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Ford v. National Independent Truckers Insurance Co.


November 9, 2009


On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-2570-07.

Per curiam.


Argued October 21, 2009

Before Judges Sabatino and J. N. Harris.

This matter involves the application of a coverage limitation within an insurance policy for a commercial vehicle. The vehicle in question is a 1995 Freightliner truck, which, at the relevant time, was owned by and registered to Marek Orzechowski ("Marek"), a resident of Linden.

In February 2002, Marek procured a one-year commercial vehicle policy with defendant, National Independent Truckers Insurance Company ("National"). The policy furnished liability coverage for damages that the "insured" would be obligated to pay for bodily injury or property damage, where caused by an accident within the scope of the policy and "resulting from the ownership, maintenance or use" of the covered vehicle. The policy defines an "insured" to include not only the vehicle's owner but also persons using the vehicle with the owner's permission.

The National policy established a coverage limit of $500,000. However, that $500,000 in coverage was qualified by additional language in a related endorsement, signed by Marek and dated February 6, 2002, pertaining to so-called "unreported drivers." The substantive portion of that endorsement reads as follows:


As used in this endorsement and policy: "Unreported Driver" means any person using a covered auto who has not been reported by you to us and whose name does not appear on the original or amended Declarations of this policy at the time of such loss.


In the event of an accident caused by the operation of a covered auto by an unreported driver to which this insurance applies, you will be liable and obligated to reimburse us up to the first $10,000 of any sums that we pay as damages because of "bodily injury", "property damage" or "covered pollution cost or expense".


The limit of insurance with respect to any accident involving an unreported driver to which this insurance applies shall be the lower of (1) the Limit of Insurance shown in the Declarations or (2) the minimum liability insurance coverage required under the Motor Vehicle Financial Responsibility Laws of the State or federal regulatory agency having jurisdiction over the issuance of this policy. [(Emphasis added).]

The appellant in this case, plaintiff Glenn Ford, has characterized this endorsement as a "step-down" clause, because its intended effect is to reduce the available coverage for accidents caused by such unreported drivers who use the truck with the owner's permission. The provision, where applicable, takes the coverage down from the $500,000 policy limit to a lower sum constituting "the minimum liability insurance coverage" required under state and federal laws.

The Declarations pages accompanying the policy solely identify Marek as the "named insured." In addition, the coterminous policy documents include a "Schedule of Reported Drivers," with blank spaces provided on that schedule for listing the vehicle's reported drivers. Marek is the only person whose name appears on the schedule. Consequently, anyone else using Marek's truck would be deemed an unreported driver, thereby reducing the available liability coverage to the $15,000 single-claimant minimum for bodily injury prescribed by our insurance statutes. See N.J.S.A. 39:6B-1.

On April 17, 2002, the insured Freightliner struck a moving Conrail train. Plaintiff, a Conrail employee, jumped off the train in anticipation of the collision, and was seriously injured. The Freightliner was driven by Marek's brother, Adam Orzechowski ("Adam"), who evidently caused the accident.

In February 2003, about ten months after the accident, Marek wrote National and requested that Adam be added to his policy as an approved driver. After reviewing Adam's driving record and other factors, National rejected his addition to the policy, and notified Marek of the rejection.

Plaintiff, who apparently did not own a vehicle and personally had no motor vehicle insurance, sought financial recourse for his injuries. In February 2004, plaintiff filed a personal injury action in the Law Division, including both Adam and Marek as named defendants. National declined to defend the lawsuit. Eventually, in September 2006, a default judgment was issued in plaintiff's favor, solely as to defendant Marek, in the sum of $350,000. Plaintiff has been unsuccessful in collecting the judgment from Marek. There also are apparently liens on the judgment in favor of plaintiff's employer and the Railroad Retirement Board.

In March 2007, plaintiff filed the present direct action against National in the Law Division. The complaint alleged that National has breached the terms of its policy affording coverage, and also that National breached its duties of good faith and fair dealing. National denied liability, except as to its potential responsibility for the $15,000 in reduced coverage applicable to unreported drivers. The insurer moved for summary judgment to enforce the unreported driver provision.

After hearing oral argument, Judge Vichness granted National's motion. The judge found that Adam was an unreported driver, that the endorsement language is unambiguous, and that the coverage thereby is capped at $15,000. The judge rejected plaintiff's argument that the unreported driver endorsement violates public policy, and that the insurer had acted unfairly. The judge recognized that plaintiff had been seriously injured, but found that, as a matter of law, the court could not allow sympathy for plaintiff to permit it to "ignore the terms of an unambiguous contract between the owner of the truck and the insurance company[.]" Consequently, the judge directed National to deposit its $15,000 in reduced policy limits with the court.

On appeal, plaintiff argues that the trial court erred in enforcing the unreported driver endorsement. Plaintiff maintains that the endorsement unfairly operates as a trap to the unwary, akin to "step down" clauses for uninsured and underinsured coverage that were challenged before our Supreme Court in Pinto v. N.J. Mfrs. Ins. Co., 183 N.J. 405 (2005) (upholding such clauses that step down UM and UIM coverage) and subsequently nullified by the Legislature in 2007 when it enacted N.J.S.A. 17:28-1.1f. Plaintiff also intimates that Marek may have been impeded by a language barrier in understanding the coverage that he had purchased and the policy documents that he had signed.

We affirm the grant of summary judgment to National, substantially for the reasons articulated in Judge Vichness's bench decision. Although ambiguous terms within a insurance policy, as a matter of general interpretation, are to be construed in favor of the insured, see Villa v. Short, 195 N.J. 15, 23 (2008), "'[i]f the policy terms are clear, courts should interpret the policy as written and avoid writing a better insurance policy than the one purchased.'" Ibid. (quoting President v. Jenkins, 180 N.J. 550, 562 (2004)). We agree with the motion judge that the unreported driver endorsement in this case is clear and unambiguous. Marek's belated attempt to have his brother added as an approved driver after the accident had already occurred was ineffective, as National declined to add him. In any event, the first paragraph of the endorsement (paragraph A) clearly states that the driver's name must appear on the policy or its Declarations "at the time of [the] loss[,]" not inserted after-the-fact. Moreover, the contention that Marek did not understand the insurance policy that he signed because of language difficulties is speculative at best, and does not relieve him or plaintiff from the clear terms of the policy.

We also are unpersuaded by plaintiff's public policy contentions. The insurer has a legitimate underwriting concern in limiting its exposure when a large commercial truck is operated by a driver who it has not yet investigated, rated and approved. The arguments against UM and UIM step-down clauses unsuccessfully raised before the Supreme Court in Pinto, supra, are not applicable here. In any event, the policy provision at issue here is no more onerous than the provisions that the Court upheld in Pinto.

The new statute responding to Pinto, N.J.S.A. 17:28-1.1f, is inapposite because it only pertains to situations where the terms of motor vehicle policy furnish "less uninsured or underinsured motorist coverage for an individual employed by [a] corporate or business entity than the coverage provided to the named insured under the policy." N.J.S.A. 17:28-1.1f. The present case simply is not the UM/UIM scenario designed to be remedied by the new statute.*fn1

Although we share the motion judge's appreciation for the substantiality of plaintiff's injuries and plaintiff's difficulties in collecting on the underlying judgment, we are likewise satisfied that National is entitled to summary judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).


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