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Orodenker v. Selective Insurance Company of America


March 3, 2009


On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-1887-06.

Per curiam.


Argued February 2, 2009

Before Judges Lisa and Reisner.

By leave granted, plaintiffs, Michael Orodenker and William Cocker, Jr., appeal from a January 24, 2008 order granting partial summary judgment to defendant, Selective Insurance Company of America, based on a step-down clause in the Underinsured Motorist (UIM) provision of its policy, and a March 27, 2008 order denying reconsideration. Plaintiffs argue that the trial court erred because (1) plaintiffs should be deemed "named insureds" by implication under the terms of Selective's policy, (2) the step-down provision does not apply because the UIM provisions in their personal policies did not provide "similar coverage" to that provided by Selective, and (3) N.J.S.A. 17:28-1.1f, which renders unenforceable step-down provisions in employers' policies such as Selective's, should be given retroactive application. We reject these arguments and affirm.

Plaintiffs were employees of Jordan's Ornamental Iron Works, LLC. On December 3, 2002, they were passengers in a vehicle owned by their employer and insured by Selective under a commercial business automobile insurance policy. They were involved in an accident caused by the driver of another vehicle, Marcia Powell. Each plaintiff settled with Powell's insurance carrier for $100,000, the limits of her liability coverage.

At the time of the accident, Orodenker was a named insured on his own personal automobile insurance policy issued by State Farm Indemnity Company. This was a standard New Jersey policy, and it contained $100,000 UIM limits. At the time of the accident, Cocker's parents were named insureds on a personal automobile policy issued by Prudential Property and Casualty Insurance of New Jersey, which was also a standard New Jersey policy, containing $100,000 UIM limits. For purposes of our analysis, we assume without deciding that Cocker was a resident of his parents' household at the time of the accident, and thus covered under the Prudential policy.*fn1

The Selective policy contained $300,000 combined single limits UIM coverage. However, that coverage was subject to a step-down provision which limited UIM coverage available to anyone other than the named insured to the amount of UIM coverage available to that individual in a personal automobile policy in which the individual is a named insured or a family member of a named insured, provided the personal policy provided "similar coverage" to that in Selective's policy.

On the declaration page of the Selective policy, the named insured was identified as Jordan's Ornamental Iron Works, LLC. Below that designation, in the space provided for "Named Insured is:" the word "INDIVIDUAL" was inserted. According to Selective, this was an "innocuous error," having no legal significance in the interpretation of the policy. According to plaintiffs, use of the word "individual" is legally significant and triggers consideration of another provision in the UIM portion of the policy under the caption "Who Is An Insured," which provides:

If the Named Insured is designated in the Declarations as:

1. An individual, then the following are "insureds":

a. The Named Insured and any "family members".

b. Anyone else "occupying" a covered "auto" or a temporary substitute for a covered "auto". The covered "auto" must be out of service because of its breakdown, repair, servicing, "loss" or destruction.

c. Anyone for damages he or she is entitled to recover because of "bodily injury" sustained by another "insured".

2. A partnership, limited liability company, corporation or any other form of organization, then the following are "insureds":

a. Anyone "occupying" a covered "auto" or a temporary substitute for a covered "auto". The covered "auto" must be out of service because of its breakdown, repair, servicing, "loss" or destruction.

b. Anyone for damages he or she is entitled to recover because of "bodily injury" sustained by another "insured".

The UIM provisions define "Family member" as "a person related to an individual Named Insured by blood, marriage, or adoption who is a resident of such Named Insured's household, including a ward or foster child."

Plaintiffs do not dispute that under their personal automobile policies the tortfeasor's vehicle was not underinsured because the UIM coverage in their respective policies was equal to the liability coverage of the tortfeasor. Plaintiffs demanded UIM coverage from Selective, claiming they were covered by that policy and that, because the UIM coverage in that policy exceeded the tortfeasor's liability coverage, the tortfeasor's vehicle was underinsured with respect to the Selective policy. Selective denied coverage, relying upon the step-down provision. Plaintiffs brought this action. The parties filed cross-motions for summary judgment regarding the enforceability of the step-down provision. Plaintiffs' arguments in the trial court were the same as those now presented before us. Judge Wellerson rejected those arguments. He therefore denied plaintiffs' motion and granted Selective's motion. After plaintiffs' reconsideration motion was denied, we granted leave to appeal.

We first consider plaintiffs' argument that, by implication, they should be considered "named insureds" under the Selective policy. In a similar context, our Supreme Court has held that where the named insured is a corporate entity, employees are not covered. Pinto v. N.J. Mfrs. Ins. Co., 183 N.J. 405, 417 (2005). In that case, the employee argued that "the denomination of a corporate entity as the 'named insured' in the employer's policy is so ambiguous as to allow any employee to be characterized as a 'named insured' and thus avoid the step-down." Id. at 407. The Court rejected that argument, and concluded that the policy language was not ambiguous and did not designate the employee "by name, or by implication, as a 'named insured.'" Id. at 417. The Court elaborated that "[a]n employer can cover employees as 'named insureds' provided appropriate language is added stating such an intention." Ibid.; see, e.g., N.J. Mfrs. Ins. Co. v. Breen, 153 N.J. 424, 431 (1998) (holding that a business automobile policy covering an unincorporated family business and designating as the named insureds the business and its husband and wife owners, provided UIM coverage to the daughter of those owners who was a "family member" of the "named insureds," and therefore covered by the policy's terms).

Plaintiffs attempt to distinguish the Pinto holding because in this case the declaration page stated that the named insured is an "individual." Plaintiffs argue that because of that designation, different coverages apply under the "Who Is An Insured" provision in the policy. That difference is described in the policy provision we have previously set forth, namely that if the named insured is designated as an individual, family members are deemed "insureds," but not if the named insured is designated as a "partnership, limited liability company, corporation or any other form of organization." Relying on this provision, plaintiffs argue that an ambiguity exists in the policy provisions, and that one reasonable reading of the policy would result in a conclusion that "all employees of the company are 'named insureds' under the policy."

We do not agree. The designation of the named insured, Jordan's Ornamental Iron Works, LLC, is clear and unambiguous. It is a limited liability company. Accordingly, the "insureds" are those listed under "Who Is An Insured" for such entities. Further, the "family member" definition in the policy simply cannot be read to be the equivalent of employees. The definition obviously pertains to those connected to another person (not a company) "by blood, marriage, or adoption," and who are residents of that other person's household. As the Court made clear in Pinto, employers can cover employees by providing "appropriate language . . . stating such an intention." Pinto, supra, 183 N.J. at 417. That was not done here. Based upon the unambiguous policy language, employees are not covered.

Plaintiffs next argue that the step-down provision does not apply to them because their personal automobile policies did not contain "similar coverage." They argue that because the terms of their policies provided that their UIM coverage would become excess coverage for an insured who is injured while occupying a non-owned vehicle, such excess coverage was "neither similar to the coverage provided by [Selective], nor were its limits applicable to the injuries sustained by [appellants] until . . . Selective's $300,000 limit was exhausted."

In support of this argument, appellants rely on our decision in National Union Fire Ins. Co. v. Jeffers, 381 N.J. Super. 13 (App. Div. 2005). We find this reliance unpersuasive. In that case, we held that the UIM provisions in a Pennsylvania policy were not similar to those in a New Jersey policy, because the statutory schemes in the two states differ, with New Jersey providing only "gap" coverage, while Pennsylvania provides "excess" insurance. Id. at 19-20. That is not the case here, however, where the Selective policy and the personal policies of both plaintiffs are New Jersey policies, defining UIM coverage in accordance with New Jersey law. It is plain to us that the coverage in all of the policies is "similar."

Finally, appellants argue that N.J.S.A. 17:28-1.1f should be applied retroactively. The Selective policy was issued for a period from June 17, 2002 to June 17, 2003. The accident occurred on December 3, 2002. In response to the 2005 Pinto decision, the Legislature enacted the statute that became codified as N.J.S.A. 17:28-1.1f, effective September 10, 2007, reversing the holding in Pinto that step-down provisions are enforceable. The statute renders such provisions unenforceable.

Judge Wellerson rejected plaintiffs' argument that the statute should be given retroactive effect. He therefore concluded that the statute did not render unenforceable the step-down provision in the Selective policy.

During the pendency of this appeal, a panel of this court issued an opinion on July 22, 2008, holding that N.J.S.A. 17:28-1.1f was not curative because its purpose was not to correct a misinterpretation of an existing statute, but was to break new ground by overturning Pinto, which had been based on contract principles. Olkusz v. Brown, 401 N.J. Super. 496, 503 (App. Div. 2008). The panel therefore held that the statute should be applied prospectively only, and that any UIM claim predicated upon an accident predating its adoption must be governed by the legal principles articulated in Pinto. Id. at 506.

We agree with the rationale and holding in Olkusz. Accordingly, we find no error in Judge Wellerson's determination that the statute should be given prospective application. The judge correctly enforced the step-down provision in Selective's policy according to its terms.


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