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Janet Duddy v. Government Employees Insurance Company (Geico

July 1, 2011


On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-311-09.



Argued February 15, 2011

Before Judges Wefing, Baxter and Koblitz.

The opinion of the court was delivered by WEFING, P.J.A.D.

Plaintiff Janet Duddy appeals from trial court orders granting summary judgment to defendant Government Employees Ins. Co. (GEICO) and denying her subsequent motion for reconsideration. After reviewing the record in light of the contentions advanced on appeal, we reverse.

Plaintiff had an automobile insurance policy with GEICO that provided coverage for two automobiles, one of which was a 2004 Pontiac GTO used by her son. He decided to sell the vehicle and placed an ad on Craigslist. George Gibson responded to the ad and, after inspecting the car, said he would purchase it. They agreed on a price of $15,000. Gibson said he would return on April 4, 2008, to pay for the car and pick it up. Plaintiff called GEICO to notify it that the Pontiac should be dropped from her policy and a replacement vehicle added. The individual to whom she spoke on the telephone indicated this would be attended to.

Gibson did return on April 4, and he gave plaintiff $2,000 in cash and a cashier's check drawn on Bank One, a unit of JP Morgan Chase, for $13,000. Plaintiff handed over the keys and the title, and Gibson drove away. The following day, she deposited the check into her account with Bank of America, which credited her with the proceeds. Approximately a week later, her account was debited $13,000. When she contacted her bank, and then Chase, she learned that the cashier's check Gibson had given to her was fraudulent. A subsequent investigation revealed that Gibson had been paid by an individual named Troy Richardson to serve as an intermediary in the transaction. The car was never recovered, and Richardson subsequently entered a plea of guilty to a charge of receiving stolen property.

N.J.S.A. 2C:20-7a.

When plaintiff learned what had happened, she promptly reported her loss to GEICO. GEICO initially advised her, in a letter dated May 8, 2008, that the loss was not covered because she had requested on April 3, 2008, that the GTO be removed as a covered vehicle on April 4, 2008, and the insurer, acting on her request, had removed the vehicle from the policy at 12:01 a.m. on April 4. She protested that GEICO had acted improperly in deleting coverage for the vehicle on the first minute of the day on which it was to be picked up. GEICO no longer asserts that action as a basis to deny coverage. Rather, on November 17, 2008, GEICO sent plaintiff a letter declining coverage because she had sold the vehicle.

Plaintiff filed suit, relying on that portion of her GEICO policy that included theft as a covered loss under the comprehensive coverage portion of her policy. GEICO, in turn, argued that the loss was not covered because another portion of the policy excluded as a covered loss a loss that resulted from sale of an owned auto. The trial court, on cross-motions for summary judgment, found this to be a sales transaction and thus within the policy's exclusionary language. This appeal followed.

"The interpretation of contracts and their construction are matters of law for the court subject to de novo review." Sealed Air Corp. v. Royal Indem. Co., 404 N.J. Super. 363, 375 (App. Div.), certif. denied, 146 N.J. 601 (2008). We note that this dispute with respect to the meaning of plaintiff's insurance policy is governed by certain underlying legal principles that are well settled.

We begin with an overview of the fundamental rules for interpreting insurance policies. As contracts of adhesion, such policies are subject to special rules of interpretation. . . .[and] should be construed liberally in the insured's favor to the end that coverage is afforded to the full extent that any fair interpretation will allow. Notwithstanding that premise, the words of an insurance policy should be given their ordinary meaning, and in the absence of an ambiguity, a court 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) (citations omitted).]

Thus, those clauses of an insurance policy that afford coverage are to be broadly construed in favor of the insured so as not to defeat the insured's reasonable expectations. Sealed Air, supra, 404 N.J. Super. at 375 (noting the "well-settled principles governing the interpretation of contracts of insurance that mandate broad reading of coverage provisions, narrow reading of exclusionary provisions, resolution of ambiguities in the insured's favor, and ...

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