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Rider Insurance Co. v. Farm Family Mutual Insurance Co.


February 3, 2009


On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, L-654-08.

Per curiam.


Argued January 6, 2009

Before Judges Winkelstein and Chambers.

In this appeal, we must decide whether a carrier providing underinsured motorist coverage (UIM) under a policy covering one vehicle must contribute UIM coverage for an accident that occurred when its insured was driving a different vehicle he owned that had UIM coverage with another carrier. Based on the policy language, we answer this question in the affirmative and reverse the contrary decision by the trial court.

Plaintiff Rider Insurance Company (Rider) provided automobile insurance to Frank W. DiMeo for a motorcycle that he owned. The policy included UIM coverage with limits of $100,000 per person and $300,000 per incident. DiMeo also owned a Porsche, which was insured by defendant Farm Family Mutual Insurance Company (Farm Family). That policy included UIM coverage of $300,000 per accident.

On August 20, 2003, DiMeo was involved in an accident while riding his motorcycle. His personal injury action against the tortfeasor went to arbitration through the court arbitration program under Rule 4:21A-1(a), and he received an arbitration award of $125,000. DiMeo subsequently settled with the tortfeasor for the latter's policy limit of $25,000. DiMeo then asserted a UIM claim against Rider, the insurer of the motorcycle involved in the accident.

Rider subsequently sought pro rata contribution from Farm Family, since the Farm Family policy on DiMeo's Porsche also provided UIM coverage. Farm Family declined coverage. Rider settled the UIM claim with DiMeo for $40,000, and, as assignee of DiMeo's claims against Farm Family, commenced this law suit seeking to compel Farm Family to contribute its pro rata share to the settlement.

On motions for summary judgment, the trial judge concluded that DiMeo was not entitled to UIM benefits under the Farm Family policy for injuries that he suffered while riding the motorcycle. As a result, he held that Farm Family provided no coverage for the accident. Rider appeals the order of April 18, 2008, granting summary judgment to Farm Family and denying summary judgment to Rider.

Rider contends that both its policy and that of Farm Family provide DiMeo with UIM coverage for the accident. It maintains that the Farm Family policy has no exclusions relieving it of this obligation and that, as a result, Farm Family is a co-primary insurer and should be required to contribute its proportionate share of the UIM benefits paid to DiMeo.

UIM insurance provides an insured with coverage for personal injuries sustained in an accident involving an underinsured vehicle. N.J.S.A. 17:28-1.1(e)(1) (defining UIM coverage as "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"). Coverage for UIM benefits in an automobile insurance policy is not mandatory under New Jersey law.

N.J.S.A. 17:28-1.1(b); Downey v. City of Elizabeth, 273 N.J. Super. 335, 338-39 (App. Div. 1994). The statute contemplates that an insured involved in an accident may have UIM coverage from more than one policy. See N.J.S.A. 17:28-1.1(c) (prohibiting the stacking of coverage limits in such situations).

Farm Family contends that its policy provided no UIM coverage to this accident because its policy did not cover the motorcycle. However, the language of the policy does not support that interpretation.

When construing the terms of an insurance policy, the goal is to ascertain from the language in the policy the intent of the parties. 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). If the terms of the policy are clear and unambiguous, it will be enforced as written. Ibid. Since an insurance policy is a contract of adhesion, any ambiguity will be interpreted in favor of the insured. Christafano v. N.J. Mfrs. Ins. Co., 361 N.J. Super. 228, 234 (App. Div. 2003). Further, the policy will be "construed liberally in the insured's favor to the end that coverage is afforded to the fullest extent that any fair interpretation will allow." Ibid. However, when construing an exclusion, a stricter interpretation limiting protection is required. Butler v. Bonner & Barnewall, Inc., 56 N.J. 567, 576 (1970). When no ambiguity is present, courts are cautioned that they "should not write for the insured a better policy of insurance than the one purchased." Bd. of Educ. of Florham Park v. Utica Mut. Ins. Co., 172 N.J. 300, 307 (2002) (quoting Gibson v. Callaghan, 158 N.J. 662, 670 (1999)).

To resolve this dispute, we must analyze the provisions in the uninsured motorist endorsement to the Farm Family policy. Undisputedly, DiMeo was an "insured" within the meaning of this provision. The endorsement defines "insured" in this way:

"Insured" as used in this endorsement means:

1. You or any "family member".

2. Any other person "occupying" "your covered auto".

3. Any person for damages that person is entitled to recover because of "bodily injury" to which this coverage applies sustained by a person described in 1. or 2. above.

Notably, the definition does not require that in order to be an "insured" one must have had an accident involving the insured vehicle.

DiMeo's claim for UIM benefits falls within the general statement of coverage in the UIM endorsement. That language in the Farm Family policy provides:

We will pay compensatory damages which an "insured" is legally entitled to recover from the owner or operator of an "uninsured motor vehicle" or "underinsured motor vehicle" because of:

1. "Bodily injury" sustained by an "insured" and caused by an accident.

DiMeo was entitled to recover damages for bodily injuries that he sustained in an accident involving an underinsured vehicle. As a result, he falls within the scope of the coverage of this provision. This language also does not require that the accident involve the vehicle insured by the Farm Family policy.

Farm Family contends that an exclusion in the endorsement defeats this coverage. That exclusion provides:


A. We do not provide coverage under this endorsement for "property damage" or "bodily injury" sustained by any "insured":

1. Who is an owner of a motor vehicle:

b. Required to be insured in accordance with New Jersey law or regulation, but not insured for this coverage or any similar coverage.

However, this Exclusion (A.1.) does not apply to you unless you are "occupying", at the time of the accident, a motor vehicle described in a. and b. above.

Hence, under this exclusion, an insured is not entitled to UIM coverage where (1) he owned the motor vehicle, (2) he was occupying it at the time of the accident, (3) New Jersey law and regulations required that it be insured, and (4) it was "not insured for this coverage or any similar coverage." The first three requirements are clearly met. When construing the fourth requirement, we must consider the following principles.

UIM insurance provides first party coverage to an insured injured in an accident involving an underinsured vehicle. Universal Underwriters Ins. Co. v. N.J. Mfrs. Ins. Co., supra, 299 N.J. Super. at 320. UIM coverage thus "is linked to the injured person, not the covered vehicle." Id. at 321 (quoting Aubrey v. Harleysville Ins. Cos., 140 N.J. 397, 403 (1995)). Further, the named insured on a policy providing UIM coverage has a reasonable expectation of such coverage from that policy. Id. at 318. For an exclusion to defeat that reasonable expectation of coverage, it must "be clear and unambiguous." Ibid.

This policy would exclude UIM coverage for the accident if the motorcycle was "not insured for this coverage or any similar coverage." However, the motorcycle was insured in accordance with New Jersey law, and its insurance policy also provided UIM benefits. We conclude that this meets the requirement that the vehicle have "coverage or similar coverage" as that language would be reasonably understood in light of the above general principles.

This result is not unusual. In Universal Underwriters, the insured also owned a motorcycle insured by one carrier and an automobile insured by a second carrier. Universal Underwriters Ins. Co. v. N.J. Mfrs. Ins. Co., supra, 299 N.J. Super. at 311. Both policies provided UIM benefits. Ibid. The insured was in a motor vehicle accident while riding the motorcycle. Ibid. Contribution for UIM benefits were sought from the carrier for his automobile. Id. at 310-11. The court found that, under the policy language involved which contained no clear and unambiguous exclusion, the carrier for the automobile was required to contribute to the insured's UIM benefits. Id. at 315.

We conclude that the Farm Family policy provided UIM coverage for this accident, and reverse the order of April 18, 2008. We remand in order that the trial court may address the remaining questions involving the amount of contribution and whether this coverage is primary or excess.

Reversed and remanded.


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