JOHN R. KOVACS v. MELISSA A. FAZIO

(NOTE: The status of this decision is .)
 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5795-07T25795-07T2

JOHN R. KOVACS and JEAN KOVACS, h/w,

Plaintiffs,

v.

MELISSA A. FAZIO and ELRAC, INC.,

Defendants-Respondents,

v.

RUTGERS CASUALTY INS. CO.,

Third-Party Defendant/

Fourth-Party Plaintiff-

Appellant,

v.

PROFORMANCE INS. CO.,

Fourth-Party Defendant-

Respondent.

__________________________________________

RIDER INSURANCE COMPANY a/s/o JOHN R.

KOVACS,

Plaintiff,

v.

MELISSA A. FAZIO and ELRAC, INC.,

Defendants/Third-Party

Plaintiffs-Respondents,

v.

RUTGERS CASUALTY INS. CO.,

Third-Party Defendant-

Appellant.

________________________________________________________________

 

Argued May 4, 2009 - Decided

Before Judges Lisa and Alvarez.

On appeal from the Superior Court of New Jersey, Law Division, Warren County, Docket Nos. L-124-05 and L-476-05.

Susan L. Moreinis argued the cause for appellant.

Michael J. Kelly argued the cause for respondent Proformance Insurance Company (Law Office of John E. Madden, attorney; Mr. Kelly, of counsel and on the brief).

Foster & Mazzie, LLC, attorneys for respondents Melissa A. Fazio and Elrac, Inc. (Carl Mazzie, on the letter of nonparticipation).

PER CURIAM

This appeal involves a dispute between automobile insurance carriers regarding their required contributions toward payment of a claim to an injured motorist. The tortfeasor, Melissa A. Fazio, was operating a vehicle she did not own when she caused an accident in which John Kovacs was injured. Kovacs made a claim for his injuries. On cross-motions for summary judgment, Judge Amy O'Connor found that, in light of the policy provisions of the three insuring agreements, the three insurers should share equally, to the extent of their coverage limits, in payment of the claim, and not on a pro rata basis.

The three insurers settled with Kovacs, and the settlement proceeds were allocated in accordance with Judge O'Connor's order. However, Rutgers Casualty Ins. Co. (Rutgers) preserved the right to appeal the allocation issue. Rutgers argues that the policy provisions in the three policies dictate pro rata allocation and that the judge erred in ordering equal sharing of responsibility. We disagree with Rutgers and affirm.

The material facts are not in dispute. The accident occurred on September 4, 2004. At that time, Fazio owned a car that was insured by Rutgers, with $50,000 bodily injury coverage. Fazio was a resident of her parents' household, and they had an automobile insurance policy with Proformance Ins. Co. (Proformance), with bodily injury coverage of $500,000. At the time of the accident, Fazio was driving a rental vehicle, rented from Elrac, Inc. (Elrac), which, by virtue of the lease agreement, provided $15,000 bodily injury coverage.

After summary judgment was rendered deciding the allocation issue in the manner we have described, the three carriers settled Kovacs' bodily injury claim for $220,000. The three carriers paid the claim on an equal basis within their coverage limits as ordered. Thus, Elrac paid its entire $15,000; Rutgers paid its entire $50,000, and Proformance paid the balance. If, as Rutgers argues, the allocation should have been on a pro rata basis in relation to the relative amounts of coverage provided by each carrier, Rutgers' share would have been only 9%, or $19,800.

In deciding the allocation issue, the judge concluded that, based upon her analysis of the three policies, all three companies had mutually repugnant excess clauses, as a result of which they were all required to provide primary coverage. She concluded that only Elrac's excess clause provided for pro rata coverage, and because neither the Rutgers nor Proformance policies provided for pro rata sharing where a non-owned vehicle is involved, pro rata sharing was not appropriate under the controlling legal authorities. The judge relied upon Robinson v. Coia, 183 N.J. 25 (2005); American Nurses Ass'n v. Passaic General Hospital, 98 N.J. 83, 91 (1984); Hanco v. Sisoukraj, 364 N.J. Super. 41, 47-48 (App. Div. 2003); and Ambrosio v. Affordable Auto Rental, Inc., 307 N.J. Super. 114, 126 (App. Div. 1998).

We owe no deference to a trial court's interpretation of the law, and we review legal issues de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). When reviewing the grant of summary judgment, we use the same standard as the trial court, first deciding whether there was a genuine issue of material fact, and, if not, deciding whether the trial court's ruling on the law was correct. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

We have already set forth the relevant undisputed facts regarding the accident and the existence of the policies providing liability coverage for Fazio. We now set forth the pertinent provisions in each policy.

The Elrac rental agreement provided:

6. BODILY INJURY AND PROPERTY DAMAGE RESPONSIBILITY: The financial responsibility of Owner is equivalent to the minimum amounts by the compulsory liability insurance law of the state in which the vehicle is operated. It is expressly agreed and understood that the owner[']s financial responsibility provided by Owner pursuant to this agreement shall be excess over any other collectible insurance. In the event that there is other collectible insurance which by its terms is also excess, and/or Owner is required to make any liability payment, the Owner share of any bodily injury and/or property damage claims or payments is the proportion that Owner's minimum financial responsibility limits bears to the total of all applicable limits.

The Rutgers' policy provided:

OTHER INSURANCE

If there is other applicable liability insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide for a vehicle you do not own shall be excess over any other collectible insurance.

The Proformance policy provided:

9. Other Insurance.

When there is other applicable insurance, we will provide coverage as follows:

a. In the first year of this policy, prior to the effective date of coverage as shown in the coverage summary for what will be a covered exposure, we will pay all covered claims up to the limits you have chosen in excess of the total limits of all other policies;

b. During the first and subsequent years of this policy for those exposures shown effective in the coverage summary, we will pay our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits;

c. Any insurance we provide with respect to a "non-owned auto" or any motor vehicle used as a temporary substitute for a motor vehicle you own shall be excess over any other collectible insurance.

Relying on American Home Assurance Co. v. Hartford Insurance Co., 190 N.J. Super. 477 (App. Div. 1983), Rutgers argues that "where each policy's terms provide for a 'pro rata' share of the loss, proration based on the total of the limits of the policies is proper." Applying that legal principle, Rutgers argues that, when read in their entirety, the applicable provisions of each of the three policies here provide for pro rata sharing under the circumstances of this case. We do not agree.

It is undisputed that Fazio was operating a non-owned vehicle at the time of the accident. Thus, under the terms of each policy, only excess coverage was provided. None of the policies provides Fazio with primary coverage. As a result, these were "mutually repugnant" excess clauses. Cosmopolitan Mut. Ins. Co. v. Cont'l Cas. Co., 28 N.J. 554, 562 (1959). Under such circumstances, whether allocation among responsible insurers is equal or pro rata depends upon the specific terms of coverage. If all affected policies provide for pro rata sharing, "the loss must be pro rated among them pursuant to the 'other insurance' provisions of these policies." Am. Home Assurance Co., supra, 190 N.J. Super. at 490. This result occurs when, "[u]nder the clear and explicit language of these clauses, each policy provides primary and concurrent coverage for the . . . accident." Id. at 489. However, where one or more of the applicable policies does not provide for pro rata sharing for non-owned vehicle, equal apportionment of liability among the insurers is required. Ambrosio, supra, 307 N.J. Super. at 126.

We agree with Judge O'Connor that a review of the three policies here places this case in the latter category. The Elrac coverage provides for pro rata sharing. However, that is not so in the Rutgers and Proformance policies.

The Proformance policy contains an individual clause defining its responsibility for liability involving use of a non-owned automobile. Unlike the prior clause in that portion of the policy, there is no provision for pro rata sharing. These are separate clauses pertaining to separate circumstances and with differing results. Likewise, the Rutgers policy initially provides for pro rata sharing when the coverage is primary. Then, in a separate and distinguishing provision, the policy says, "However, any insurance we provide for a vehicle you do not own shall be excess over any other collectible insurance," with no mention of pro rata sharing. Again, these are separate terms of coverage for separate circumstances with differing results.

An insurance policy is generally interpreted according to its plain and ordinary meaning. Ambrosio, supra, 307 N.J. Super. at 120. "[W]hen the 'other insurance' clauses of all the policies covering a single risk render each of the policies excess if there is other insurance, all the policies are consequently primary and the carriers share the risk as primary insurers." Hanco, supra, 364 N.J. Super. at 47 (citing Cosmopolitan Mut. Ins. Co., supra, 28 N.J. at 562). "[U]nless all the policies contain congruent pro-rata provisions, the provision is equal." Id. at 47-48 (citing Cosmopolitan, supra, 28 N.J. at 564; Am. Nurses Ass'n, supra, 98 N.J. at 91). In this context, equal liability means equal contribution among the carriers up to the policy limit of the carrier with the lowest coverage. Id. at 48. The remaining balance is divided equally among those carriers who have not reached their policy limit until the next lowest limit is reached and so forth. Ibid.

Judge O'Connor correctly applied these legal principles to the facts in this case. She reached the correct result.

Affirmed.

Kovacs' carrier also made a subrogation claim for property damage it paid to Kovacs. That subrogation carrier is not involved in the appeal, and there is no need for us to discuss separately that aspect of the claim. Therefore, although the contribution allocation among the liability carriers would be the same for the property damage claim as Kovacs' personal injury claim, we need not discuss separately in this opinion the property damage claim, and we focus solely on Kovacs' personal injury claim.

Proformance disputed that, for purposes of its policy, Fazio was a resident of her parents' household at the time of the accident. On cross-motions for summary judgment, Judge O'Connor decided Fazio was a resident. Proformance has not appealed from that determination, and we deem the fact of Fazio's residence settled.

On October 15, 2007, Judge O'Connor denied Proformance's summary judgment motion, determining that Fazio was a member of her parents' household at the time of the accident, and that Proformance therefore provided coverage for her. The order also denied Rutgers' motion seeking pro rata coverage. The judge deemed the three policies as co-primary and ordered "payment of liability equally until the limits of each policy [are] exhausted." Proformance and Rutgers both filed reconsideration motions. On January 10, 2008, the judge denied both motions.

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A-5795-07T2

June 4, 2009