 260, 274 (2001) (noting "Courts will enforce only the restrictions and the terms in an insurance contract that are consistent with the objectively reasonable expectations of the average insured."); Clients' Sec. Fund v. Security Title, 134 N.J. 358, 372 (1993) (stating "In determining what a policyholder's reasonable expectations are, our courts have applied an objective standard of reasonableness." (citations omitted)).
We have reviewed each of these policies in detail. In our judgment, nothing within the policies could trigger an objectively reasonable expectation that the policyholder had obtained world-wide insurance. Plaintiffs stress that the declarations page does not contain a geographical limitation. Such an omission cannot, in our judgment, be used to create a reasonable expectation of universal coverage. The purpose of the declarations page is to provide the policyholder with a summary statement of the types and monetary limit of coverage afforded under the policy, not to restate all of the policy's provisions.
The Supreme Court in Zacarias rejected the argument that the policyholder had an objectively reasonable expectation of coverage following an accident because the policy's declarations page did not refer to an intrafamily exclusion set forth within the body of the policy. Zacarias, supra, 168 N.J. at 602-03. In our judgment, Zacarias controls; the declarations sheet of these policies did not have to restate the geographic scope of coverage. The trial court correctly rejected so much of plaintiffs' argument as rested on the doctrine of reasonable expectations.
Plaintiffs' next argument is that they are entitled to UIM coverage under these policies because the policies did not unambiguously exclude world-wide UIM coverage. "Any ambiguity found in the policy should be construed against the insurer...." Universal Underwriters Ins. Co. v. N.J. Mfrs. Ins. Co., 299 N.J. Super. 307, 312 (App. Div.), certif. denied, 151 N.J. 73 (1997). Thus, "[i]f the controlling language of an insurance policy supports two interpretations, one favorable to the insurer and the other favorable to the insured, courts are obligated to adopt the interpretation supporting coverage." Ibid. (quoting Watson v. Agway Ins. Co., 291 N.J. Super. 417, 423 (App. Div.), certif. denied, 146 N.J. 500 (1996)).
Plaintiffs cite Universal Underwriters to support their argument that an ambiguity lurks within their policies, entitling them to UIM coverage. We consider Universal Underwriters to be distinguishable.
In that case, David Marshall had two policies of insurance: a motorcycle policy issued by Universal and an automobile policy issued by New Jersey Manufacturers ("NJM"). Id. at 311. Both policies provided UIM coverage, the NJM policy having a UIM limit of $500,000. Ibid. While riding his motorcycle, Marshall was seriously injured in a collision with an automobile on which there was a $15,000 liability policy. Ibid. Marshall sought UIM coverage under both of these policies. NJM's policy excluded liability coverage for accidents involving "'ownership, maintenance or use of: [a]ny motorized vehicle having fewer than four wheels.'" Id. at 320. NJM contended Marshall was not entitled to UIM coverage because of this exclusion; we rejected that argument, concluding that "[t]he determining factor under the NJM policy is whether Marshall, as the insured, was undersinsured in relation to [the tortfeasor's] vehicle." Id. at 322.
Here, however, we are not dealing with an exclusionary clause, taking away in one part of the policy coverage afforded in another. Rather, we are dealing with the fundamental scope of the policy itself. The language used in each of these policies could not have been clearer: they provided no coverage beyond the territorial borders of the United States, Canada, and, in the case of IFA, Puerto Rico.
Nor are we persuaded by the plaintiffs' reference to our decision in Hermann v. Rutgers Cas. Ins. Co., 221 N.J. Super. 162 (App. Div. 1987). In that case, we held that an insured was entitled to PIP coverage under her policy following an automobile accident which occurred in Hungary. Id. at 168. Plaintiffs assert that the geographical limitations contained within these policies are misleading because under Hermann, they would be entitled to recover PIP benefits under their policies.
This argument misapplies the principle of construing an ambiguity in favor of the policyholder. In effect, plaintiffs assert that a sophisticated policyholder, aware of a technicality of PIP law, could be confused by this language while an ordinary policyholder would not.
Plaintiffs also argue that we should void the geographical restrictions within their policies for violating the remedial purposes of UIM coverage and public policy. We are not persuaded by plaintiffs' citation of Corcione v. Keystone Ins. Co., 297 N.J. Super. 571 (Law Div. 1996). The plaintiff Corcione was the executrix of the estate of Georgette Fish, who was struck and killed by an automobile upon which there was a liability policy of $15,000. At the time of her death, Fish held an auto policy with defendant Keystone that had UIM coverage of $250,000. The trial court permitted the executrix of Ms. Fish's estate to pursue a wrongful death action under the UIM provisions of the policy, stressing the remedial nature of UIM coverage. Id. at 578. In our judgment, the case provides no support for plaintiffs' argument.
Plaintiffs' final argument is that these geographical restrictions are void because they are not authorized by statute. Again, we disagree.
UM and UIM coverage is governed in New Jersey by statute, N.J.S.A. 17:28-1.1. A standard automobile liability policy issued in New Jersey must include UM coverage for bodily injury with minimum limits of $15,000 per person and $30,000 per accident. N.J.S.A. 17:28-1.1(a). The UM statute specifically refers to an accident "arising out of the ownership, maintenance, operation or use of such uninsured or hit and run motor vehicle anywhere within the United States or Canada...." N.J.S.A. 17:28-1.1(a)(2).
N.J.S.A. 17:28-1.1(b) authorizes insurers issuing automobile liability policies in New Jersey to offer UIM coverage up to $250,000 for each person and $500,000 for each accident. This section of the statute omits the reference to an accident occurring within the United States or Canada. Plaintiffs and the amicus Association of Trial Lawyers-New Jersey ("ATLA-NJ") contend that as a result of this omission the insurers must offer worldwide UIM coverage. While we agree the reference to accidents within the United States and Canada in one section of the statute and its omission in another section creates an ambiguity, we do not agree that such an ambiguity results in a declaration of coverage.
To resolve that statutory ambiguity, we are "guided by familiar canons of construction":
"If the plain language of a statute creates uncertainties or ambiguities, a reviewing court must examine the legislative intent underlying the statute and'construe the statute in a way that will best effectuate that intent.'" In undertaking that task, courts may ascertain the intent of the drafters by looking to extrinsic sources such as the statute's underlying purpose and history. [Musikoff v. Jay Parrino's The Mint, L.L.C., 172 N.J. 133, 140 (2002) (citations omitted).]
We consider the history and purposes of N.J.S.A. 17:28-1.1 to be instructive. We set forth that history in Transport of New Jersey v. Watler, 161 N.J. Super. 453 (App. Div. 1978), modified, 79 N.J. 400 (1979). We noted that when originally enacted in 1968, the statute merely required insurers to offer UM coverage. Id. at 459. Four years later, when New Jersey adopted no-fault automobile insurance, the statute was amended to make UM insurance compulsory. Ibid. One of the purposes behind the UM statute was to prevent a drain on the Unsatisfied Claim and Judgment Fund by allowing an insured to recover from his or her own insurer, rather than the Fund. Ibid.
Insurers, on the other hand, were not even required to offer UIM coverage until 1983, more than ten years after UM coverage was made compulsory. UIM coverage, moreover, "does not implicate the public financial concerns represented by assault on the resources of the Unsatisfied Claim and Judgment Fund." Downey v. City of Elizabeth, 273 N.J. Super. 335, 338 (App. Div. 1994). Rather, it is grounded in considerations of fundamental fairness and is reflective of the inadequacy of the compulsory limits to protect innocent victims of highway mayhem who sustain serious injury. There is surely an essential justice in affording motorists the opportunity to purchase for themselves the same amount of protection they purchase for others. [Id. at 338-39.]
Thus different policies underlie UIM coverage than underlie UM coverage. Only UM coverage has a mandatory floor. Taylor v. Nat'l Union Fire Ins. Co., 289 N.J. Super. 593, 601 (App. Div.), certif. denied, 145 N.J. 376 (1996). We are unable to conclude that the Legislature, by omitting a geographic reference in N.J.S.A. 17:28-1.1(b), intended to mandate universal UIM coverage.
Hermann does not indicate a contrary legislative intent. The plaintiff in that case was injured, together with her daughter, in an automobile accident in Hungary. Hermann, supra, 221 N.J. Super. at 164. They had a New Jersey automobile liability policy, and all such policies must include PIP coverage; accordingly, they sought PIP benefits under their New Jersey auto policy. The insurer declined, however, because their policy restricted PIP coverage to accidents occurring in the United States or Canada. Ibid. We found for the plaintiffs, noting that the PIP statute, N.J.S.A. 39:6A-7, did not contain any geographic restrictions. In the course of our opinion we noted one reason for distinguishing between the geographic reference in N.J.S.A. 17:28-1.1(a) for UM coverage and the omission of such a reference in N.J.S.A. 39:6A-7: "[D]eterminations concerning UM coverage will implicate applicable liability principles of a foreign country, problems of investigation access and the like that are not required for a determination of PIP benefits." Id. at 168.
The question before us, however, is the reverse of the question before the Hermann court in that UIM coverage, just like UM coverage, implicates the applicable liability principles of a foreign country. It is reasonable therefore to permit geographic limitations on UIM coverage even if such restrictions would be impermissible for PIP coverage.
Finally, amicus ATLA-NJ urges that we should, in any event, restrict our holding to the facts and claims presented here. We consider such an explicit statement unnecessary; any court only deals with the precise question before it.
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