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Katchen v. Government Employees Insurance Co.

Superior Court of New Jersey, Appellate Division

January 22, 2019

ROBERT KATCHEN, Plaintiff-Respondent,

          Submitted November 27, 2018

          On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2766-16.

          Rudolph & Kayal, PA, attorneys for appellant (Darren C. Kayal, on the briefs).

          Blume, Forte, Fried, Zerres & Molinari, PC, attorneys for respondent Robert Katchen (David M. Fried, on the brief).

          Kriney & Vaughan, attorneys for respondent Rider Insurance Company (William E. Vaughan, on the brief).

          Murray A. Klayman, PC, attorneys for respondent Farmers Insurance Company of Flemington (Murray A. Klayman, on the brief).

          Before Judges Fisher, Hoffman and Suter.

          HOFFMAN, J.A.D.

         In this appeal, we consider whether an auto insurer may combine uninsured (UM) and underinsured motorist (UIM) coverage in a single section and include exclusions not listed on the policy's declaration page. We also consider if an insurer may exclude UIM coverage for an accident involving a vehicle owned by the insured but not covered under the subject policy. Because we find the exclusion does not violate public policy or result in ambiguity, we reverse.


         In December 2015, plaintiff suffered injuries in a motor vehicle accident while operating his Harley Davidson motorcycle. Prior to settling with the other driver for his policy limit of $25, 000, plaintiff submitted a UIM claim under three insurance policies he maintained: a motorcycle policy issued by defendant Rider Insurance Company (Rider), a commercial auto policy issued by defendant Farmers Insurance Company of Flemington (Farmers), and a personal auto policy issued by defendant Government Employees Insurance Company (GEICO).[1]

         In response, GEICO "disclaim[ed] coverage" based on an exclusion in its policy. In its disclaimer letter, GEICO identified the relevant policy language supporting its decision.

         Section IV of GEICO's policy, which addresses both UM and UIM coverages, provides, in relevant part:

We will pay damages for bodily injury and property damage caused by an accident which the insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle or underinsured motor vehicle arising out of the ownership, maintenance[, ] or use of that vehicle.

         However, Section IV excludes coverage for "bodily injury sustained by an insured while occupying a motor vehicle owned by an insured and not described in the [d]eclarations and not covered by the Bodily Injury and Property Damage liability coverages of this policy." Because the motorcycle, although owned by plaintiff, was not listed on the policy it issued, GEICO determined it did not constitute an "owned auto," which the policy defined as a "vehicle described in this policy for which a premium charge is shown for these coverages." Based upon this determination, GEICO denied plaintiff's claim.

         Upon receiving GEICO's disclaimer, plaintiff filed a complaint against all three defendant insurance carriers, seeking a declaratory judgment that the UIM coverage of all three carriers applied to the subject accident. GEICO then filed a motion for a declaratory judgment, urging the court to find its owned-motor-vehicle exclusion "valid, unambiguous, and enforceable." The motion court denied GEICO's motion, viewing the language of GEICO's policy as ambiguous, and holding that GEICO failed "to comply with the statutory requirements [of] N.J.S.A. 17:28-1.1."

         The parties thereafter came to an agreement that Rider and Farmers would pay their pro-rata share of the $975, 000 in UIM coverage owed to plaintiff, and GEICO would take this appeal; if GEICO does not prevail, it would pay its pro-rata share as well. Plaintiff, Rider, and Farmers (respondents) all oppose GEICO's appeal and urge us to affirm.


         We review the interpretation of a contract de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995); Sealed Air Corp. v. Royal Indem. Co., 404 N.J.Super. 363, 375 (App. Div. 2008). When an insurance contract's terms are clear and unambiguous, we interpret the policy as written, using the "plain, ordinary meaning" of the words used. Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001). But where an ambiguity arises, we interpret the policy in favor of the insured and against the insurer. President v. Jenkins, 180 N.J. 550, 562-63 (2004).

         An ambiguity exists when "the phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage." Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979). We consider the entire policy in determining if an ambiguity exists, but do 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). Insurance policies are to be interpreted narrowly, but the provisions within are presumed valid and effective if "specific, plain, clear, prominent, and not contrary to public policy." Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997) (citing Doto v. Russo, 140 N.J. 544, 559 (1995)).

         On appeal, GEICO argues the motion judge incorrectly found the subject policy ambiguous and in violation of N.J.S.A. 17:28-1.1. GEICO asserts its exclusion unambiguously bars UIM coverage for a loss sustained by plaintiff while operating a ...

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