April 21, 2011
MAX C. STEMBER-YOUNG, PLAINTIFF,
PALISADES INSURANCE COMPANY, DEFENDANT-RESPONDENT, AND SELECTIVE INSURANCE COMPANY OF AMERICA, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-2534-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 30, 2011
Before Judges Lihotz and J. N. Harris.
This is another appeal -- in an ever-increasing procession of automobile liability insurance coverage disputes -- that relates to a step-down provision affecting underinsured motorist (UIM) protection. Co-defendant Selective Insurance Company of America (Selective) appeals from the following two orders entered by the Law Division: (1) the March 23, 2008*fn1 order granting summary judgment to co-defendant Palisades Insurance Company (Palisades) declaring that Palisades's step-down of UIM benefits was valid, thereby making Selective solely responsible for plaintiff's first-party UIM benefits and (2) the June 12, 2009 order denying Selective's motion for reconsideration. We affirm.
The operative facts relating to this appeal are not in dispute. We derive them from the motion record created by Selective's and Palisades's cross-motions for summary judgment.*fn2
The dispute between the parties has its source in a collision on February 5, 2005, between automobiles driven by then sixteen-year-old plaintiff Max C. Stember-Young, and non-party Brandon L. Abelson. Stember-Young claimed that Abelson negligently operated his vehicle, which proximately resulted in Stember-Young's serious personal injuries.
Stember-Young -- with permission -- was driving the car of his grandfather, Cyrus Stember, at the time of the accident. Pursuant to a Property Settlement Agreement that was incorporated into his parents' divorce, Stember-Young resided primarily with his mother, Susan Stember-Young. Stember-Young maintained a good relationship with his father, Andrea Young,*fn3 and often spent time at his father's apartment.
These four automobile insurance policies were implicated by the events of February 5, 2005:
3/4 Abelson's Proformance Insurance Company
(Proformance) automobile policy with a liability limit of $100.000. 3/4 Cyrus Stember's Palisades automobile policy with UIM coverage in the amount of $500,000. 3/4 Andrea B. Young's Selective automobile policy with UIM coverage in the amount of $500,000. 3/4 Susan Stember-Young's GEICO automobile policy with UIM coverage in the amount of $100,000.
As a result of the accident and resultant injuries suffered by Stember-Young, Abelson and his insurer agreed to pay Stember-Young the limit of the Proformance policy, $100,000.
Nonetheless, Stember-Young believed that his injuries warranted compensatory damages greater than $100,000. Asserting that he was entitled to first-party UIM coverage under his grandfather's and father's automobile insurance policies, Stember-Young commenced the instant action against Palisades and Selective, but not against GEICO,*fn4 seeking arbitration of his UIM claim (count one) and the payment of UIM benefits from both insurers (count two).
Following the court's transmittal of the dispute to arbitration, with a resultant award finding that Stember-Young was entitled to gross damages of $375,000, three motions were filed: (1) Stember-Young moved to set a trial date, presumably on count two of the complaint to determine which insurer was responsible to pay for his net damages; (2) Selective moved for summary judgment to apportion its respective responsibility to pay the net damages from its UIM coverage; and (3) Palisades moved for summary judgment to discharge its liability for UIM benefits.
Reviewing the Palisades policy language, the Law Division determined the step-down provision "limits the [UIM] exposure . . . to the statutory minimums." Also, the court held that the coverage provided to Stember-Young under Selective's policy was dissimilar to the coverage provided by the Palisades policy because the coverage "is not subject to the same classifications or benefits." These rulings had the effect of making only Selective responsible for Stember-Young's net damages. Selective's timely motion for reconsideration was denied. Thereafter, Selective and Stember-Young settled their remaining dispute for $207,500, with Selective expressly reserving its right to seek further remedies against Palisades. This appeal followed.
Selective raises the following points for our review:
POINT I: THE COURT ERRED IN LIMITING THE PALISADES UIM COVERAGE TO $15,000 AS THERE IS NO MINIMUM STATUTORY COVERAGE FOR UIM; UIM IS A CONTRACTUAL OBLIGATION UNDER THE POLICY.
POINT II: THE COURT ERRED IN FINDING THAT THE PALISADES COVERAGE WAS DISTINGUISHABLE BASED ON "OCCUPANCY"; THE COVERAGE IS SIMILAR SO THAT THE LIMITING LANGUAGE OF THE PALISADES AND [SELECTIVE] POLICIES STEP-DOWN CLAUSES ARE APPLICABLE.
From our review of the compact record, together with the arguments of the parties' briefs, we conclude that Selective is incorrect in its first point concerning the operation of Palisades's step-down provision. Accordingly, because the Law Division properly found that Palisades's UIM benefits were not available to Stember-Young, we find it unnecessary to address Selective's second point.
All standard personal automobile insurance policies issued in this State with regard to motor vehicles registered or principally garaged here, must provide uninsured motorist (UM) coverage of at least $15,000 for injury or death to one person and $30,000 for injury or death to more than one person.
N.J.S.A. 17:28-1.1(a)(1) to (2). The statute, however, does not require that UIM coverage be included in standard liability automobile insurance policies, but rather, UIM coverage is an option that must be offered by the insurer to the named insured. N.J.S.A. 17:28-1.1(b); Allgor v. Travelers Ins. Co., 280 N.J. Super. 254, 259 (App. Div. 1995).
"UIM coverage . . . is 'personal' to the insured. Coverage is linked to the injured person, not the covered vehicle." Aubrey v. Harleysville Ins. Cos., 140 N.J. 397, 403 (1995). "UIM coverage provides 'as much coverage as the insured is willing to purchase, for his or her protection, subject only to the owner's policy liability limits for personal injury and property damages to others.'" Ibid. (quoting Prudential Prop. & Cas. Ins. Co. v. Traveler's Ins. Co., 264 N.J. Super. 251, 259-60 (App. Div. 1993)). Because it is linked to the injured party, "[o]ur case law recognizes the legitimacy of step-down provisions even though they may result in differential treatment of similar plaintiffs based on the existence of other available insurance." Pinto v. N.J. Mfrs. Ins. Co., 183 N.J. 405, 412 (2005).
The phenomenon of injured parties having recourse to multiple policies of insurance that provide UIM coverage is both unremarkable and legislatively contemplated. See Magnifico v. Rutgers Cas. Ins. Co., 153 N.J. 406, 415-16 (1998) (recognizing the legitimacy of step-down provisions); N.J.S.A. 17:28-1.1(c) (prohibiting "stacking" where more than one policy of UIM is available to the injured party). Accordingly, where a permissive driver seeks to recover damages under the UIM provision of the car owner's insurance policy in which the driver was injured, an insurer "[is] free to modify the insurance policy language to limit the UIM coverage." Pinto, supra, 183 N.J. at 413 (citing Magnifico, supra, 153 N.J. at 418).
Our starting points to determine the applicable UIM coverages are with each insurance policy's contract language and Declarations. See Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 270, 272-73 (reiterating the duty of a court to examine the plain language of the policy and emphasizing the important role that Declarations play in insurance coverage disputes); Severino v. Malachi, 409 N.J. Super. 82, 97-98 (App. Div.) (same), certif. denied, 200 N.J. 505 (2009).
The Selective policy at issue listed as the sole insured, Andrea B. Young. Page one of the Declarations provided $500,000 UM protection for each accident. However, page two contained a reference to endorsement PP04800104, which provided UIM coverage in the same amount. This UIM endorsement promised payment for damages arising from bodily injury or property damage "that an insured is legally entitled to collect from the owner or operator of an . . . underinsured motor vehicle." The term "insured" was defined as:
1. You or any "family member."*fn5
2. Any other person "occupying" "your covered auto."
3. Any person for damages that person is entitled to recover because of "bodily injury" to which this coverage applies sustained by a person described in 1. or 2. above.
The Selective UIM endorsement further contained the following "limit of liability":
a. An "insured" is not the named insured under this policy or any other policy;
b. That "insured" is insured as a spouse or family member under one or more other policies providing similar coverage; and
c. All such other policies have a limit of liability for similar coverage which is less than the limit of liability for this coverage; then our maximum limit of liability for that "insured," for all damages resulting from any one accident, shall not exceed the highest applicable limit of liability under any insurance providing coverage to that "insured" as a spouse or family member.
The Palisades*fn6 policy at issue listed Cyrus Stember and Marjorie Stember as the only named insureds. The Declarations confirmed UIM coverage of $500,000 (for each accident). The UIM provisions were contained in the policy's combined "Part E: Uninsured Motorist Coverage (Includes Underinsured Motorist Coverage)." The UIM and UM insuring agreement in Part E provided:
We will pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle or underinsured motor vehicle where such coverage is indicated as applicable in the Declarations because of:
1. Bodily injury sustained by an insured and caused by an accident.
The term "insured," for both UIM and UM purposes, was defined as:
1. You or any family member.
2. Any other person occupying your covered auto. However, this person is only entitled to the minimum statutory limits of Uninsured Motorist Coverage.
3. Any person for damages that person is entitled to recover because of bodily injury to which this coverage applies sustained by a person described in 1. or 2. above.
The Palisades UIM and UM policy language further contained the following limit of liability, which includes the challenged step-down language:
Any person qualifying as an insured under this policy and who is not the named insured, spouse or resident relative is limited to the minimum statutory coverage required by law and not those limits shown in the declarations if greater than the minimum statutory coverage but in no even will the per person, per accident limit be increased.
From this contract language, the Law Division concluded that because the Palisades policy stepped down its UM and UIM limitation of liability to the "minimum statutory coverage required by law," this meant that "[s]ince [p]laintiff has already recovered well in excess of this amount from the tortfeasor [Abelson], Palisades has no further obligation to the [p]laintiff." Selective argues that the Palisades policy provision is ambiguous and should not be enforced due to the absence of a "minimum statutory coverage" for UIM benefits. Although Selective's statement of the law arguably may be technically correct, it does not follow that the step-down is ambiguous or unenforceable.
Whether an insurance policy is ambiguous cannot be ascertained by focusing upon the contract language contained in one section of the contract. Werner Indus., Inc. v. First State Ins. Co., 112 N.J. 30, 37 (1988). Instead, the challenged section should be read in the context of the entire policy to determine whether it may be harmonized with the remainder of the policy. Zacarias v. Allstate Ins. Co., 168 N.J. 590, 603 (2001).
Stember-Young was not the named insured, spouse, or resident relative
within the contemplation of the Palisades UM and UIM contract
language. He was covered for UIM benefits only because he held the
status of being "[a]ny person qualifying as an insured" under the
terms of said policy. As such, pursuant to the plain terms*fn7
of the Palisades step-down provision, the individual maximum
limit for both UM and UIM benefits was
$15,000, the minimum
statutory coverage limit required by
N.J.S.A. 17:28-1.1. Because
this limit was below the liability limit contained in the tortfeasor's
policy, Stember-Young was not underinsured vis-a-vis Palisades, and
therefore, was not entitled to pursue a claim for UIM benefits under
the Palisades policy. See Pinto, supra, 183 N.J. at 412; Magnifico,
supra, 153 N.J. at 418.
A very similar circumstance was addressed by us in Morrison v. American International Insurance Co. of America, 381 N.J. Super. 532 (App. Div. 2005), where we interpreted a comparable combined UIM and UM step-down clause, holding:
Unlike the first two paragraphs of this section that specifically address uninsured motorist coverage, the third paragraph makes no reference to either uninsured or underinsured motorist coverage. Rather, it simply and clearly states that the insurer's liability as to any insured who is not a named insured or resident family member is the minimum amount contained in this specifically identified statute. Further, although the first page of the four-page endorsement is captioned "Uninsured Motorists," there is reference throughout the endorsement to both uninsured and under insured motorists. Because the step-down provision mentions neither class of drivers, it reasonably follows that the step-down provision applies to underinsured motorists, as well as uninsured motorists. [Id. at 541-42.]
The only significant difference between the step-down provision in Morrison and the comparable clause in this case is the precise statutory reference to N.J.S.A. 17:28-1.1 in Morrison. There, the American International Insurance Company's combined UIM and UM step-down section provided:
"[w]ith respect to any 'insured' who is not a named insured or 'family member' under this policy, our maximum limit of liability for 'bodily injury' is the minimum limit required by N.J.S.A. 17:28-1.1." [Morrison, supra, 381 N.J. Super. at 536-37 (emphasis added).]
As noted, the Palisades policy here provided:
Any person qualifying as an insured under this policy and who is not the named insured, spouse or resident relative is limited to the minimum statutory coverage required by law and not those limits shown in the declarations if greater than the minimum statutory coverage but in no even will the per person, per accident limit be increased. [(emphasis added).]
The relevant provisions of the Palisades policy are unambiguous. Therefore, the policy should be enforced as written. Universal Underwriters Ins. Co. v. N.J. Mfrs. Ins. Co., 299 N.J. Super. 307, 312 (App. Div.), certif. denied, 151 N.J. 73 (1997). Here, all of the conditions for enforcement of the step-down have been satisfied. Consequently, the Palisades policy limits UIM coverage to $15,000, far below what Stember-Young recovered from Abelson. The Law Division's grant of summary judgment in favor of Palisades was correct, as was its denial of Selective's motion for reconsideration.