Dillard v. Hertz Claim Management

SYLLABUS
 

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

Christine Dillard v. Hertz Claim Management, et al. (A-33-95)

(NOTE: The Court wrote no full opinion in this case. Rather, the Court's affirmance of the judgment of the Appellate Division is based substantially on the reasons expressed in Judge Vallaneuva's written opinion below. This is a companion case to Marotta v. New Jersey Automobile Full Insurance Underwriting Association, also decided today.)

Argued October 23, 1995 -- Decided June 11, 1996

PER CURIAM

Christine Dillard was injured while a passenger in a car operated by Deborah Dillard, her sister. The Dillard car was struck by a car operated by Ester Kim. Just prior to the accident, Deborah had applied for insurance through Hertz Claim Management and/or EDS Systems, as a servicing agent for the New Jersey Automobile Full Insurance Underwriting Association (NJAFIUA). Deborah paid the premium by a check that was later dishonored for insufficient funds. When NJAFIUA discovered, after the accident, that the check had been dishonored, it retroactively revoked Deborah's insurance policy.

Christine Dillard filed a complaint for damages against Deborah and Ester Kim. Christine also sought benefits from the Unsatisfied Claim and Judgment Fund (UCJF). Thereafter, Christine brought the declaratory judgment action against Hertz Claim Management and/or EDS Systems, as servicing agent for the NJAFIUA. NJAFIUA's motion to dismiss the complaint against Hertz Claim Management and EDS Systems was granted.

At a bench trial, based on stipulated facts, the trial judge entered a declaratory judgment holding NJAFIUA liable for benefits payable to Christine. The court concluded that voidance of the policy does not apply to a passenger who is an innocent third party and, therefore, Dillard was entitled to PIP coverage. The court also found that Christine was entitled to make a claim against her driver for liability and any verdict in Christine's favor was to be paid by NJAFIUA. In addition, the court found that Christine had a right to make a claim for uninsured motorists (UM) coverage because Kim's car was not insured.

NJAFIUA appealed to the Appellate Division, seeking a determination as to whether the retroactive revocation of the insurance policy affects the right of a third-party plaintiff/passenger. NJAFIUA argued that under the terms of the application for insurance executed by Deborah, the insurance contract never went into effect and, therefore, no policy existed to provide any benefits.

The Appellate Division affirmed the decision of the trial court, reasoning that the distinction between first and third party claims against a cancelled or voided policy is of primary importance in determining whether coverage is afforded. Any agreement pursuant to the policy in respect of the voidance of coverage if the premium is dishonored is between the insured (Deborah Dillard) and the insurance company, not between the insurance company and an innocent third party such as Christine Dillard. The Appellate Division also found that although there was no provision establishing a financial responsibility law in the enabling legislation that established the NJAFIUA, coverage is generally afforded when an innocent third party seeks to recover from the cancelling NJAFIUA insurer.

The Appellate Division also concluded that UM benefits are not excluded from coverage. According to the Appellate Division, the fact that Christine has a claim against the UCJF is irrelevant since the UCJF would merely provide supplemental relief. The Appellate Division recognized the unfairness to a carrier that

is held liable to a third party on a policy for which it receives no payment. However, the court noted that the carrier could have prevented this by requiring payment in cash, or by money order, certified check, bank check or credit card. The carrier chose to accept an uncertified check and, therefore, must suffer the same consequences as any merchant who sells goods and is paid by a bad check.

The Supreme Court granted the NJAFIUA's petition for certification.

HELD: Judgment of the Appellate Division is AFFIRMED substantially for the reasons expressed in Judge Villaneuva's opinion. The retroactive revocation of a driver's liability policy, when the check for a premium payment was dishonored for insufficient funds, does not affect the right of an innocent third-party passenger to recover under the liability and uninsured motorist provisions of that policy. The remedy of the New Jersey Automobile Full Insurance Underwriting Association was against the defaulting driver.

1. Coverage afforded under the policy is limited to the statutory coverage required by N.J.S.A. 39:6A-3 and N.J.S.A. 39:6B-1 in accordance with the holding in Marotta v. New Jersey Automobile Full Insurance Underwriting Association, also decided today. (pp. 1-2)

Judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI, STEIN and COLEMAN join in this opinion.

SUPREME COURT OF NEW JERSEY
A- 33 September Term 1995

CHRISTINE DILLARD,

Plaintiff-Respondent,

v.

HERTZ CLAIM MANAGEMENT and/or EDS SYSTEMS, as servicing agent for the NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING ASSOCIATION (NJAFIUA),

Defendants,

and

NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING ASSOCIATION (NJAFIUA),

Defendant-Appellant.

Argued October 23, 1995 -- Decided June 11, 1996

On certification to the Superior Court, Appellate Division, whose opinion is reported at 277 N.J. Super. 448 (1994).

Robert G. Engelhart argued the cause for appellant (Gebhardt & Kiefer, attorneys).

Raymond T. Sheldon argued the cause for respondent (Surdovel & Sheldon, attorneys).

PER CURIAM.
The judgment is affirmed, substantially for the reasons expressed in the opinion of the Appellate Division, reported at 277 N.J. Super. 448 (1994). We add that the coverage afforded under the policy is limited to the statutory coverage required by N.J.S.A. 39:6A-3 and N.J.S.A. 39:6B-1 in accordance with the

holding in Marotta v. New Jersey Automobile Full Insurance Underwriting Association, ___ N.J. ___ (1996), also decided today.

CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI, STEIN and COLEMAN join in this opinion.

SUPREME COURT OF NEW JERSEY
 

NO. A-33

SEPTEMBER TERM 1995
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court

CHRISTINE DILLARD,

Plaintiff-Respondent,

v.

HERTZ CLAIM MANAGEMENT et al.,

Defendants,

and

NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING ASSOCIATION (NJAFIUA),

Defendant-Appellant.

DECIDED

June 11, 1996
Chief Justice Wilentz PRESIDING
OPINION BY Per Curiam
CONCURRING OPINION BY DISSENTING OPINION BY
CHECKLIST
AFFIRM CHIEF JUSTICE WILENTZ X JUSTICE HANDLER X JUSTICE POLLOCK X JUSTICE O'HERN X JUSTICE GARIBALDI X JUSTICE STEIN X JUSTICE COLEMAN X TOTALS
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