December 10, 2008
RICHARD BREWSTER, PLAINTIFF-APPELLANT,
AIG CENTENNIAL INSURANCE COMPANY FORMERLY KNOWN AS GE AUTO INSURANCE, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-3744-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 17, 2008
Before Judges Lisa and Alvarez.
While operating a motorcycle, plaintiff was involved in an accident with an automobile. He settled his liability claim with the operator of the automobile for her $10,000 policy limits. At the time of the accident, plaintiff maintained an automobile insurance policy with defendant, AIG Centennial Insurance Company (AIG). The policy listed a particular automobile as plaintiff's only vehicle. It provided coverage limits for liability and underinsured motorist (UIM) coverage of $100,000 per person and $300,000 per accident. In addition to setting forth the various coverages and applicable limits, the declarations page contained a section entitled, "EXCEPTIONS AND ENDORSEMENTS FORMING A PART OF THIS POLICY," which included DP1429 and DP129. DP129 is the "NEW JERSEY AMENDATORY ENDORSEMENT" pertaining to UIM (as well as uninsured motorist (UM)) coverage. The endorsement was attached to and therefore part of the policy. It stated that plaintiff was "protected against uninsured motorists and underinsured motorists while You are occupying an auto or while You are a pedestrian." DP1429, which constitutes the basic policy of insurance, contains a "GLOSSARY OF IMPORTANT TERMS," which defines "Auto" as "a four-wheeled motor vehicle designed for use mainly on public roads."
Plaintiff sought UIM coverage from AIG for up to $90,000, representing the difference between his recovery from the tortfeasor and his UIM coverage limits. AIG disclaimed coverage based on the UIM endorsement provision limiting coverage to injuries sustained while occupying a four-wheeled vehicle or as a pedestrian. Plaintiff brought this action. The trial judge agreed with AIG and granted summary judgment in its favor, dismissing the complaint. The judge also denied plaintiff's reconsideration motion. This appeal followed. We agree with the trial judge and affirm.
No material facts are in dispute, and the matter was ripe for summary judgment. Our review of a trial court's interpretation of the law and the consequences that flow from established facts are not entitled to any special deference, and our review is de novo. Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995).
The rules of construction for insurance contracts are well settled. As with any other contract, the words of an insurance policy should be given their plain, ordinary meaning, and in the absence of ambiguity, courts should not write for the insured a better policy of insurance than the one purchased. Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001). Recognizing, however, the substantial imbalance between insurance companies and insureds, and that insurance policies are contracts of adhesion, when there is an ambiguity, courts interpret the policy to comport with the reasonable expectations of the insured, even if a close reading of the written text reveals a contrary meaning. Id. at 594-95.
In the trial court and again before us, plaintiff relies on our holding in Universal Underwriters Ins. Co. v. N.J. Mfrs. Ins. Co., 299 N.J. Super. 307 (App. Div. 1997), insisting that it was based upon the same facts as this case, and its holding is dispositive. The trial court did not agree, and neither do we.
In Universal Underwriters, an automobile policy issued by New Jersey Manufacturers Insurance Company (NJM) provided for $500,000 in UIM coverage. Universal Underwriters, supra, 299 N.J. Super. at 312. The substantive provisions of the UIM coverage extended to damages suffered by the insured caused by an underinsured motor vehicle because of bodily injury sustained in an accident. Id. at 313. The UIM coverage did not contain a limitation, such as that in the AIG policy in this case, limiting coverage to injuries suffered while occupying a four-wheeled vehicle or as a pedestrian. The plaintiff in Universal Underwriters was injured while operating a motorcycle. Id. at 311. NJM argued that because the liability portion of its policy excluded coverage for an accident arising from the use of a motorcycle, the UIM provision should similarly exclude such coverage. Id. at 316. NJM argued that, pursuant to N.J.S.A. 17:28-1.1b, which provides that UIM coverage cannot exceed the limits of liability coverage in a policy, the exclusion of motorcycles in the liability section resulted in a zero limit of liability coverage, and, therefore, recovery under its UIM coverage must be statutorily capped at zero dollars. Ibid.
We rejected the argument, noting that "the cited statute merely stipulates that an insured cannot purchase more UIM coverage than the liability coverage that has been purchased. It does not affect the applicability of the UIM coverage." Id. at 318. We found that NJM's suggested technical application, not contained in the explicit terms of the policy and, at best from NJM's perspective, constituting an ambiguity, would not be consistent with the reasonable expectations of the insured. Ibid. "To defeat this reasonable expectation of coverage, a motorcycle exclusion from NJM's UIM coverage, if permissible, would have to be clear and unambiguous." Ibid.
Relying on Universal Underwriters, plaintiff argues that because the limitation on the UIM coverage is not set forth in the declarations page, it is unenforceable. However, although we held in Universal Underwriters that "boilerplate exclusions could not be used to defeat coverage implied from the expressed terms of the declaration page," we further held that "[i]t is the reasonable expectations created by the declaration page that are controlling and, therefore, cannot be defeated 'unless the declaration page itself so warns the insured.'" Id. at 319 (quoting Lehrhoff v. Aetna Cas. & Sur. Co., 271 N.J. Super. 340, 347 (App. Div. 1994)).
The problem in Universal Underwriters was that to accept NJM's argument, it would be necessary to engraft the limitations on liability coverage onto the UIM provisions. Id. at 320. Doing so would be beyond any objectively reasonable expectation of the insured. In our analysis, we noted that while liability coverage is vehicle oriented, UIM coverage is person oriented, following the insured, not the vehicle. Id. at 321-22. That discussion served to explain why, in the absence of an express provision to the contrary, it would be beyond the reasonable expectations of the insured that a limitation in the liability coverage would be carried over to apply to the UIM coverage. Plaintiff argues that the discussion stands for the proposition that it is per se impermissible to limit UIM coverage in the manner provided in the AIG policy. We do not agree.
As stated in both the majority and concurring opinions in Universal Underwriters, a clear and unambiguous limitation in the UIM provision would not result in an ambiguity, and, as a result, there would be no need to invoke the reasonable expectations doctrine and to interpret the insurance contract in any other way than as provided by its express terms. Id. at 318, 319; Id. at 324 (Landau, J. concurring). Thus, Universal Underwriters did not hold that an automobile insurance policy cannot limit the terms of its UIM coverage. It merely held that to do so, it must do it in clear and unambiguous terms.
The declarations page in the policy before us clearly alerted the policyholder to the endorsements making up his policy, captioned in large print and all capital letters as "EXCEPTIONS AND ENDORSEMENTS FORMING A PART OF THIS POLICY." All endorsement numbers were listed, including the two we have previously described, which contain the limitations on UIM coverage. Those limitations are written in clear and unambiguous language, which any ordinary reasonable insured would understand. There is no contradiction, inconsistency or ambiguity between the declarations page and the body of the policy. Zacarias, supra, 168 N.J. at 602-03. There is no requirement that an insurer set forth all exclusions and limitations on the declaration page. Id. at 603.
Unlike UM coverage, which is mandatory, UIM coverage is optional, and, as a result, courts have frequently struck UM restrictions that exceeded statutory requirements, but have been more indulgent in upholding UIM restrictions, as long as they are reasonable, clearly stated, and not violative of public policy. Campbell v. Lion Ins. Co., 311 N.J. Super. 498, 507-088 (App. Div. 1998). In that case, we upheld an exclusion that precluded UIM coverage when the covered auto was being used to carry persons or property for a fee. Id. at 501. See also, Royal Ins. Co. v. Rutgers Cas. Ins. Co., 271 N.J. Super. 409, 419 (App. Div. 1994) (commenting that with UIM coverage it is "fundamental that in the absence of a statutory prohibition to the contrary, an insurance company has a right to impose whatever conditions it desires prior to assuming it is obligations"). In our view, the motorcycle exclusion in AIG's policy was, in addition to being clearly stated, reasonable and not violative of public policy. We therefore have no occasion to strike it with respect to this UIM claim.
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