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State Farm Indemnity Co. v. Butler


October 10, 2008


On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-872-07.

Per curiam.


Argued September 29, 2008

Before Judges Skillman and Graves.

On June 29, 2000, defendant William Butler was seriously injured in a motorcycle accident. Butler lost control of his motorcycle as it passed over a grate on one of the travel lanes of Quakerbridge Road in Lawrence Township and was thrown onto the pavement. While on the pavement, Butler was run over by another motorcyclist named James Everett.

Butler subsequently brought a personal injury action against Everett and Mercer County, which owns and maintains Quakerbridge Road. Butler settled his claim against Everett for $15,000, which was the coverage limit of Everett's policy, and also settled his claim against Mercer County for $400,000, for a total recovery of $415,000.

At the time of his accident, Butler had a motor vehicle insurance policy with plaintiff State Farm, which included $100,000 of underinsured motorist (UIM) coverage for a single occurrence. Following the settlement of his claims against Everett and Mercer County, Butler submitted a UIM claim to State Farm for $85,000, representing the difference between the $15,000 limit of Everett's policy and Butler's $100,000 of UIM coverage. State Farm denied the claim on the ground that Butler already had obtained a total recovery of $415,000 for his injuries suffered in the accident, which exceeded his $100,000 UIM coverage, and subsequently brought this action for a declaratory judgment that it had no liability for payment to Butler of UIM benefits.

State Farm brought the case before the trial court by a motion for summary judgment. The court granted the motion for the reasons set forth in an oral opinion. Butler filed a motion for reconsideration, which the court denied.

On appeal, Butler argues that under both the statute governing UIM coverage and the terms of the policy issued by State Farm, he is entitled to recover from State Farm the difference between the $15,000 limit of Everett's policy and the $100,000 of UIM coverage provided to him under the State Farm policy.

The applicable part of the statute governing UIM coverage states:

The limits of [UIM] coverage available to an injured person shall be reduced by the amount he has recovered under all bodily injury liability insurance or bonds[.] [N.J.S.A. 17:28-1.1(e).]

In Bauter v. Hanover Insurance Company, 247 N.J. Super. 94 (App. Div. 1991), certif. denied, 126 N.J. 335 (1991), we concluded that this provision requires the set-off against the UIM limits of all prior recoveries by the injured party, including recoveries from non-automobile insurance policies. In reaching this conclusion, we stated:

The purpose of New Jersey's statute is to protect the insured up to the UIM limits purchased and not to make an injured person whole again.....

Because plaintiff in this case has recovered more than his UIM limits, permitting him to recover UIM benefits from Hanover would be contrary to the language of N.J.S.A. 17:28-1.1(e). Rather, requiring a set-off of all available non-automobile liability insurance proceeds... would further the legislative intent behind N.J.S.A. 17:28-1.1(e) of providing UIM coverage merely as a gap filler and not to compensate the injured plaintiff for the full value of his injuries. [247 N.J. Super. at 96, 99.]

In Vassiliu v. Daimler Chrysler Corp. 356 N.J. Super. 447, 457 (App. Div. 2002), we reaffirmed the holding of Bauter, and the Supreme Court affirmed this part of our decision on the basis of our opinion, 178 N.J. 286, 296 (2004); see also Selective Ins. Co. of Am. v. Thomas, 179 N.J. 616, 620 (2004) ("The principle of UIM coverage is not to make the injured party whole, but to put that person in as good a position as if the tortfeasor possessed an amount of liability insurance equal to the UIM coverage of an'insured' under the policy in question.") (quoting Vassiliu, supra, 356 N.J. Super. at 456). Thus, our holding in Bauter is now Supreme Court precedent that is binding upon us.

This appeal is directly controlled by Bauter and Vassiliu. Butler's aggregate recoverage of $415,000 from Everett and Mercer County far exceeded the $100,000 UIM coverage provided under his policy with State Farm. Therefore, the trial court correctly concluded that, under the part of N.J.S.A. 17:28-1.1 governing the determination of UIM coverage, Butler is not entitled to any UIM benefits in connection with his June 29, 2000 accident.

We also reject Butler's alternative argument that the State Farm policy provided him with broader UIM coverage than is mandated by N.J.S.A. 17:28-1.1 and that the policy can be read to require that the $400,000 recovered from Mercer County should be disregarded in determining his eligibility for UIM benefits. The pertinent section of the policy states:

The most we pay as the result of an accident involving an underinsured motor vehicle will be the lesser of:

a. the difference between the applicable limit of liability of this coverage and the amount paid to the insured in damages by or for any person or organization who may be legally liable for the bodily injury or property damage[.]

(Emphasis added.)

We perceive no ambiguity in this section. It requires the amount paid to the insured by "any" person or organization, including a public entity such as Mercer County, to be deducted from the insured's UIM coverage in determining his or her eligibility for benefits. Moreover, there is nothing in this language that could reasonably be read to restrict the required deduction to amounts recovered from vehicular tortfeasors. See Bauter, supra, 247 N.J. Super. at 101-02.



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