EDWARD LESKE COMPANY, INC., et al. v. CRUM & FORSTER INSURANCE COMPANY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0914-05T30914-05T3

EDWARD LESKE COMPANY, INC., JAMES

DEL GUERCIO, INDIVIDUALLY, and

JAMES DEL GUERCIO AS GUARDIAN AD

LITEM FOR GABRIELLE DEL GUERCIO,

Plaintiffs-Appellants,

v.

CRUM & FORSTER INSURANCE COMPANY,

Defendant-Respondent.

 

Argued October 30, 2006 - Decided November 27, 2006

Before Judges Lintner and Seltzer.

On appeal from the Superior Court of

New Jersey, Law Division, Monmouth County, L-2280-03.

Russell Macnow argued the cause for appellants (Lawrence S. Reynolds, attorney).

Margaret F. Catalano argued the cause for respondent (Carroll, McNulty & Kull, attorneys; Ms. Catalano, of counsel and on the brief).

PER CURIAM

Edward Leske Company, Inc. appeals from a summary judgment dismissing its declaratory judgment complaint seeking underinsured motorist (UIM) coverage under its commercial umbrella policy issued by defendant, Crum & Forster Insurance Company. We affirm.

On June 4, 2000, Gabrielle Del Guercio, two years of age, was standing in her neighbor's driveway when she sustained catastrophic injuries after being struck by a car driven by the neighbor. Her father, James Del Guercio, was the owner and an employee of Edward Leske Company, Inc. (Leske). At the time of the accident, Leske was insured with a business automobile policy issued by defendant, which provided UIM coverage to James as a named insured and Gabrielle as a family member, with limits of $1,000,000 for injuries sustained as a pedestrian struck by a non-owned automobile. Leske was also covered, at that time, with a commercial umbrella (umbrella) insurance policy issued by defendant with limits of $10,000,000.

James and his wife brought suit against the neighbor on behalf of Gabrielle. They also demanded that defendant provide UIM coverage for Gabrielle under the umbrella policy. After defendant rejected their demand for coverage under the umbrella policy, James and his wife settled Gabrielle's suit for $1,100,000, representing the policy limits of their neighbor's liability coverage. The declaratory judgment complaint followed.

Defendant's umbrella policy provided the following relevant provisions:

INTRODUCTION

Various provisions in this policy restrict coverage. Read the entire policy carefully to determine rights, duties and what is and is not covered.

. . . .

I. COVERAGE

A. We will pay on behalf of the "Insured" those sums in the excess of the "Retained Limit" which the "Insured" by reason of liability imposed by law, or tort liability assumed by the "Insured" under contract prior to the "Occurrence", shall become legally obligated to pay as damages for:

1. "Bodily Injury" or "Property Damage" occurring during the Policy Period stated in Item 2 of the Declarations and caused by an "Occurrence";

2. "Personal Injury" caused by an "Occurrence" committed during the Policy Period; or

3. "Advertising Injury" caused by an "Occurrence" committed during the Policy Period.

Damages because of "Bodily Injury" include damages claimed by any person or organization for care or loss of services resulting at any time from the "Bodily Injury."

. . . .

III. NAMED INSURED AND INSURED

A. The term "Named Insured" means any individual or organization stated in Item I of the Declarations . . . .

B. The term "Insured" means the "Named Insured" and:

. . . .

8. any person [or] organization included as an insured in the "Underlying Insurance"; or

9. at your option, any person or organization (other than the "Named Insured") included as an additional insured in the "Underlying Insurance", but only with respect to liability arising out of "Your Work", "Your Product", or property owned or used by you.

(emphasis added).

Section V of the umbrella policy sets forth limitations of the policy, and a separate "EXCLUSIONS" section delineates what the policy did not apply to. The words "underinsured motorist" do not appear anywhere within the umbrella policy.

Plaintiffs' expert, Armando Castellini, testified at his deposition that it has become "common practice" to include uninsured (UM) and UIM coverage in commercial umbrella policies. He believed that the umbrella policy included UIM coverage because it did not specifically exclude it. He also maintained that the premium worksheet's inclusion of a place for "UM" premium, although blank, was indicative that "UM" coverage was provided in the commercial umbrella policy. He conceded, however, that the premium rate calculations for the umbrella policy used by defendant's underwriter did not include a premium for UM coverage.

Defendant's expert, Roger Quigley, stated that the use of UM coverage in defendant's rating worksheet was normal because the worksheet is used in multiple states, some of which require the inclusion of UM and UIM insurance. He testified that UIM coverage was not included in the premium rating calculations. He opined that defendant's policy only covered liability incurred by the insured. Because the umbrella policy did not have first-party coverage, Quigley concluded it would be illogical to have a specific exclusion for UM/UIM coverage. Describing how the premium was calculated, defendant's underwriter, Susan Nelson, explained that the only manual rates used for automobile coverage were those for liability in arriving at the total premium charged for the umbrella policy. According to Nelson, the manual rates for personal injury protection (PIP), UM/UIM, and Med Pay coverage "from the primary policy were not included in calculating the manual rate for the umbrella policy."

Against this factual backdrop, Leske asserts on appeal that there were significant facts present to establish a reasonable expectation on its part that UIM coverage was provided under the umbrella policy. Leske essentially argues that, because there is nothing in the policy or the declaration page indicating the absence of UIM coverage, a fair reading of the policy would lead an insured to believe that UIM coverage was provided. It also maintains that the policy language is ambiguous.

New Jersey does not require insurance companies to offer UIM coverage in umbrella insurance policies. Doto v. Russo, 140 N.J. 544, 553 (1995) (citing N.J.S.A. 39:6A-14 (requiring automobile owners to maintain UI coverage in their primary automobile insurance policies); N.J.S.A. 17:28-1.1b (setting forth the minimum UIM coverage amounts insurers must give as an option in primary insurance policies)). Interpretation of an insurance contract raises questions of law and, therefore, it is proper to resolve such questions on summary judgment. Adron, Inc. v. Home Ins. Co., 292 N.J. Super. 463, 473 (App. Div. 1996). A court reviewing the terms and conditions of an insurance policy "should give the policy's words 'their plain, ordinary meaning.'" President v. Jenkins, 180 N.J. 550, 562 (2004) (quoting Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001)). If the terms of the insurance policy are clear and unambiguous, the court "should interpret the policy as written and avoid writing a better insurance policy than the one purchased." Ibid. (citing Gibson v. Callaghan, 158 N.J. 662, 670 (1999)).

Insurance contracts are viewed as "contracts of adhesion between parties who are not equally situated." Meier v. N.J. Life Ins. Co., 101 N.J. 597, 611 (1986). Therefore, courts will closely examine the terms of insurance policies "'to avoid injury to the public.'" President, supra, 180 N.J. at 562 (quoting Sparks v. St. Paul Ins. Co., 100 N.J. 325, 335 (1985)). If the insurance contract is ambiguous and could be construed either for the insured or for the insurer, the terms of the policy will generally be construed in favor of the insured, the non-drafting party, as providing the coverage sought. Id. at 563 (citing 495 Corp. v. N.J. Ins. Underwriting Ass'n, 86 N.J. 159, 164 (1981)); see also Doto, supra, 140 N.J. at 556; Martusus v. Tartamosa, 150 N.J. 148, 159 (1997).

However, an insurance contract is only considered ambiguous "where 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). The court should be guided by the plain language of the policy and should not torture the language used to create ambiguities. Stiefel v. Bayly, Martin and Fay of Conn., Inc., 242 N.J. Super. 643, 651 (App. Div. 1990).

Contrary to Leske's contention, defendant's policy language is clear and unambiguous. Defendant's insuring agreement limited its obligation to "pay on behalf of the 'Insured' . . . sums in . . . excess of the 'Retained Limit,' which the 'Insured by reason of liability imposed by law, or tort liability assumed . . . under contract prior to the 'Occurrence', shall become legally obligated to pay as damages . . . ." The clear meaning of the policy language was to provide third-party insurance coverage rather than first-party coverage. See, e.g., id. at 648-49.

Equally misplaced is Leske's contention that the failure to mention that UIM coverage was excluded in the declaration page led the insured to believe that first-party coverage was provided. Simply stated, an insuring agreement that is limited to third-party liability coverage need not mention that specific types of first-party coverage are excluded because, generally, umbrella policies are "not . . . understood to provide UM/UIM coverage." Doto, supra, 140 N.J. at 555.

Likewise unavailing is Leske's contention that its reasonable expectation was that defendant provided UIM coverage. Generally, "we have recognized the importance of construing contracts of insurance to reflect the reasonable expectations of the insured in the face of ambiguous language and phrasing." Id. at 556 (citing State, Dep't of Envtl. Prot. v. Signo Trading Int'l, Inc., 130 N.J. 51, 62 (1992)). However, "in exceptional circumstances," the reasonable expectation doctrine has been applied even though "the literal meaning of the policy is plain." Ibid. (citing Werner Indus., Inc. v. First State Ins. Co., 112 N.J. 30, 35-36 (1988); Sparks, supra, 100 N.J. at 338; Gerhardt v. Cont'l Ins. Cos., 48 N.J. 291, 297-99 (1966)). Thus, an insurer, through its actions and conduct, may be equitably estopped from relying on the plain language of its policy. Id. at 557.

In Doto, the company that reinsured the umbrella carrier insisted that the UM/UIM coverage limits in the insured's underlying automobile policy be increased for the purpose of reducing its exposure to UM/UIM claims under the umbrella policy. Id. at 558. It was uncontested that the umbrella carrier's claims manager insisted, and the insured complied by raising its UM/UIM limits. Ibid. Moreover, after the injured plaintiff's accident, several of the umbrella carrier's employees confirmed that the umbrella policy contained UM/UIM coverage. Id. at 559. The record in Doto also established that the umbrella carrier possessed a standard endorsement form excluding UM/UIM coverage, which it elected not to use in the policy in question. Ibid.

The Court in Doto concluded that, under the circumstances presented, the umbrella carrier was "estopped from denying coverage." Id. at 560. It pointed out that the carrier "pursued a course of conduct . . . that would have convinced an objectively reasonable insured to believe that the umbrella policy contained UM/UIM coverage," and confirmed that impression by "post-accident representations . . . that the umbrella policy provided such coverage." Ibid. There are no equivalent circumstances present here. Defendant neither expressly nor implicitly represented that UM/UIM coverage was provided. The policy language, which was clear and unambiguous, was devoid of any reference to UM/UIM coverage. So too, the testimony from the two experts and defendant's underwriter established that the premium did not include any charge for UM/UIM coverage.

Affirmed.

 

Effective May 11, 2000, the liability limits of the commercial umbrella policy were increased from $5,000,000 to $10,000,000.

(continued)

(continued)

10

A-0914-05T3

November 27, 2006