STEPHANIE WEAVER v. NATIONAL GENERAL INSURANCE COMPANY

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4534-12T4

STEPHANIE WEAVER,

Plaintiff-Respondent,

v.

NATIONAL GENERAL INSURANCE

COMPANY and GMAC INSURANCE

COMPANY,

Defendants-Appellants.

___________________________________

January 16, 2014

Submitted November 7, 2013 Decided

Before Judges Grall, Waugh and Nugent.

On appeal from Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-412-13.

Schenck, Price, Smith & King, LLP, attorneys for appellants (Michael J. Marotte and Cynthia L. Flanagan, on the brief).

Shapiro & Sternlieb, LLC, attorneys for respondent (Gary S. Shapiro, on the brief).

PER CURIAM

Defendants, National General Insurance Company and GMAC Insurance Company, appeal from a Law Division order that declared that an automobile insurance policy they issued to plaintiff Stephanie Weaver's parents (the auto policy) provided uninsured motorist (UM) coverage for injuries plaintiff sustained when she was struck by a car in Italy. Defendants contend that the trial court erred by misinterpreting the auto policy's plain language, which restricted UM coverage to accidents occurring in the United States, its territories or possessions, Puerto Rico, and Canada. We agree that the policy's UM coverage was limited to accidents that occurred in those regions. Accordingly, we reverse.

I.

The auto policy provided that the parties could arbitrate UM claims but not coverage disputes. Plaintiff demanded UM arbitration, named an arbitrator, and requested that defendants name an arbitrator. In response, defendants denied coverage. Plaintiff then filed a verified complaint seeking a declaration that the auto policy covered her UM claim. Accepting the complaint's description of the accident as true, and also accepting that the automobile insurance policy submitted by defendants was the one in effect on the date of the accident, the trial court decided the coverage issue on the pleadings, policy terms, and the parties' briefs. Upon concluding that the policy provided coverage, the court entered an order compelling the parties to arbitrate plaintiff's UM claim.

Plaintiff asserted she was in in Florence, Italy, "sitting on a sidewalk leaning against a building when a speeding motor vehicle peeled around the corner, ran over her foot and kept driving[.]" She was unable to identify either the owner or the driver of the speeding vehicle. At the time of the accident her father, Paul J. Weaver, was the named insured in the auto policy issued by defendants and she was insured under the policy as a resident relative.

Defendants provided the trial court with a certified copy of the policy that they acknowledged was in effect on the date of the accident, and they contended that its UM coverage did not apply to an accident occurring in Italy.1 The policy was divided into six parts designated as A through F. Part A provided liability coverage and Part C provided UM coverage. Part F, entitled "General Provisions," included the following temporal and territorial restrictions on coverage:

A. This policy applies only to accidents and losses which occur:

1. During the policy period as shown in the Declarations; and

2. Within the policy territory.

B. The policy territory is:

1. The United States of America, its territories or possessions;

2. Puerto Rico; or

3. Canada.

This policy also applies to loss to, or accidents involving, "your covered auto" while being transported between their ports.

The policy included a UM endorsement that began with two sentences centered across the top of the first page, in bold and capital letters, stating: "THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY." The endorsement replaced Part C, UM coverage. The endorsement also modified Part F, General Provisions, but only by adding additional language to the "Our Right to Recover Payment" provision. The endorsement did not modify Part F's temporal and territorial restrictions limiting coverage to claims that occurred during the policy period in the United States, its territories or possessions, Puerto Rico, and Canada.

The policy also included a PIP endorsement that began with the following sentences, centered across the top of the first page of the endorsement, with the words in capital and bold letters: "THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY." Centered immediately beneath these sentences, in capital and bold letters, was the following sentence: "PERSONAL INJURY PROTECTION COVERAGE NEW JERSEY." Beneath that sentence, centered across the page, appeared the following: "With respect to coverage provided by this endorsement, the provisions of the policy apply unless modified by the endorsement." (Emphasis added). The endorsement included the following relevant modification to Part F:

B. Paragraph B, of the Policy Period and Territory provision is replaced by the following:

POLICY PERIOD AND TERRITORY

B. The policy territory is, with respect to:

1. Principal Personal Injury Protection Coverage or Extended Medical Expense Benefits Coverage anywhere in the world.

2. Pedestrian Personal Injury Protection Coverage, New Jersey.

Following oral argument, the court issued a written opinion in which it concluded that the auto policy provided coverage for plaintiff's accident in Italy. In the trial court's view, the geographic coverage area contained in the auto policy's General Provisions section, Part F, conflicted with both the PIP endorsement, "which provide[d] an unlimited geographic coverage area," and the UM endorsement, "which does not specify a geographic coverage area." The court explained that because the PIP endorsement specified a geographic coverage area anywhere in the world it would be reasonable to assume that the UM endorsement would also "specify a geographic coverage area." The court found that defendants' "failure to specify where Part F General Provision[s] applies and the inconsistent application of Part F to only one of these two endorsements is ambiguous and contravenes the reasonable expectations of Plaintiff, who believed coverage existed 'anywhere in the world.'" Relying on precedent requiring construction of ambiguous insurance policy language in favor of coverage, the court concluded that the policy provided coverage for plaintiff's UM claim.

II.

Defendants contend that the policy provision restricting UM coverage to the United States, its territories and possessions, Puerto Rico, and Canada, is clear and unambiguous. They argue that the trial court misinterpreted the relevant provisions of the auto policy, PIP endorsement, and UM endorsement, and thereby created ambiguity where none existed in the straightforward policy language.

Plaintiff insists the court correctly concluded that the language in the policy and its endorsements is confusing. Plaintiff questions whether Part F was included in the policy issued to the insured, but argues that if Part F was contained in the policy, it should be deemed ambiguous, confusing, and contrary to the insured's reasonable expectations. Plaintiff also argues that there is a strong public policy in favor of finding coverage to compensate motor vehicle accident victims.

Defendants reply that the statute requiring UM coverage in automobile insurance policies authorizes a territorial restriction on coverage, and therefore such a restriction does not contravene public policy. They also maintain that the certified copy of the auto policy that they submitted to the court, rather than the documents mistakenly sent to plaintiff, is the document that must be considered for purposes of plaintiff's complaint seeking declaratory relief.

Because the interpretation of language in contracts, including insurance contracts, involves questions of law, our review of a trial court's interpretation of an insurance policy is de novo. Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med. & Physical Therapy, 210 N.J. 597, 605 (2012).

"As contracts of adhesion, [insurance] policies are subject to special rules of interpretation." Longobardi v. Chubb Ins. Co. of New Jersey, 121 N.J. 530, 537 (1990). Although

policies should be construed liberally in [the insured's] favor to the end that coverage is afforded to the full extent that any fair interpretation will allow[,] . . . the words of an insurance policy should be given their ordinary meaning, and in the absence of an ambiguity, a court should not engage in a strained construction to support the imposition of liability.

[Ibid. (first alteration in original) (citation and internal quotation marks omitted).]

"If the terms are not clear, but instead are ambiguous, they are construed against the insurer and in favor of the insured, in order to give effect to the insured's reasonable expectations." Flomerfelt v. Cardiello, 202 N.J. 432, 441 (2010). Courts should not, however, "'write for the insured a better policy of insurance than the one purchased.'" Ibid. (quoting Walker Rogge, Inc. v. Chelsea Title & Gaur. Co., 116 N.J. 517, 529 (1989)).

Applying these principles to the auto policy here, we conclude that the auto policy unambiguously restricts coverage for UM claims to those arising from accidents occurring in the United States, its territories or possessions, Puerto Rico, and Canada.

We begin our analysis by recognizing that

[i]nsurance policies consist of several parts. The first part is the declarations page, colloquially known as the "dec page." The dec page sets forth the most basic facts regarding the policy its nature, limits, effective period, and who it insures. Many endorsements will typically be attached to the policy at its inception. These will often, but not always, be listed on the dec page . . . .

The second part of the insurance policy is a basic (usually standard) policy form. The third, and last, part is the portion containing the endorsements.

[3 Jeffrey E. Thomas, New Appleman on Insurance Law Library Edition 21.01 (2013) (discussing these principles in the context of commercial general liability insurance)].

Although endorsements usually alter the basic policy form, "[i]t is important to recognize that the endorsement alters the policy only to the extent set forth in the text of the endorsement. In other words, the terms and conditions of the basic policy form remain in full force and effect, except to the extent they are expressly altered by the endorsement." Ibid.

In the case before us, the basic policy form included General Provisions, Part F, which included a territorial restriction explicitly stating that the policy "applies only to accidents and losses which occur . . . [w]ithin the policy territory." That plain and unambiguous territorial restriction applied to the entire auto policy, including the UM provisions in Part C. The UM endorsement did not alter the territorial restriction on UM coverage. Consequently, the territorial restriction remained in full force and effect.

Contrary to the trial court's finding, the UM endorsement did not conflict with the territorial restriction in the General Provisions section of the basic policy form. Keeping in mind the general principle that endorsements alter a basic policy only to the extent set forth in the text of the endorsement, we note that here the UM endorsement "replaced" the UM coverage in Part C of the auto policy, but did not alter the territorial restriction on coverage, which was contained in the "General Provisions" section, Part F. As to Part F, the UM endorsement only altered the provision concerning the insurer's subrogation rights; it did not delete, negate, or in any way alter the territorial restriction. No language in the endorsement suggested that the territorial restriction, which applied to the entire policy, was affected by the UM endorsement.

Nor did the PIP endorsement affect the territorial restriction as it applied to the remainder of the auto policy, including UM coverage. The PIP endorsement stated in its third sentence that "[w]ith respect to coverage provided by this endorsement, the provisions of the policy apply unless modified by the endorsement." The plain language of that clause restricted the modifications listed in the endorsement to the coverage provided in the endorsement, namely, PIP coverage. No language in the endorsement stated explicitly or suggested implicitly that the endorsement applied to any coverage other than PIP. The language in the PIP endorsement was not ambiguous. No one could have reasonably concluded from the express language of the PIP endorsement that worldwide PIP coverage affected UM coverage. To hold otherwise would be to "engage in a strained construction to support the imposition of liability," a practice in which "a court should not engage." Longabardi, supra, 121 N.J. at 537.

Having considered the nature of insurance policy endorsements generally, and the language of the PIP and UM endorsements in the case before us specifically, we conclude the auto policy's territorial restriction on UM coverage was clear and unequivocal.

Defendants next contend that because the auto policy's territorial restriction on UM coverage is unambiguous, it was unnecessary for the trial court to resort to the principle that courts should interpret insurance policies to comport with the reasonable expectations of the insured. Regardless of whether the trial court properly resorted to the "reasonable expectations" construct, plaintiff could not have had a reasonable expectation that the auto policy provided UM coverage for an accident that occurred in Italy.

"In determining what a policyholder's reasonable expectations are, our courts have applied an objective standard of reasonableness." Clients' Sec. Fund of the Bar of N.J. v. Sec. Title & Guar. Co., 134 N.J. 358, 372 (1993); see also Progressive Cas. Ins. Co. v. Hurley, 166 N.J. 260, 274 (2001). Here, nothing in the auto policy's language would give rise to a reasonable expectation on the part of the insured that UM coverage was worldwide. The plain language of the policy restricts UM coverage. And plaintiff proffered no evidence that any information she received from defendants about the policy would have given rise to an objectively reasonable expectation that the policy's UM coverage was worldwide. For those reasons, we reject the notion that plaintiff had an objectively reasonable expectation that the auto policy covered her accident in Italy.

Plaintiff argues that the absence of the territorial restriction in the auto policy's declaration page might reasonably lead a policyholder to expect worldwide coverage. We disagree.

We have explained that the declarations page of an insurance policy, "in terms of the construction of the policy as a whole and in terms of its capacity to define the insured's reasonable expectations of coverage," has "signal importance." Lehrhoff v. Aetna Cas. & Sur. Co., 271 N.J. Super. 340, 346 (App. Div. 1994). Thus, where an ambiguity in the declarations page leads the insured to reasonably expect coverage, and "[o]nly a full, careful, sophisticated, and experienced reading of the full policy would . . . inform[] [the insured] otherwise[,]" the policy will be interpreted as providing such coverage. Id. at 350.

Nonetheless, an insured has an "ordinary duty to review, and to be bound by the terms of, the policy itself[.]" Pizzullo, supra, 196 N.J. at 273. For that reason, the mere omission of a policy provision or term from the declarations page does not create an ambiguity where the provision or term is written in clear and ordinary terms in the main body or standard form of the policy. See Zacarias, supra, 168 N.J. at 602 (finding "no ambiguity, inconsistency, or contradiction between the declarations sheet and the body of [a] policy" where the declarations page did "not expressly list [an] intra-family exclusion" but did "alert[] the insured that the coverages and limits of liability are subject to the provisions of the policy, one of which is the intra-family exclusion"). A contrary conclusion would require an insurer to undertake the impossible task of listing all of a policy's provisions in a declarations page.

The auto policy here did not express the territorial limits of UM coverage in the declarations page, but did express those territorial limits in plain language in the policy's General Provisions section. Plaintiff did not need to make "a full, careful, sophisticated, and experienced reading of the full policy" to learn of the restriction. Lehrhoff, supra, 271 N.J. Super. at 350. Rather, she needed only to discharge her "ordinary duty to review, and to be bound by the terms of, the policy itself[.]" Pizzullo, supra, 196 N.J. at 273.

We are unpersuaded by plaintiff's remaining argument that coverage for her accident is supported by considerations of public policy. The statute that requires UM coverage to be included in motor vehicle liability policies issued in this State requires that such coverage be provided for accidents that occur "anywhere within the United States or Canada." N.J.S.A. 17:28-1.1(a)(2). A policy that includes UM coverage as required by that statute does not contravene public policy.

1 There was some confusion about the policy. The confusion arose from a demand plaintiff made of defendants more than two years before she filed her complaint. Plaintiff claims that she demanded a copy of the auto policy; defendants claim she demanded a copy of the underwriting file. When plaintiff later filed her brief with the trial court, she argued that the policy contained no territorial limitation because the documents defendants had provided in response to her request contained no such limitation. She did not, however, file a certification casting doubt on the authenticity of the policy defendants had certified and submitted. Defendants responded that plaintiff was relying on the underwriting file, not the actual auto policy. The trial court properly accepted defendants' certified copy of the auto policy as the insuring agreement that was in effect when the accident occurred.

Apparently as an alternate basis for affirmance, plaintiff renews that argument on appeal. Based on our review of the record, we conclude that plaintiff's argument on this point has insufficient merit to warrant any further discussion. R. 2:11-3(e)(1)(E).