August 17, 2010
MICHAEL FREUND AND KATHLEEN FREUND, PLAINTIFFS-RESPONDENTS,
UNIVERSAL UNDERWRITERS GROUP INSURANCE COMPANY, DEFENDANT-RESPONDENT, AND ALLSTATE INSURANCE COMPANY, DEFENDANT-APPELLANT.
MICHAEL FREUND AND KATHLEEN FREUND, PLAINTIFFS-APPELLANTS,
UNIVERSAL UNDERWRITERS GROUP INSURANCE COMPANY, DEFENDANT-RESPONDENT, AND ALLSTATE INSURANCE COMPANY, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-08982-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued June 16, 2010
Before Judges Chambers and Kestin.
These appeals, arising from the same trial proceeding, were calendared to be considered together. We consolidate them for the purposes of this opinion.
Plaintiffs Michael Freund and Kathleen Freund and defendant Allstate Insurance Company (Allstate) appeal from the orders*fn1 granting summary judgment to defendant Universal Underwriters Group Insurance Company (Universal). The trial court ruling declared that Universal's policy provides plaintiffs with underinsured motorist (UIM) coverage with limits of $15,000 for the accident of December 19, 2003. Plaintiffs and Allstate contend that the Universal policy in fact provides plaintiffs with UIM coverage limits of $300,000. Based on the coverage election form completed by the insureds, we conclude that the UIM coverage limit on the Universal policy for plaintiffs' claims is $15,000, and we affirm.
The litigation arises out of the following undisputed facts. On December 19, 2003, plaintiff Michael Freund was in a motor vehicle accident. At the time of the accident, he was driving, in the course of his employment, a Dodge Caravan owned by his employer, H-K Tire Company, and insured by Universal. At that time, Freund also had a personal motor vehicle policy with Allstate with UIM limits of $100,000. Both Freund and Allstate maintained that the Universal policy had a UIM coverage limit of $300,000 for the accident, while Universal maintained that its coverage limit was only $15,000.
Due to this dispute, plaintiffs commenced this declaratory judgment action, seeking a declaration, among other relief, that they had UIM coverage up to $300,000 under the Universal policy. The matter came before the trial court on motions for summary judgment. The trial court granted summary judgment to Universal concluding that, under the terms of Universal's policy, the UIM coverage limit for the accident was $15,000. Allstate's motion for summary judgment and plaintiff's order to show cause, both seeking a declaration that Universal's UIM coverage limit was $300,000, were denied.
Our review of a trial court decision on a motion for summary judgment is de novo. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). If the movant will prevail as a matter of law when the evidence is "viewed in the light most favorable to the non-moving party," and no genuine issues as to any material facts exist, then the movant is entitled to summary judgment. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); R. 4:46-2(c). We need not defer to the trial court's interpretation of the law, or its determination of the legal consequences that flow from undisputed facts. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). In considering the dispute presented in this appeal, we recognize that a "stark imbalance" exists between insurers and their insureds regarding their respective understanding of the provisions in insurance policies, and as a result, the courts give "special scrutiny to insurance contracts". Zacarias v. Allstate Ins. Co., 168 N.J. 590, 594 (2001). Insurance policies are treated as "contracts of adhesion" and "are subject to special rules of interpretation." Id. at 595 (quoting Gibson v. Callaghan, 158 N.J. 662, 670 (1999)). However, when construing insurance contracts, we give the words their "plain, ordinary meaning." Ibid. Where no ambiguity is present, we will enforce the policy as written and will "not write for the insured a better policy of insurance than the one purchased." Ibid. (quoting Gibson v. Callaghan, supra, 158 N.J. at 670).
When the terms in an insurance policy are unclear or ambiguous, we will construe the policy in accordance with "the reasonable expectations of the insured, even if a close reading of the written text reveals a contrary meaning." Ibid. Under this reasonable-expectations-of-the-insured doctrine, "[t]he objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations." Ibid. (quoting Sparks v. St. Paul Ins. Co., 100 N.J. 325, 338-39 (1985)). When applying this standard, we are guided by the following principles:
First, in enforcing an insurance policy, courts will depart from the literal text and interpret it in accordance with the insured's understanding, even when that understanding contradicts the insurer's intent, if the text appears overly technical or contains hidden pitfalls, cannot be understood without employing subtle or legalistic distinctions, is obscured by fine print, or requires strenuous study to comprehend. Second, the plain terms of the contract will be enforced if the "entangled and professional interpretation of an insurance underwriter is [not] pitted against that of an average purchaser of insurance," or the provision is not so "confusing that the average policyholder cannot make out the boundaries of coverage." [Id. at 601 (citations omitted) (alteration in original).]
We also recognize that the declaration page plays a critical role in determining the reasonable expectations of the insured. Lehrhoff v. Aetna Cas. and Sur. Co., 271 N.J. Super. 340, 346 (App. Div. 1994). With respect to the declaration page, we have written:
We, however, regard the declaration page as having signal importance in these respects. A personal automobile insurance policy is a bulky document, arcane and abstruse in the extreme to the uninitiated, unversed and, therefore, typical policyholder. We are persuaded, therefore, that a conscientious policyholder, upon receiving the policy, would likely examine the declaration page to assure himself that the coverages and their amounts, the identity of the insured vehicle, and the other basic information appearing thereon are accurate and in accord with his understandings of what he is purchasing. We deem it unlikely that once having done so, the average automobile policyholder would then undertake to attempt to analyze the entire policy in order to penetrate its layers of cross-referenced, qualified, and requalified meanings. Nor do we deem it likely that the average policyholder could successfully chart his own way through the shoals and reefs of exclusions, exceptions to exclusions, conditions and limitations, and all the rest of the qualifying fine print, whether or not in so-called plain language. We are, therefore, convinced that it is the declaration page, the one page of the policy tailored to the particular insured and not merely boilerplate, which must be deemed to define coverage and the insured's expectation of coverage. And we are also convinced that reasonable expectations of coverage raised by the declaration page cannot be contradicted by the policy's boilerplate unless the declaration page itself clearly so warns the insured. [Id. at 346-47.]
With these principles in mind, we have reviewed Universal's policy, which exceeds two-hundred pages, and its twelve page declaration sheet. The policy and declaration pages are not only lengthy, but they are complex and confusing. Part of the problem is that the policy provides multiple types of coverage without clearly delineating the differences in the paperwork. In a number of material respects, the declaration pages are almost incomprehensible to anyone not well versed in Universal policies and the format for its declaration pages. The different types of coverages are not clearly delineated in a visual way on the declaration pages. Further, some lines on the declaration pages are to be read horizontally, from left to right, and other sections place the information vertically, top to bottom, although which is which is not apparent from the layout of the pages.
With respect to UIM coverage, the declaration pages are unclear on whether the coverage limit on a single accident is $15,000 or $300,000, because both numbers appear on the declaration pages. Indeed, on the portion of the declaration page dealing with automobile coverage which Universal contends governs this claim, the number $300,000 appears in the column to the right of the words "UNDERINSURED MOTORISTS." However, at this point, Universal contends that the declaration sheet must be read vertically, and a few lines under the $300,000 appear the numbers $15,000 and $30,000, which Universal contends is the applicable limit. Certainly, if we were solely to rely on the declaration pages to determine the reasonable expectations of the insured, Universal would lose this appeal.
However, despite this confusion in the declaration pages, the evidence indicates that Michael Freund's employer knew exactly what UIM coverage it was receiving. Included in the policy is a document entitled "UNINSURED-UNDERINSURED MOTORISTS COVERAGE ELECTIVE OPTIONS FORM NEW JERSEY." This form is clear and unambiguous. It is dated November 14, 2003, about two weeks before the policy's effective date, and is signed by Philip Seagull, a principal or officer of H-K Tire Company. In the form, H-K Tire Company clearly elected the minimum coverage for UM/UIM benefits as provided for by law, with the exception that a $300,000 limit governed the UM/UIM coverage for two designated individuals, Bonnie Seagull and Phil Seagull.
We conclude that where, as here, the policyholder elected specific coverage in a clear and unambiguous, signed and dated writing made close in time to the date of the declaration pages, the written election will prevail over any ambiguity in the declaration pages, because, in these circumstances, the reasonable expectation of the policyholder is that the coverage is limited by the election.
We note that this election of coverage was not signed by plaintiff Michael Freund, who is an insured by virtue of his employment. However, nothing in the record indicates that he saw the Universal policy or declaration pages before this accident and that he had any reasonable expectation that his UIM coverage would be $300,000 under his employer's policy. Nor does the record support a finding that his employer had any reasonable expectation that Freund's coverage would be above the legal limits.