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Digirolamo v. Geico General Insurance Co.


April 7, 2010


On appeal from Superior Court of New Jersey, Law Division, Hunterdon County, Docket No. L-330-07.

Per curiam.


Argued March 23, 2010

Before Judges Grall, Messano and LeWinn.

Plaintiffs Daniel and Angela DiGirolamo appeal from an order enforcing a "step-down" clause relevant to uninsured motorist (UM) coverage in a policy of commercial auto insurance issued to Mr. DiGirolamo's employer. Plaintiffs contend that a statutory amendment prohibiting such clauses that was enacted on September 10, 2007, L. 2007, c. 163; N.J.S.A. 17:28-1.1f, should be applied retroactively in this case. Because this case involves a policy that expired in 2006 and an accident that occurred in 2005, we affirm.

On May 5, 2005, Mr. DiGirolamo was injured in an accident involving a "hit and run motor vehicle." At the time of the accident, Mr. DiGirolamo was driving a truck leased by his employer, defendant Gary W. Gray Trucking (Gray) from defendant View Point Leasing. The truck was insured under a policy of commercial auto insurance issued to Gray by defendant Zurich American Insurance Company (Zurich) for the period from March 1, 2005 to March 1, 2006.

The involvement of the "hit and run motor vehicle" raised a question about the availability of UM coverage to Mr. DiGirolamo under his employer's policy with Zurich. N.J.S.A. 17:28-1.1e(2)(c). Although the limit of UM coverage is $1,000,000 under the Zurich policy, the "step-down" clause limits coverage available to an insured, other than a "named insured," who has similar coverage under another policy as a "named insured." In that circumstance, the limit is "the highest applicable limit of insurance under any coverage form or policy providing coverage to that - insured - as an individual named insured."

Mr. DiGirolamo is not a "named insured" under the Zurich policy and is a "named insured" under a policy issued by defendant Geico General Insurance Company (Geico). The limit for UM coverage under the Geico policy is $25,000.

The judge determined that the $25,000 limit applied and that defendants Zurich and Geico should each pay $12,500. Nonetheless, Geico deposited the full $25,000 available under its policy with the court, and plaintiffs' claims against Geico were dismissed.*fn1

There is no question that a clause in a commercial auto insurance policy unambiguously limiting UM or underinsured motorist (UIM) coverage to the amount of an insured's personal policy of insurance was valid and enforceable prior to and during the term of this policy. On June 17, 2003, in a case involving UM coverage, this court upheld a similar "step-down" clause limiting both UM and UIM coverage. Botti v. CNA Ins. Co., 361 N.J. Super. 217, 221, 228 (App. Div. 2003). On January 21, 2004, this court upheld application of a "step-down" clause in a case involving UIM coverage under a commercial policy; like the one at issue here, that policy did not include the employee seeking coverage as a "named insured." Pinto v. N.J. Mfrs. Ins. Co., 365 N.J. Super. 378, 381, 397 (App. Div. 2004). The Supreme Court affirmed Pinto on June 6, 2005. 183 N.J. 405 (2005); see also Christafano v. N.J. Mfg. Ins. Co., 361 N.J. Super. 228, 237 (App. Div. 2003) (rejecting a claim that a "step-down" provision in a personal policy "[ran] afoul of the provisions of N.J.S.A. 17:28-1.1" as written at that time).

The statutory amendment prohibiting "step-down" clauses of the sort at issue here was not adopted until September 10, 2007. The statement accompanying the bill that led to this legislative reform demonstrates recognition of the fact that its enactment would change existing law. The legislative committee describes the bill as one "in response to the New Jersey Supreme Court's decision in Pinto v. New Jersey Manufacturers Insurance Company" and the Court's decision as one "uphold[ing] earlier case law on the subject." Olkusz v. Brown, 401 N.J. Super. 496, 501 (App. Div. 2008) (quoting the statement).

Accordingly, the question presented on this appeal is not whether a "step-down" clause of this sort was valid during the term of this policy. The question is whether the statutory amendment of September 10, 2007 reaches back in time to invalidate a clause in an insurance policy limiting coverage and requires greater coverage for an accident that took place more than two years prior to the change in the law.

Two panels of this court have considered whether the reform enacted in N.J.S.A. 17:28-1.1f applies prospectively or retroactively. Both cases, like this one, involved an accident that occurred and a claim under a policy that had expired prior to the effective date of the amendment; albeit for different reasons, both panels reversed orders giving the statutory reform retroactive effect.

In Olkusz, the panel held: "[T]his statutory amendment must be applied prospectively, commencing from the date of its passage by the Legislature. Any UM/UIM claim predicated upon an accident which predates the adoption of [the amendment] must be governed by the legal principles articulated by the Supreme Court in Pinto, supra, 183 N.J. 405." 401 N.J. Super. at 506. The Olkusz panel considered whether "(1) the Legislature has expressed, either explicitly or implicitly, its intent that the statute apply retroactively; (2) the statute is 'curative'; or (3) the expectations of the parties warrant the retroactive application of the statute." Id. at 502-03. After discussing and applying these exceptions to the generally applicable presumption of prospective application, the court concluded that none justified retroactive application of this statutory reform. Id. at 503-06.

In Hand v. Philadelphia Ins. Co., 408 N.J. Super. 124, 134 (App. Div. 2009), the panel held: "[T]he Legislature implicitly intended that the Amendment have retroactive effect. However, . . . [the members of the panel] also conclude[d] that applying the Amendment retroactively to the facts of this case would be unfair and work a manifest injustice to the contractual rights of defendant [insurer]." Id. at 134.

Two members of this panel would reverse substantially for the reasons stated in Olkusz, supra, 401 N.J. Super. at 502-06, and one member would reverse substantially for the reasons stated in Hand, supra, 408 N.J. Super. at 143-46. Thus, while we agree that N.J.S.A. 17:28-1.1f cannot be applied to afford plaintiffs relief, our reasons differ.

The source of disagreement is this: whether reversal is required because the Legislature has not expressed its intention to give retroactive effect to this unexpected change in the insurance law, Olkusz, supra, 401 N.J. Super. at 502-06, or whether reversal is required because retroactive application, although intended by the Legislature, would be manifestly unjust in this case involving an accident that occurred and a policy that expired prior to the effective date, Hand, supra, 408 N.J. Super. at 143-46.

As we concur in the conclusion that this legislative reform cannot be given retroactive effect in this case, there is no need to elaborate upon our divergent rationales. The reasons are more than adequately set forth in Olkusz and Hand, and the arguments presented by plaintiffs do not warrant discussion beyond what is stated in those opinions. R. 2:11-3(e)(1)(E).


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