December 22, 2010
PAUL GIAMBANCO, PLAINTIFF-APPELLANT,
THEODORE SHERRER, JR., CHRISTINE M. HUJBER, DEFENDANTS, AND CLARENDON NATIONAL INSURANCE COMPANY, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1032-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 20, 2010 - Decided Before Judges R. B. Coleman and Lihotz.
This case requires us to review whether a material misrepresentation made by a claimant seeking benefits during an insurance examination will forever bar coverage of future claims submitted under any subsequent policy issued by the same insurer. Plaintiff Paul Giambanco appeals from the December 4, 2009 summary judgment dismissal of his declaratory judgment action seeking underinsured/uninsured motorists (UIM/UM) and personal injury protection (PIP) benefits to compensate him for personal injuries suffered in an April 27, 2004 motor vehicle accident (the 2004 accident). Plaintiff was a front-seat passenger in a vehicle operated by Christine Hujber and insured by defendant Clarendon National Insurance Company.
Fifteen months earlier, on January 26, 2003, plaintiff had also suffered injuries in an accident while a passenger in Hujber's automobile (the 2003 accident). At that time, plaintiff completed a PIP application, an affidavit of no insurance, and an examination under oath giving inaccurate information about his identity. Specifically, plaintiff used his brother's name, date of birth and social security number, rather than his own, claiming he was in "a self-imposed witness protection program" and feared for his safety if his whereabouts were discovered. Plaintiff's deception was uncovered prior to final adjudication of his claims regarding the 2003 accident, although no question had been raised challenging the materiality of his injuries or the reasonableness and necessity of medical treatments rendered following the 2003 accident.
In the litigation initiated by plaintiff following the 2004 accident, defendant moved for summary judgment. In its review, the court relied upon the insurance policy's "Concealment or Fraud" provision, determining plaintiff's prior misstatements about his identity following the 2003 accident precluded recovery for injuries incurred in the 2004 accident, even though plaintiff had been completely forthright following the 2004 accident.
On appeal, plaintiff argues the clause relied upon by the court is ambiguous as to time, requiring an interpretation that favors plaintiff. We agree and conclude the clause is limited by the period of the policy, which has not been provided in the record. Accordingly, we reverse and remand.
These are the undisputed facts taken from the summary judgment record regarding the 2004 accident. While Hujber's vehicle was stopped at a traffic light on Route 29, where it intersects with South Warren Street in Trenton, Theodore Sherrer's vehicle struck Hujber's automobile in the rear. Plaintiff, a front-seat passenger in Hujber's car, sustained injuries, including disc bulges at L4-5 and C5-6, as well as tears in his right knee medial meniscus, right anterior cruciate ligament and shoulder.
In the course of discovery undertaken in plaintiff's negligence action following the 2004 accident, it was learned Sherrer had no automobile liability insurance when his vehicle struck Hujber's vehicle. Defendant moved to intervene. Plaintiff put defendant on notice of his claim for UIM/UM benefits and amended his complaint to directly name defendant in the action and requested a determination that defendant was obligated to pay his PIP and UIM/UM benefit claims. The court added defendant as a direct party. Defendant commenced discovery and participated in non-binding arbitration.
Prior to its direct involvement in the 2004 accident litigation, defendant had uncovered plaintiff's false statements during the 2003 accident insurance investigation. Defendant became aware of plaintiff's misstatements when its investigator, who had spoken to plaintiff following the 2003 accident, was also assigned to conduct plaintiff's examination under oath in the insurance investigation of the 2004 accident. Defendant's investigator recognized plaintiff from the previous encounter and plaintiff admitted he filed the 2003 claim for PIP benefits using his brother's name, "Salvatore Giambanco," along with Salvatore's social security number and date of birth.
In the litigation resulting from the 2003 accident, defendant moved to disclaim its obligation to provide PIP benefits to plaintiff because he had manufactured his identity. The court granted defendant's request for summary judgment on July 26, 2006 and relieved defendant "of any duty to provide insurance coverage" to plaintiff under the policy. Further, plaintiff was ordered to repay $4,174.13 in PIP benefits defendant had previously paid.
At some point, in the 2004 accident litigation, defendant, armed with the July 26, 2006 order from the 2003 accident litigation, asserted it had no liability for plaintiff's PIP and UIM/UM claims. The parties filed cross-motions for summary judgment. During oral argument before the Law Division, plaintiff explained he had been completely truthful in the inquiry surrounding the 2004 accident and refuted defendant's contention that the policy's language precluded his current recovery. Defendant argued that although the July 26, 2006 order had been entered with respect to the 2003 accident litigation, it should equally apply to plaintiff's demands for coverage regarding the 2004 accident. Alternatively, defendant suggested the policy's "Concealment or Fraud" provision barred plaintiff's 2004 accident claims.
The trial court did not impose the terms of the prior order to bar plaintiff's recovery in the current litigation but agreed with defendant's argument to impose the policy's fraud clause, which stated: "There is no coverage under this Policy if you or any other person insured under this Policy has made false statements with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under this Policy." The Law Division judge found the clause was not only unambiguous, but sufficient to deny coverage. The court concluded the "any claim" language used was designed to protect the insurance company and deter insurance fraud. Accordingly, defendant's "right to declare the policy void as to plaintiff" was upheld. Plaintiff appealed.
A motion for summary judgment should be granted only when the moving party establishes the absence of any genuine issue as to a material fact. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 539-40 (1995). In our review of a grant or denial of summary judgment, we apply the same standard as the trial court. Moore v. Woman to Woman Obstetrics & Gynecology, L.L.C., 416 N.J. Super. 30, 40 (App. Div. 2010). We first decide whether there was a genuine issue of fact. If none is presented we decide whether the lower court's ruling on the law was correct. Brill, supra, 142 N.J. at 538-41.
We begin our review by recognizing we must consider the facts in the light most favorable to plaintiff, granting him all reasonable inferences that can be drawn from the established facts. Ledley v. William Penn Life Ins. Co., 138 N.J. 627, 635 (1995). Further, we owe no special deference to the trial judge's interpretation of the law and the legal consequences that flow from the established facts. Zabilowicz v. Kelsey, 200 N.J. 507, 512-13 (2009); Manalapan Realty L.P. v. Twp. of Manalapan, 140 N.J. 366, 378 (1995); Homesite Ins. Co. v. Hindman, 413 N.J. Super. 41, 46 (App. Div. 2010); Sealed Air Corp. v. Royal Indem. Co., 404 N.J. Super. 363, 375 (App. Div.), certif. denied, 196 N.J. 601 (2008); Spring Creek Holding Co. v. Shinnihon U.S.A. Co., 399 N.J. Super. 158, 190 (App. Div.), certif. denied, 196 N.J. 85 (2008).
Our review must also be guided by well-settled principles governing the interpretation of insurance contracts. Primarily, we note "the words of an insurance policy are to be given their plain, ordinary meaning. In the absence of any ambiguity, courts should not write for the insured a better policy of insurance than the one purchased." Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001) (internal quotations and citations omitted). "A liberal construction of an insurance policy is not warranted when the policy is clear on its face." Cassilli v.
Soussou, 408 N.J. Super. 147, 154 (App. Div. 2009) (internal quotation omitted). "In the absence of ambiguity,  a court must enforce the policy as written." Ibid. (internal quotation omitted).
However, because insurance policies are "contracts of adhesion, such policies are subject to special rules of interpretation." Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537 (1990). When an ambiguity is discerned, such as, "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[,]" we "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[.]" Zacarias, supra, 168 N.J. at 601 (internal quotations and citations omitted). See also Progressive Cas. Ins. Co. v. Hurley, 166 N.J. 260, 277-78 (2001) (stating the interpretation of ambiguous language favoring coverage for the insured should be applied); Cassilli, supra, 408 N.J. Super. at 154 (stating courts will generally "construe ambiguous language in favor of coverage for the insured").
As noted, the instant dispute centers on the "Concealment or Fraud" clause, which mandates forfeiture by an "insured who has intentionally concealed or misrepresented any material fact or circumstance in connection with any claim" under the policy. "Because the law disfavors forfeitures, Hampton v. Hartford Fire Ins. Co., 65 N.J.L. 265, 267 (E. & A. 1900), such clauses should be construed if possible to sustain coverage." Longobardi, supra, 121 N.J. at 537.
The Supreme Court has reviewed the meaning of policy clauses similar to the one presented here and instructed "'concealment or fraud' clauses apply when an insured misrepresents facts to the insurer that is investigating a loss." Id. at 538 (citations omitted). In this regard, the trial judge apparently adopted Longobardi's holding that "the intentional concealment or misrepresentation of any material fact relating to the insurance will void the policy. [As] any means any." Id. at 539 (quotations and citations omitted). The Court had instructed that the scope of the concealment or fraud provision extends not only to misrepresentations made when applying for insurance, but to misstatements made during the insurer's investigation of a claim. Ibid.
We are aware of no reported opinions explicitly addressing the circumstance here presented. Other matters interpreting the impact of a policy's fraud clause address an insured's material misrepresentation made either when applying for coverage or in the course of a claim investigation. See Id. at 543 (examining insured's material false statement during his examination under oath "in an effort to or for the purpose of hindering, deflecting or misleading defendant in the course of its investigative process"); Ledley, supra, 138 N.J. at 631-632 (examining insured's knowing misrepresentation of material facts relating to his health treatment). This matter is different.
Plaintiff did not challenge the application of the concealment or fraud provision to bar his claims originating from the 2003 accident. He also conceded the phrase "any claim" would extend to bar any type of coverage sought including PIP, UIM/UM, collision, comprehensive or liability. However, he challenges the temporal interpretation sought by defendant, arguing "it strains credulity . . . that there is no coverage . . . under the [defendant's] policy for future claims where [plaintiff] did not make false statements with the intent to conceal or misrepresent a material fact with [regard to] that future claim." Plaintiff suggests he has been punished for his misrepresentation following the 2003 accident and the benefits now sought must be allowed because he made no misrepresentation in the course of the 2004 accident investigation.
Defendant argues the unambiguous policy clause denies coverage any time a claimant conceals or misrepresents any material fact or circumstance in connection with any benefits sought for an accident that occurred under the policy. Defendant maintains "once a claim is fraudulently made," "the policy provides no more insurance coverage." Further, defendant asserts the forfeiture of coverage is "absolute," and it logically follows that all subsequent claims are precluded "as to that person."
Although we agree with defendant's argument that the policy clause "does not limit denial of coverage [solely] to those claims [occurring under the policy] where the claimant misrepresents himself or herself," we do not subscribe to defendant's proposed expansion of the fraud clause, extending its reach into perpetuity, such that plaintiff will forever be prevented from seeking coverage under an automobile liability policy between Hujber and defendant. The barring of benefits does not attach to individual claimants. Rather, the bar applies "under the policy," meaning the period of the policy during which the accident occurred.
We specifically note that the form policy included in the record limits claims to those that occur during the policy period. See Zuckerman v. Nat'l Union Fire Ins. Co., 100 N.J. 304, 310-11 (1985) (stating an "occurrence" policy covers all acts occurring within the policy period regardless of when the claim is filed). Section III discusses "When and Where Coverage Applies," stating "The coverages you choose apply to accidents and losses that take place during the policy period."
Plaintiff's misrepresentation following the 2003 accident would attach to possible claims he might make during that policy period. However, once the period ends, a new policy begins. Hujber must reapply and redefine the requested insurance coverages for the next policy period. Likewise, defendant reassesses its risks and computes the applicable premium. Thus, if plaintiff's second claim was in all respects honestly presented and validly made under a new policy for a subsequent policy period, the fraud clause is not triggered and defendant's contractual obligations remain intact.
The two accidents were fifteen months apart. While it is likely they fell under separate policy periods, we cannot be certain of this fact because the Declarations defining the policy periods were omitted from the record. Our experience suggests automobile liability policies do not exceed a period of twelve months, with many extending coverage for merely six months.
Consequently, if the 2004 accident occurred during a new policy period, and not the same policy period as the 2003 accident, plaintiff's claims will not be barred as there is no basis to impose the fraud clause. We reverse the December 4, 2009 order and remand the matter for review of the policy periods and for further proceedings consistent with our opinion.
Reversed and remanded.
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