On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-2136-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner and Sabatino.
The Town of Kearny (Kearny or the Town) appeals from a trial court order dated September 6, 2005, in favor of New Jersey Manufacturers Insurance Company (NJM), and a December 8, 2009 order in favor of General Security Property and Casualty Insurance Company (General). Except for the denial of Kearny's counsel fee motion, which we affirm, we reverse both orders.
Norman Swartz, a Kearny police officer, was involved in an accident while on duty in his police vehicle. Swartz sued the tortfeasors and settled for their entire $100,000 policy. He then pursued a claim for underinsured motorist benefits (UIM) by seeking UIM arbitration with both Kearny and his personal auto insurer, NJM. When a dispute arose concerning the UIM coverage, NJM filed a declaratory judgment action in Hudson County against Kearny, Kearny's excess insurer General, and Swartz, contending that Swartz was entitled to UIM coverage under the General policy. Swartz filed a cross-claim against Kearny and General. Swartz also filed a separate lawsuit in Essex County against NJM, Kearny and General, seeking UIM payment for his serious injuries.
We pause here to describe the relevant insurance policies involved in this case. The NJM policy provided Swartz with $300,000 in UIM coverage, but also provided that "with respect to a vehicle you do not own [the UIM coverage] shall be excess over any other collectible insurance providing such coverage on a primary basis." Hence, if the General policy provided the primary UIM coverage for the accident, the NJM policy would be excess to that coverage. See Magnifico v. Rutgers Cas. Ins. Co., 153 N.J. 406, 416 (1998).
We next describe Kearny's insurance coverage. By an ordinance adopted in 1995, Kearny had established a $100,000 self-insurance fund "pursuant to the provisions of N.J.S.A. 40A:10-6," which permits a municipality to create such a fund. The terms of that fund were set forth in the ordinance's statement of purposes. In pertinent part, those purposes were:
A. To insure against liability resulting from the use or operation of motor vehicles, . . . owned by, or controlled by, the Town of Kearny. . . .
B. To insure against liability for the Town of Kearny's negligence and that of its officers, employees and servants . . . .
C. Liability resulting from claims and petitions filed by employees pursuant to the New Jersey Workers Compensation Act . . . .
Notably, nothing in the ordinance suggested that Kearny intended to create or fund insurance for anything beyond its possible legal "liability." The ordinance did not mention creating underinsured motorist insurance or any other type of coverage that Kearny was not legally required to provide. See Downey v. City of Elizabeth, 273 N.J. Super. 335, 339 (App. Div. 1994) (municipal self-insurer is not required to provide UIM coverage).
To protect against its possible liability for amounts over $100,000, Kearny purchased an excess policy from General, which provided $5 million in coverage. However, under the terms of the policy, Kearny would have to exhaust its $100,000 ...