NEW JERSEY MANUFACTURERS INSURANCE COMPANY v. STATE FARM INDEMNITY COMPANY, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1178-05T31178-05T3

NEW JERSEY MANUFACTURERS INSURANCE

COMPANY,

Plaintiff-Appellant,

v.

STATE FARM INDEMNITY COMPANY,

Defendant-Respondent,

and

ONE BEACON INSURANCE GROUP and/or NEW

JERSEY SKYLANDS INSURANCE COMPANY

and DIANE LINKE, jointly, severally,

individually, and in the alternative,

Defendants.

______________________________________

 

Argued January 29, 2007 - Decided February 23, 2007

Before Judges Lintner and C.L. Miniman.

On appeal from the Superior Court of

New Jersey, Law Division, Mercer County,

L-1578-04.

William F. Hartigan, Jr., argued the

cause for appellant (McLaughlin & Cooper, attorneys; W. John Weir, II, of counsel; Mr. Hartigan, on the brief).

Julie C. Smith argued the cause for respondent (Chierici, Chierici & Smith, attorneys; Ms. Smith, on the brief).

PER CURIAM

This appeal involves a dispute between two insurance companies, New Jersey Manufacturers Insurance Company (NJM) and State Farm Indemnity Company (State Farm), over which company's policy provides primary underinsured motorist (UIM) coverage to the injured party, Diane Linke. The facts are undisputed.

Linke, a passenger in an automobile owned and operated by Barbara Nurko, was injured when a vehicle operated by Shawne Bailey struck Nurko's vehicle from behind. The vehicle operated by Bailey was insured with a policy that provided minimum $15,000/$30,000 liability coverage. Linke was the named insured under an automobile policy issued by NJM with UIM coverage of $100,000. Linke was also covered as a resident relative by a policy containing UIM coverage issued by One Beacon Insurance Group (One Beacon) to her daughter with limits of $250,000. The One Beacon policy contained a step-down clause reducing the available UIM coverage to Linke to the $100,000 limits of her NJM policy and providing for prorating with policies providing similar coverage.

Nurko was the named insured in a policy issued by State Farm, which provided $100,000 UIM coverage to its named insured. The State Farm policy contained the following applicable provisions.

Who Is an Insured

1. When the bodily injury or property damage arises out of the ownership, maintenance or use of an uninsured motor vehicle, Insured means:

a. you;

b. your spouse;

c. your relatives; and

d. any other person while occupying:

(1) your car . . . .

. . . .

2. When the bodily injury or property damage arises out of the ownership, maintenance or use of an underinsured motor vehicle, Insured means:

a. you;

b. your spouse;

c. your relatives who are neither listed as a named insured on any other personal automobile policy nor a spouse of such a named insured; and

d. any person entitled to recover damages because of bodily injury to an insured under a through c above.

. . . .

When Coverage U Does Not Apply

. . . .

6. FOR ANY PERSON OTHER THAN YOU OR A RELATIVE IF THAT PERSON IS A NAMED INSURED OR RELATIVE OF A NAMED INSURED UNDER ANOTHER POLICY PROVIDING UNINSURED AND UNDERINSURED MOTORIST COVERAGE.

. . . .

If There Is Other Coverage

1. If the insured sustains bodily injury that arises out of the ownership, maintenance or use of an uninsured motor vehicle, and other uninsured motorist coverage applies:

a. the total limits of liability under all such coverages shall not exceed that of the coverage with the highest limit of liability; and

b. we are liable only for our share. Our share is that per cent of the damages that the limit of liability of this coverage bears to the total of all uninsured motorist coverage applicable to the accident.

NJM filed a declaratory judgment action, naming State Farm, One Beacon, and Linke as defendants, seeking to declare that the State Farm policy provided primary UIM coverage to Linke as passenger in the Nurko vehicle. The parties filed motions and cross-motions for summary judgment. One Beacon and NJM sought summary judgment declaring State Farm's policy to be primary, thus triggering the other insurance provisions in the One Beacon and NJM policies and making their respective UIM coverage excess. Linke sought summary judgment declaring that One Beacon's $250,000 UIM coverage did not step down to $100,000. State Farm sought summary judgment that it did not provide coverage under its policy provision excluding persons other than its named insured or the named insured's relative if that person is a named insured or a relative of a named insured in another policy providing UM and UIM coverage. The motion judge found that the State Farm policy excluded Linke from UIM coverage because she was a named insured under the NJM policy. He also found that One Beacon's step-down provision was valid. Finally, the judge prorated the UIM coverage available under the One Beacon and NJM policies, determining that they were of equal primacy.

NJM asserts, for the first time on appeal, that the challenged exclusion in the State Farm policy does not comport with standard policy language approved by the Commissioner of Insurance and has not been approved by the Commissioner of Insurance (Commissioner). Normally, an appellate court will decline to consider questions or issues not properly presented to the trial court when an opportunity for such presentation is available, "'unless the questions so raised on appeal go to the jurisdiction of the trial court or concern matters of great public interest.'" Brown v. Twp. of Old Bridge, 319 N.J. Super. 476, 501 (App. Div.) (quoting Skripek v. Bergamo, 200 N.J. Super. 620, 629 (App. Div.), certif. denied, 102 N.J. 303 (1985)), certif. denied, 162 N.J. 131 (1999). NJM concedes that it did not argue in the Law Division that the State Farm policy language was not approved or that it did not comport with standard policy language mandated by the Commissioner. There is nothing provided in the record to substantiate NJM's claim that State Farm's UM and UIM endorsement was issued without the required approval. See N.J.S.A. 17:28-l.1d. Moreover, State Farm was not provided with advance notice prior to NJM's motion to meet or contradict the assertion that its policy was not approved. We, therefore, forego any further consideration of the issue.

NJM next contends that the language in the State Farm policy excluding Linke is contrary to statutory provisions, specifically N.J.S.A. 17:28-1.1, mandating optional UIM coverage. NJM argues that both the applicable statutory provisions and case law contemplate that persons occupying a covered vehicle who are neither the named insured nor a family member of the named insured are required to have the available UIM coverage when occupying the insured vehicle. It contends that it is improper for State Farm to avoid primary coverage to an occupant by limiting UIM coverage to a named insured. In support of its contention, NJM places heavy reliance on the following quoted portion in French v. N.J. Sch. Bd. Ass'n Ins. Group, 149 N.J. 478, 487 (1997):

If the only trigger to UIM coverage were the limits "chosen" by an injured person, a broad class of victims such as those who did not own or did not drive automobiles would be entirely excluded from UIM coverage. They have "chosen" no coverage against which to compare the tortfeasor's liability coverage. Certainly the Legislature could not have intended that such persons would receive no UIM benefits under the policy of a host vehicle.

However, at the time French was decided, standard UM/UIM endorsements approved for use in personal New Jersey automobile insurance policies defined "insured" as including "[a]ny other person 'occupying your covered auto.'" Ibid. Indeed, Diane French's employer's UIM endorsement unambiguously provided coverage for anyone "occupying a covered auto." Id. at 494. The Court in French thus concluded that, as a school bus driver injured during the course of her employment, French was covered with the UIM benefits afforded by her employer's policy.

NJM also relies on a reference in Magnifico v. Rutgers Cas. Ins. Co., 153 N.J. 406, 417 (1998), to the then-existing New Jersey Auto Insurance Guide (Guide), N.J.A.C. 11:3-15.6(o). After noting that the description of UM and UIM coverage in the Guide referring to coverage for "'your passengers or relatives living with you'" was contained only in the paragraph describing UM coverage, the Court posited that "a reasonable interpretation of the Guide would suggest that those categories of beneficiaries were also to receive the benefit of UIM coverage purchased by the insured." Id. at 418. Since that time, N.J.A.C. 11:3-15.6(o) has been repealed and replaced by N.J.A.C. 11:3-15.5, authorizing the current Buyer's Guide, NEW JERSEY AUTO INSURANCE BUYER'S GUIDE, http://www.state.nj.us/dobi/ acrobat/autoguide02.pdf. Neither N.J.A.C. 11:3-15.5 nor the Buyer's Guide makes reference to passengers.

In Magnifico, the policy covering the host vehicle, like the policy in French, contained unambiguous language providing UIM benefits to occupants of the vehicle. Magnifico, supra, 153 N.J. at 413. The Court accordingly held that the UIM coverage for which the host driver had paid a premium "expressly applied to passengers." Id. at 418. It also noted, "insurers can modify policy language in an effort to address issues of UIM coverage and liability." Ibid.

More recently, in Pinto v. N.J. Mfrs. Ins. Co., 183 N.J. 405, 407 (2005), the Court again dealt with the interpretation of a UIM endorsement contained in an employer's policy. Raymond Pinto was severely injured while operating his employer's truck when a vehicle operated by Theresa Trotter struck it from behind. Trotter's infant daughter was also injured. Trotter's liability carrier paid its aggregate $300,000 limits. Pinto received $30,000 after dividing the payout with Trotter's daughter. Pinto had UM/UIM coverage of up to $100,000 under his personal automobile policy. Because his damages exceeded the amount available under Trotter's policy, he sought UM/UIM benefits under his employer's $1,000,000 policy issued by NJM. The NJM policy provided for UM/UIM coverage for persons occupying the vehicle. The endorsement, however, contained a step-down provision, which limited the amount of UM/UIM benefits to those covered, other than a named insured, to the UM/UIM limits available from other policies having similar coverage. No individuals were designated as "named insureds" in the NJM policy, only two entities.

Citing the appellate panel's opinion that UIM coverage is "'personal to the insured'" and "'linked to the injured person,'" the majority upheld the validity of the step-down provision, concluding that the policy was not ambiguous and it did not designate Pinto as a named insured either expressly or by implication. Id. at 410-12 (quoting Pinto v. N.J. Mfrs. Ins. Co., 365 N.J. Super. 378, 388 (App. Div. 2004), aff'd, 183 N.J. 405 (2005)). In reaching its decision, the majority relied in part on N.J. Mfrs. Ins. Co. v. Breen, 153 N.J. 424, 431 (1998), which reiterated the reasoning in both French and Magnifico "that the plain language of an insurance policy dictates whether a person is entitled to recover UIM benefits." Pinto, supra, 183 N.J. at 414. The majority also relied on the conclusion expressed in Magnifico "that insurers were free to modify the language of insurance policies to incorporate step-down clauses limiting the amount of UIM coverage available to individuals." Ibid.

We begin our analysis by restating the principles enunciated in Magnifico and Pinto, namely, that insurers may modify policy language in an effort to address issues of UIM coverage so long as plain language is used to dictate whether an individual is entitled to UIM benefits. With those principles in mind, we examine NJM's contention that the State Farm modification is invalid. Initially, we note that NJM does not argue that the modification to the State Farm policy excluding occupants, other than the named insured, spouse, and relatives, is ambiguous. Instead, NJM frames its argument by asserting that the State Farm policy language is invalid because it leaves an otherwise uninsured occupant without the UIM policy coverage afforded to the named insured. It is true that the State Farm policy provides only basic UM benefits to an otherwise uninsured occupant of the named insured's vehicle by providing UIM policy benefits only to the named insured, the named insured's spouse, as well as the named insured's relatives not named as insureds in any other personal automobile policy. We disagree with NJM's contention that such a modification of the UIM benefits is invalid.

N.J.S.A. 17:28-1.1a, which requires a standard policy to provide UM coverage limits of $15,000 for injury or death to one person and $30,000 for injury or death to more than one person, "'serves two important functions, namely, to ease the financial burden on the Unsatisfied Claim and Judgment Fund and to provide insured motorists with protection from uninsured, financially irresponsible motorists.'" Rider Ins. Co. v. First Trenton Cos., 354 N.J. Super. 491, 497 (App. Div. 2002) (quoting Fernandez v. Selected Risks Ins. Co., 82 N.J. 236, 240 (1980)). N.J.S.A. 17:28-1.1a "contains no language requiring that the insured's vehicle itself be insured or that the insured have any special relationship with the vehicle that he is operating or in which he is a passenger." Fernandez, supra, 82 N.J. at 241. Thus, the legislative purpose behind the mandatory UM statute is to provide "'adequate indemnification of innocent automobile accident victims' and [the statute] should be construed and applied to effectuate this policy." Ibid. (quoting Motor Club of Am. Ins. Co. v. Phillips, 66 N.J. 277, 292 (1974)). By providing all occupants of the vehicle with basic UM coverage, State Farm meets its obligation to protect those occupants who are otherwise uninsured.

This same mandate does not apply to increased UM or UIM coverage above the required minimum. N.J.S.A. 17:28-1.lb provides that increased limits "shall be provided as an option by an insurer to the named insured electing a standard automobile insurance policy . . . ." N.J.S.A. 39:6A-2g defines "Named insured" as "the person or persons identified as the insured in the policy and, if an individual, his or her spouse, if the spouse is named as a resident of the same household . . . ." N.J.S.A. 39:6A-2n defines a "[s]tandard automobile insurance policy" as one with the coverage required in N.J.S.A. 39:6A-3 and -4. N.J.S.A. 39:6A-3 requires every owner or registered owner of an automobile garaged in this State to be insured against liability with personal injury limits of $15,000/$30,000 and property damage limits of $5000. N.J.S.A. 39:6A-4 requires a standard automobile insurance policy to provide personal injury protection benefits "to the named insured and members of his family residing in his household." Thus, when read as a whole, there is no statutory prohibition to modifying those who are covered with optional UIM benefits so long as the named insured and related residents of the same household are afforded the option to increase either UM or UIM coverage.

The State Farm policy appropriately identifies the insured for UIM purposes as "you," "your spouse," as well as your relatives who are not "listed as a named insured on any other personal automobile policy." Further, the State Farm provision excluding UM and UIM coverage "FOR ANY PERSON OTHER THAN YOU OR A RELATIVE IF THAT PERSON IS A NAMED INSURED OR RELATIVE OF A NAMED INSURED UNDER ANOTHER POLICY PROVIDING UNINSURED AND UNDERINSURED MOTORIST COVERAGE" is neither ambiguous nor inconsistent with the provision limiting UIM coverage to the named insured, the named insured's spouse or relative. By contrast the other insurance provision in the State Farm policy makes it clear that when considering UM, whether it be those UM benefits provided an occupant or the increased UM benefits provided the named insured, they are to be prorated with other similar coverage as required by N.J.S.A. 17:28-1.1c.

Accordingly, we are satisfied that the modification to the provisions of the State Farm policy limiting UIM coverage to the named insured spouse or relative is in accordance with the type of modification permitted in Pinto and not contrary to either legislative or statutory mandate.

Affirmed.

 

At oral argument on appeal, the parties agreed that Nurko was the only named insured on the State Farm policy.

"Coverage U" refers to Section III of the State Farm policy entitled "UNINSURED AND UNDERINSURED MOTORIST-COVERAGE U."

Linke does not appeal from the judge's determination that the One Beacon policy stepped down to the limits provided in the NJM policy. One Beacon does not appeal the judge's determination that State Farm is not primary and prorating One Beacon's policy with NJM's policy.

(continued)

(continued)

14

A-1178-05T3

 

February 23, 2007