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Nowell James and Maryann James, His Wife v. New Jersey Manufacturers Insurance Company


July 5, 2012


On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2147-09.

Per curiam.


Submitted March 13, 2012 -

Before Judges Messano and Kennedy.

Plaintiffs Nowell and Maryann James appeal from the grant of summary judgment to defendant New Jersey Manufacturers Insurance Company. We have considered the arguments raised in light of the record and applicable legal standards.

We reverse.

On July 5, 2007, plaintiff was operating a motor vehicle owned by his employer, Metric Plumbing and Heating, Inc. (Metric), when it was struck by a vehicle owned by John J. Demeo and operated by Rita T. Demeo.*fn1 Defendant insured Metric's vehicle under a policy issued March 18, 2007, that provided uninsured/underinsured (UM/UIM) coverage with a limit of $500,000. Plaintiff settled his claim with the Demeos for their policy limits, $100,000, on August 3, 2008.

The policy issued by defendant to Metric included a step-down provision applicable to the UM/UIM coverage. In essence, the step-down clause limited the UM/UIM coverage available to a covered employee of Metric, such as plaintiff, to the amount of coverage contained in that employee's personal or family auto insurance policy. The personal policy issued to plaintiff's wife contained a UM/UIM limit of $50,000. As a result, defendant determined the Demeo vehicle was not "underinsured" and apparently denied plaintiff's claim.

On July 2, 2009, plaintiff filed suit seeking payment of unpaid and future medical bills, compensatory damages and counsel fees. Defendant moved for summary judgment citing the policy's "step-down" provision. Plaintiff countered by arguing that, N.J.S.A. 17:28-1.1(f), effective September 10, 2007, which essentially prohibited the use of step-down provisions in policies issued to corporate and business entities, applied.*fn2

Citing our opinions in Olkusz v. Brown, 401 N.J. Super. 496 (App. Div. 2008), and Hand v. Philadelphia Insurance Co., 408 N.J. Super. 124 (App. Div.), certif. denied, 200 N.J. 506 (2009), the trial judge granted defendant's motion and this appeal followed.

Plaintiff similarly argues before us that he is not subject to the step-down clause because the Amendment applies retroactively. Defendant counters by arguing that neither Olkusz nor Hand applied the Amendment retroactively to an accident that occurred prior to September 10, 2007, and, therefore, the step-down provision applies to defeat plaintiff's claim.

The Olkusz panel concluded the Legislature did not clearly indicate its intention that the Amendment be given retroactive application. Olkusz, supra, 401 N.J. Super. at 499. They held that the Amendment did not apply to "[a]ny UM/UIM claim predicated upon an accident which predates the adoption of N.J.S.A. 17:28-1.1(f)." Id. at 506.

Our colleagues in Hand, however, reached a different conclusion. "[C]onduct[ing] the legislative intent analysis that was not addressed in Olkusz," Sexton v. Boyz Farms, Inc., 780 F. Supp. 2d 361, 365 (D.N.J. 2011), that panel concluded "the Legislature intended [the Amendment] apply retroactively." Hand, supra, 408 N.J. Super. at 138. In particular, the panel held "that the Legislature impliedly intended to reform all commercial vehicle insurance policies in existence on the effective date of the Amendment, and to provide an immediate remedy to those making a claim for coverage under their employer's UM/UIM policy provisions as of that date." Id. at 141; Sexton, supra, 780 F. Supp. at 365.

For the reasons expressed in the opinion, we find the conclusion reached by the Hand panel to be more persuasive than that expressed in Olkusz. However, the Hand panel determined "that retroactive application to the Amendment to the facts of th[at] case would work a manifest injustice to [the insurer]." Hand, supra, 408 N.J. Super. at 143. In this regard, the panel particularly noted:

In this case, the policy expired years before the Amendment was enacted.

Retroactive application of the Amendment in these circumstances would enable a plaintiff to seek benefits under any policy of insurance, whenever it was issued, as long as the statute of limitations, six years, had not expired. That universe of potential claimants might be further extended to a small degree by permitting minor plaintiffs, named-insureds on their own policies, to now present a claim for an earlier accident occurring even beyond the six-year limit. No one can, or has, legitimately estimated what the universe of potential claimants could in fact be. [Id. at 145-46.]

The panel specifically chose not to engage in a similar analysis as to whether it would be manifestly unjust to apply the Amendment in a limited retroactive fashion to only those contracts of insurance extant on the Amendment's effective date, thereby limiting the Amendment's retroactive effect to a finite set of insurance policies, as opposed to an uncertain universe of potential claims. [Id. at 146 n.8.]

The issue not considered in Hand is clearly presented in this case. Defendant's policy was issued to Metric in March 2007 and was extant on the day of plaintiff's accident, July 5, 2007, and on the effective date of the Amendment, September 10, 2007. As a result, defendant's policy was effectively reformed as of September 10, 2007, and the step-down provision was eliminated. See Watkins v. Davis, 268 N.J. Super. 211, 212-13, (App. Div. 1993) (where we characterized the effect of the "deemer" statute, N.J.S.A. 17:28-1.4, to be the "automatic reformation of out-of-state policies").

As the Hand panel noted, "Our courts have repeatedly recognized the public policy concerns that undergird the automobile insurance industry in this state, and the ability on the part of the Legislative and Executive branches to retroactively amend the statutory or regulatory scheme to achieve a desired result without violating the insurer's due process rights." Hand, supra, 408 N.J. Super. at 143 (citing State Farm Mut. Auto. Ins. Co. v. State, 124 N.J. 32, 64-65 (1991); Affiliated FM Ins. Co. v. State, 338 N.J. Super. 540, 561-62 (App. Div. 2001); In re Am. Reliance Ins. Co., 251 N.J. Super. 541, 557 (App. Div. 1991), certif. denied, 127 N.J. 556 (1992).

We do not believe the "automatic reformation" of policies extant on the effective date of the Amendment is manifestly unjust or otherwise impairs defendant's contractual rights. We therefore reverse and remand the matter to the trial court for further proceedings consistent with this opinion.

Reversed and remanded. We do not retain jurisdiction.

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