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Patimetha v. Pumchardengatna


April 13, 2009


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-5163-05.

Per curiam.


Argued December 9, 2008

Before Judges Winkelstein, Gilroy and Chambers.

In this automobile insurance coverage case, defendant Allstate Insurance Company appeals from two orders of January 19, 2007, that:

1) denied its motion for summary judgment; and 2) granted the cross-motion of defendant IFA Insurance Company, determining that Allstate's liability coverage was primary to that of defendants Elrac, Inc., d/b/a Enterprise Rent-A-Car, and its administrative claim services entity, Elco Administrative Services (collectively, Elrac) and IFA. We reverse, determining that Allstate does not owe liability coverage for the accident.


Plaintiff Maleewan Patimetha is the owner of a motor vehicle insured by Allstate. Defendant Penchit Pumchardengatna is the owner of a motor vehicle insured by IFA. Patimetha, Pumchardengatna, and plaintiff Premchit Hu are co-workers. On August 5, 2005, because she was apprehensive that her motor vehicle might break down on a business trip to North Carolina, Patimetha rented a motor vehicle from Elrac. Elrac self-insured the rental vehicle.

On August 6, 2003, Patimetha operated the rental motor vehicle, and Hu and Pumchardengatna were passengers. After driving for several hours, Patimetha became ill, and turned the operation of the motor vehicle over to Pumchardengatna. Pumchardengatna lost control of the motor vehicle, causing injuries to Patimetha and Hu.

On July 22, 2005, Patimetha and Hu filed a personal injury negligence complaint against Pumchardengatna. Because of an insurance coverage dispute among Allstate, IFA and Elrac, plaintiffs sought a declaratory judgment in the same complaint seeking a resolution of the coverage issue.*fn1

On December 5, 2006, Allstate filed a motion for summary judgment, seeking an order declaring that it did not owe coverage to Pumchardengatna because the rental motor vehicle was not an "insured auto" and Pumchardengatna was not an "insured person" under its policy. IFA opposed and cross-moved, seeking a determination that Allstate's coverage was primary, with IFA and Elrac owing excess coverage on a pro rata basis. On January 19, 2007, the trial court entered two orders, supported by an oral decision, denying Allstate's motion and granting IFA's cross-motion.

In deciding the motions, the court found that the rental vehicle was not a "substitute auto" under the Allstate policy because Patimetha's vehicle was not being repaired or serviced at the time of the accident as defined in the policy. Nevertheless, the court determined that Allstate owed liability coverage on a primary basis by applying the initial-permission rule*fn2 against the language of the Allstate policy. The court reasoned that the rental vehicle met the definition of a "non-owned auto" as defined in Allstate's policy, and therefore, not only was Allstate obligated to provide coverage to Patimetha as a permissive user, but also to any person to whom she gave permission to operate the vehicle.

After Allstate's motion for leave to appeal was denied, it settled Patimetha's claim for $50,000 and Hu's claim for $70,000. Allstate now appeals, seeking a reversal of the two January 19, 2007 orders, and a remand for entry of an order directing IFA and Elrac to reimburse it for the amounts paid in the settlements.

On appeal, Allstate argues that: 1) "the trial court erred as a matter of law by applying the initial[-]permission rule [to] find coverage that was not afforded by the terms of the Allstate policy"; and 2) "the trial court's ruling that the Allstate policy must provide primary coverage was erroneous as a matter of law."

A trial court will grant summary judgment to the moving party "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). On appeal, "the propriety of the trial court's order is a legal, not a factual, question." Pressler, Current N.J. Court Rules, comment 3.2.1 on R. 2:10-2 (2009). "We employ the same standard that governs trial courts in reviewing summary judgment orders." Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

Disputes involving insurance contracts are resolved by looking to the language of the policy. Riccio v. Prudential Prop. & Cas. Ins. Co., 108 N.J. 493, 499 (1987). Words of an insurance policy should be given "their plain, ordinary meaning." Hardy v. Abdul-Matin, ___ N.J. ___, ___ (2009) (slip op. at 8) (quotation omitted). "In the absence of any ambiguity, courts 'should not write for the insured a better policy of insurance than the one purchased.'" Gibson v. Callaghan, 158 N.J. 662, 670 (1999) (quoting Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537 (1990)). If the expressed language of the policy is clear and unambiguous, the "'court is bound to enforce the policy as it is written.'" Royal Ins. Co. v. Rutgers Cas. Ins. Co., 271 N.J. Super. 409, 416 (App. Div. 1994) (quoting Flynn v. Hartford Fire Ins. Co., 146 N.J. Super. 484, 488 (App. Div.), certif. denied, 75 N.J. 5 (1977)).


Allstate argues that the trial court erred in determining that it was obligated to defend and indemnify Pumchardengatna under the initial-permission rule. We agree. Allstate is not obligated to provide coverage to Pumchardengatna as a permissive user of the leased vehicle.

At the time of the accident, Patimetha was insured under a personal automobile policy issued by Allstate. The Allstate policy protects an "insured person" from liability for damages arising out of the ownership, maintenance or use, loading or unloading of an "insured auto." "Insured person" is defined in the policy as:

a. While using any insured auto, except a non-owned auto:

1. you [the policy holder Patimetha];

2. any resident relative; and

3. any other person using it with your permission.

b. While using a non-owned auto:

1. you; and

2. any resident relative.

"Insured auto" is defined as "any auto . . . [the insured] own[s] which is described on the Policy Declarations." The term also includes, among other non-relevant vehicles, a substitute auto, and a non-owned auto.*fn3 The two terms are defined in the policy in relevant part as:

"Substitute auto" means a non-owned auto being temporarily used by you or a resident relative with the permission of the owner while your insured auto is being serviced or repaired, or if your insured auto is stolen or destroyed.

"Non-owned auto" means an auto used by you or a resident relative with the owner's permission but which is not:

a. owned by you or a resident relative; or

b. available or furnished for the regular use of you or a resident relative.

Applying the above definitions to the undisputed facts, Pumchardengatna was not an insured person covered by Allstate's policy when operating the rental vehicle at the time of the accident. The policy obligates Allstate to defend and indemnify an insured person as a result of an accident involving an insured auto. Allstate's policy excludes coverage for permittees operating a "non-owned auto." The policy restricts coverage for those operating non-owned autos to the insured or the insured's resident relative. Although the rental vehicle falls within the policy definition of a non-owned auto, Pumchardengatna was neither the named insured nor Patimetha's resident relative.

IFA argues that the rental vehicle qualified under Allstate's policy as a "substitute auto," and Pumchardengatna was entitled to coverage as a permissive user, citing Ambrosio v. Affordable Auto Rental, Inc., 307 N.J. Super. 114 (App. Div. 1998). IFA's reliance on Ambrosio is misplaced.

In Ambrosio, Leonard Weinberger, a part-owner of Fortune Garden, Inc., leased a motor vehicle from Affordable Auto Rental, Inc., because his car was mechanically unreliable, that is, "he 'was having difficulty starting the car in the morning on numerous occasions, . . . and it had been in and out of the shop to have problems solved.'" Id. at 117-18. On September 12, 1993, Joel Nierenberg, an employee of Fortune Garden, operated the leased vehicle and was involved in a motor vehicle accident with Darren Ambrosio and Vincent Ottoman. Id. at 117. After Ambrosio and Ottoman filed suit against Nierenberg, Affordable Auto, Weinberger, and Fortune Garden, a dispute arose among Allstate, the insurer of Weinberger's personal automobile; Unity Fire and General Insurance Company, the insurer for Affordable Auto; Progressive Casualty Insurance Company, the insurer of Fortune Garden; and First Trenton Indemnity Company, the insurer of Nierenberg's father's motor vehicle. Id. at 118.

The trial court determined that Unity Fire was primary, and Progressive and First Trenton were secondary on a pro rata basis. Ibid. The court further directed that if the coverage limits of the three policies were exhausted, then Allstate was to provide additional coverage. Ibid.

On appeal, we reversed, determining that all four insurers owed coverage on a pro rata basis up to the lowest policy limit, with the remainder equally apportioned among the remaining insurers up to the lowest policy limit. Id. at 125-27. Although Allstate, Nierenberg's insurer, was ordered to provide coverage, it was only because the leased vehicle was defined as a "temporary substitute" vehicle under the terms of Allstate's policy. Id. at 122. Under Allstate's policy, a non-owned vehicle was considered a temporary substitute vehicle if the covered auto "is out of normal use because of its breakdown, repair, servicing, loss or destruction." Ibid. Because under that definition, a covered vehicle only needed to be out of normal use because of a breakdown, which we defined as "a failure to function," we held that the policy "did not require that the renter's own car be in service or under repair." Ibid.

Here, contrary to Ambrosio, Allstate's policy requires the covered vehicle to be in service or under repair before a rental vehicle is deemed a "substitute auto" under Allstate's policy. "Substitute auto" is defined in the Allstate policy as a non-owned auto temporarily used by the insured or his or her resident relative with permission of the owner while the insured's auto is being serviced or repaired or if the insured's auto has been stolen or destroyed. We are satisfied that the trial court correctly determined that the rental vehicle was not a substitute auto under the policy based on Patimetha's deposition testimony that she had rented Elrac's vehicle "[b]ecause [she was] afraid that [her personal vehicle] might break down . . . on the way," not because her vehicle was being serviced or repaired. When specifically asked in her deposition whether there were any mechanical difficulties with her car at the time, she answered in the negative.

However, we conclude that the trial court incorrectly determined that Allstate was required to provide liability coverage to Pumchardengatna under the initial-permission rule. Allstate's policy only provides coverage to initial permittees or subpermittees when operating "any insured auto, except a non-owned auto," provided the permittee is "using it with [the insured's] permission." (Emphasis added). Contrary to the trial judge's determination, the initial-permission rule does not require an insurer to provide coverage to a permittee operating a non-owned motor vehicle.

The initial-permission rule provides:

[I]f a person is given permission to use a motor vehicle in the first instance, any subsequent use short of theft or the like while it remains in his [or her] possession, though not within the contemplation of the parties, is a permissive use within the terms of a standard omnibus clause in an automobile liability insurance policy.

[Matits, supra, 33 N.J. at 496-97.]

The purpose of the rule is "to assure that persons who cause automobile accidents are able to answer financially to their innocent victims." Id. at 496.

The initial-permission rule "is consistent with the language of the standard omnibus clause in automobile liability insurance policies." Ibid. Omnibus provisions of automobile insurance policies must conform with N.J.S.A. 39:6B-1a, that is, "[e]very owner or registered owner of a motor vehicle registered or principally garaged in this State shall maintain motor vehicle liability insurance coverage . . . insuring against loss resulting from liability imposed by law for bodily injury, death and property damage sustained by any person arising out of the ownership, maintenance, operation or use of a motor vehicle . . . ."

Under the initial-permission rule, a vehicle's insurance policy affords coverage not only to the named insured, but also to those persons given permission by the named insured or owner to operate the motor vehicle. Matits, supra, 33 N.J. at 496-97; see also French v. Hernandez, 184 N.J. 144, 152 (2005). The rule provides that:

"[a]s long as the initial use of the vehicle is with the consent, expressed or implied, of the insured, any subsequent changes in the character or scope of the use . . . do not require the additional specific consent of the insured." Simply put, once an owner gives his vehicle's keys to another person for a drive, the courts ordinarily will find coverage, even if the driver deviates from the expected scope of the use of the vehicle, unless the driver's later conduct amounts to a theft or the like of the vehicle. [Ibid. (internal citations omitted) (emphasis added).]

The rule also provides coverage to a subpermittee who has the permission of the initial permittee to use the motor vehicle. Rutgers Cas. Ins. Co. v. Collins, 158 N.J. 542, 549 (1999); Atlantic States Group v. Skovron, 383 N.J. Super. 423, 429 (App. Div. 2006).

The first question in any initial-permission rule case is whether "the insured or owner had given initial permission to the non-insured to use the vehicle." Jaquez v. Nat'l Cont'l Ins. Co., 178 N.J. 88, 95 (2003) (emphasis added). Thus, the initial-permission rule extends insurance coverage to provide coverage to a subsequent permittee operator of an insured vehicle. Here, the Allstate policy provided coverage by defining an "insured person" as a person "using any insured auto, except a non-owned auto," including the insured, the insured's resident relative and "any other person using [the vehicle] with [the insured's] permission." However, it excluded coverage to permittees by limiting an "insured person," when using a non-owned auto, to the insured and his or her resident relative. It does not provide coverage to permissive users of non-owned vehicles.

We part ways with the trial court's reasoning because it expanded the umbrella of the initial-permission rule to not only include the use of the insured vehicle by subsequent permissive drivers, but also non-covered automobiles. The trial court's reasoning would apply if Elrac had denied coverage as it was the owner of the leased vehicle that gave permission to Patimetha to use the vehicle, who subsequently permitted Pumchardengatna to operate the vehicle as a subpermittee. Allstate Ins. Co. v. Royal Globe Ins. Co., 195 N.J. Super. 598, 604-06 (App. Div 1984).

Accordingly, we reverse the two summary judgment orders of January 19, 2007, concluding that Allstate does not owe a duty to defend or indemnify Pumchardengatna for any damages flowing from the automobile accident. We remand the matter to the trial court for further proceedings on Allstate's claim for indemnification for monies paid to the plaintiffs in settlement.

Reversed and remanded.

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