June 24, 2010
JAMES HUCKLEBRIDGE AND CAROL HUCKLEBRIDGE, H/W, PLAINTIFFS-RESPONDENTS,
GOVERNMENT EMPLOYEES INSURANCE COMPANY, A DIVISION OF GEICO, A NEW JERSEY LICENSED INSURANCE COMPANY, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-4905-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 20, 2010
Before Judges Parrillo and Lihotz.
Defendant Government Employees Insurance Company (GEICO) appeals from a Law Division order denying its summary judgment motion in favor of plaintiffs James and Carol Hucklebridge. Accordingly, GEICO, a New Jersey licensed insurance company, was compelled to provide insurance benefits under plaintiffs' automobile insurance policy for injuries they sustained in a motorcycle accident. GEICO argues an unambiguous exclusion in its policy bars benefits for injuries experienced as a result of plaintiffs' use of their motorcycle, which was insured by a different carrier and, therefore, the trial court erred in denying its motion. We agree and reverse.
On August 21, 2005, plaintiffs were operating their 2001 Honda Goldwing motorcycle. James was driving and Carol was a passenger when they were involved in an accident with an automobile. Plaintiffs settled their liability claim with the third-party automobile operator for the driver's $50,000 policy limit. However, plaintiffs allege they suffered injuries surpassing the amount received from the third party's insurance coverage and they filed claims with GEICO.
Plaintiffs own three automobiles covered under their GEICO policy. However, plaintiffs' insure their motorcycle with Foremost Insurance, which is not a party to this action. The GEICO policy includes underinsured motorist (UIM) coverage of $100,000 per person and $300,000 per accident, which will pay damages for bodily injury and property damage caused by an accident which the insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle or underinsured motor vehicle arising out of the ownership, maintenance or use of that vehicle.
GEICO denied plaintiffs' claim, citing an enumerated policy exclusion barring UIM coverage for bodily injury sustained by an insured while occupying a motor vehicle owned by an insured and not described in the Declarations and not covered by the Bodily Injury and Property Damage liability coverages of this policy.
In the letter disclaiming coverage, GEICO explained bodily injury and property damage liability coverage applied only to "owned" and "non-owned" vehicles and the motorcycle which was involved in this event does not qualify as an owned auto, specifically since [plaintiffs] own the motorcycle, and insure it under a separate policy with Foremost Insurance it therefore is not a vehicle for which a premium charge is shown [on the policy's declaration sheet]. Additionally, the motorcycle is . . . not considered to be a non-owned auto because [plaintiffs] owned [it].
GEICO reasons that plaintiffs' injuries were caused while operating a motor vehicle they owned but that was not described in the declaration sheet, thus barring coverage under the policy for any loss.
Following GEICO's denial of their claim, plaintiffs filed a declaratory judgment action in the Law Division seeking a finding they were eligible to claim UIM benefits under the GEICO policy. The coverage issue was presented on cross-motions for summary judgment. The motion judge found the exclusion applied only if the term "motor vehicle" included motorcycles. Based on the policy's "failure to, at the very least, define what a motor vehicle [wa]s," the motion judge concluded the UIM exclusion was ambiguous and unenforceable. Accordingly, an order was entered granting plaintiffs' motion and compelling GEICO to provide the UIM benefits within the limits of its policy.*fn1
On appeal, GEICO argues the motion judge's determinations were erroneous as "the format and language of the exclusion are unambiguous." The exclusion unambiguously bars coverage for loss sustained by the insured while operating uncovered motor vehicles they owned but chose not to insure under the policy. GEICO maintains the policy's omission of a definition for the term "motor vehicle" requires that the undefined term be given its ordinary meaning. Further, GEICO argues public policy concerns support its position; otherwise, people would "purchase high limits of coverage on only one vehicle and . . . insure all the other vehicles under lower-limit policies."
Plaintiffs counter, as they did before the trial judge, that the failure to define "motor vehicle" renders the exclusion ambiguous and unenforceable. Plaintiffs additionally identify another section of the GEICO policy injecting further ambiguity into the scope of coverage. Referring to the personal injury protection (PIP) section of the policy defining "auto" as a self-propelled vehicle not including motorcycles, plaintiffs assert GEICO "has specifically excluded coverage for motorcycles in another portion of the policy which might well lead an insured to understand that if motorcycles are to be excluded then they would be expressly mentioned in that exclusion."
The interpretation of an insurance contract is a question of law, subject to de novo review. Manalapan Realty, L.P. v. Tp. Comm. of Manalapan, 140 N.J. 366, 378 (1995); Sealed Air Corp. v. Royal Indem. Co., 404 N.J. Super. 363, 375 (App. Div.) ("The interpretation of contracts and their construction are matters of law for the court subject to de novo review."), certif. denied, 196 N.J. 601 (2008). Well-settled principles guide our review of this issue.
When the terms of an insurance contract are clear and unambiguous, courts must interpret the policy as written, giving the words "their plain, ordinary meaning," Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001), and avoid writing a better policy for the insureds than that purchased. President v. Jenkins, 180 N.J. 550, 562 (2004). An "insured is chargeable with knowledge of the contents of a policy, in the absence of fraud or unconscionable conduct on the part of the insurer." Botti v. CNA Ins. Co., 361 N.J. Super. 217, 225 (App. Div. 2003). Additionally, because insurance contracts are contracts of adhesion, courts should interpret the policy in favor of the insured and against the insurer where an ambiguity exists. President, supra, 180 N.J. at 562-63; Doto v. Russo, 140 N.J. 544, 556 (1995).
Ambiguity "arise[s] where the phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage." Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979). A court should look to the entire policy to determine whether ambiguity exists but "should not engage in a strained construction to support the imposition of liability." Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530, 537 (1990).
We construe exclusions in insurance policies narrowly, but the provisions "are presumptively valid and will be given effect if 'specific, plain, clear, prominent, and not contrary to public policy.'" Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997) (citing Doto, supra, 140 N.J. at 559). The burden is on the insurer to bring the case within the exclusion. Ibid.
"[T]he scope of the UIM benefits provided under an automobile liability policy is determined by the language of the policy and the reasonable expectations of the persons insured thereunder." Cook-Sauvageau v. PMA Group, 295 N.J. Super. 620, 624 (App. Div. 1996), certif. denied, 150 N.J. 29 (1997). When reviewing claims for UIM benefits, we note coverage "'is linked to the injured person, not the covered vehicle,'" and is available regardless of the vehicle the insured is occupying at the time of the accident generating the UIM claim. Universal Underwriters Ins. Co. v. N.J. Mfrs. Ins. Co, 299 N.J. Super. 307, 321 (App. Div.) (quoting Aubrey v. Harleysville Ins. Cos., 140 N.J. 397, 403 (1995)), certif. denied, 151 N.J. 73 (1997). However, policy provisions may permissibly limit UIM benefits "[s]o long as the terms and conditions of coverage are fairly disclosed." French v. N.J. School Bd. Ins. Group., 149 N.J. 478, 492 (1997); see also Campbell v. Lion Ins. Co., 311 N.J. Super. 498, 507-08 (App. Div. 1998) (distinguishing between uninsured motorist (UM) coverage dominated by statutory requirements and underinsured motorist (UIM) coverage largely left to the terms of the parties' contract).
We examine the provisions of the GEICO policy in light of plaintiffs' asserted reasonable expectation of UIM coverage based on the language of the policy. To defeat a reasonable expectation of coverage, exclusion of the motorcycle accident must be clear and unambiguous. Universal Underwriters Ins. Co., supra, 299 N.J. Super. at 318.
We disagree with the motion judge that the UIM exclusion is ambiguous because the policy failed to define motor vehicle. Although GEICO could have included a definition of "motor vehicle" in its policy, we determine the undefined words as used "should be given their ordinary meaning," and we decline to "engage in a strained construction to support the imposition of liability." Longobardi, supra, 121 N.J. at 537; see also Priest v. Roncone, 370 N.J. Super. 537, 544 (App. Div. 2004).
The provision explicitly states UIM coverage is not provided for an insured's injuries suffered in a motor vehicle owned but not covered by the policy. Any ordinary reasonable person understands a motorcycle is a type of motor vehicle. So too the legal definition of motor vehicle includes a motorcycle. See N.J.S.A. 39:1-1 (defining "motor vehicle" to include "all vehicles propelled otherwise than by muscular power, excepting such vehicles as run only upon rails or tracks and motorized bicycles").
Plaintiffs would have specifically understood that their motorcycle was a motor vehicle as they had it registered with the State and were required by that registration application to include "the name of the insurer of the vehicle and the policy number." N.J.S.A. 39:3-4 (requiring owners to register vehicles driven on public roadways, including motorcycles, and to obtain separate insurance).*fn2
Examining the exclusion itself also leads to the conclusion it was easily understood. It uses plain precise language, lacks contradictions or inconsistencies, is prominently placed under the heading "EXCLUSIONS," defined as "what is not covered," and is located on the same policy page as the UIM coverage provisions. The exclusion's reference to owned motor vehicles "not described in the Declarations" is also easily understood to mean the vehicles for which insurance coverage was not purchased. We discern the language of the exclusion provision in GEICO's policy forecloses plaintiffs from recovering UIM benefits for the injuries suffered while riding their motorcycle.
We also reject plaintiffs' new assertion that other sections of the policy inject ambiguity regarding the scope of UIM coverage. The exclusion of motorcycles contained within the definition of "auto" in the personal injury protection (PIP) section of the policy is not linked to the UIM provisions or the exclusion at issue. Therefore, the special definition of "auto" within the provisions addressing PIP benefits for injured pedestrians adds nothing to the understanding of available UIM benefits related to injuries suffered while in motor vehicles.
We conclude the UIM exclusion in the GEICO policy is reasonable, clearly stated, and not violative of public policy; therefore, it must be upheld. Campbell, supra, 311 N.J. Super. at 507-08.
The Law Division orders dated July 17 and August 19, 2009 granting plaintiffs summary judgment are reversed. We remand to the Law Division for entry of judgment in favor of GEICO.