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Plaintiff Unable to Collect Judgment Over Insurance Coverage Amount for Bankrupt Defendant

Plaintiff Keith Hacker was in a motor vehicle accident with defendant Carlos Jaime-Valdez on January 27, 2018.  Defendant Jaime-Valdez had $100,000 of insurance coverage each with both State Farm and Geico.  After answering the complaint, Jaime-Valdez filed for bankruptcy. The issue in Hacker v. Jaime-Valdez, 2025 N.J. Super. LEXIS 44 (App. Div. June 13, 2025) was whether the plaintiff could collect on a judgment against the bankrupt defendant in excess of the amount of available insurance coverage.

Plaintiff Hacker filed a lawsuit against Michele Donato, the owner of the vehicle, and Jaime-Valdez, who was operating the vehicle that collided with his vehicle.  Jaime-Valdez answered the complaint and participated in discovery until he filed a bankruptcy petition under Chapter 7.  This lawsuit was listed in his schedule and plaintiff was listed as a creditor.  The bankruptcy was filed on May 14, 2021.

On July 7, 2021, defendant filed a motion with the trial court for an order staying plaintiff’s lawsuit.  His defense counsel represented that defendant had recently filed for bankruptcy and, hence, sought a stay of this Law Division matter pending the outcome of the bankruptcy proceeding.

Plaintiff opposed that motion and represented to the trial court that he would be immediately filing a motion to lift the automatic stay.  Plaintiff’s counsel provided a certification that State Farm and Geico each had $100,000 in liability coverage and excess liability coverage respectively, regarding this accident.  Plaintiff’s counsel opposed the stay motion because he represented that plaintiff was seeking $200,000 to resolve this claim and nothing above the liability and excess coverage afforded to defendant.  Therefore, he argued that the resolution of this civil matter would not involve the property of the bankruptcy case.

After opposing the motion, plaintiff did move in the bankruptcy court for relief from the automatic stay.  He sought an order modifying the automatic stay, expressly to permit him to pursue the defendant’s $200,000 in insurance coverage.

The bankruptcy court conducted a hearing and granted relief from the automatic stay and permitted him to pursue his prosecution of the Law Division action to the limits of the defendant’s available liability insurance coverage.  The plaintiff’s counsel submitted that order to the Law Division judge and, hence, the trial court subsequently denied the defendant’s motion for a stay of this civil claim.

The case thereafter proceeded to trial and, on January 19, 2023, the jury awarded $1.6 million dollars to plaintiff. Previously, the plaintiff had represented to both the bankruptcy court and the Law Division judge that he was only seeking to pursue the limits of defendant’s insurance coverage.  However, he now advised the defendant that he would hold defendant directly responsible for the excess verdict and also seek a bad faith claim against defendant’s respective insurance carriers.

The defendant then moved to mold the verdict to the $200,000 coverage limit, or, in the alternative, he moved for a remittitur or a new trial.  He relied upon the bankruptcy court’s order for the motion to mold the verdict to the coverage limit.  The trial court denied that motion, ruling that the defendant needed to seek relief from the bankruptcy court.  The trial court issued an order, awarding plaintiff $1.6 million plus pre-judgment  interest and counsel fees based upon defendant’s non-acceptance of plaintiff’s offer of judgment. 

However, the trial court stayed the judgment to give defendant an opportunity to apply to the bankruptcy court.  Defendant then moved in the bankruptcy court to reopen the discharged Chapter 7 case and for an order that the judgment obtained by plaintiff was not enforceable beyond the $200,000 policy limits of his automobile insurance.  The bankruptcy court did grant defendant’s motion and found that the concept of judicial estoppel applied.

Under the doctrine of judicial estoppel, a party would be precluded from assuming an inconsistent position with one court after he’s been successful with it in another.  Following the entry of the bankruptcy court’s orders, defendant again moved in the Law Division for an order molding the judgment to $200,000.  While acknowledging the bankruptcy court’s order, the trial court nevertheless denied defendant’s motion.  This appeal ensued. 

The Appellate Division did find that judicial estoppel applied.  It noted that under this doctrine, “if a court has based a final decision, even in part, on a party’s assertion, that same party is thereafter precluded from asserting a contrary position.”  Here, the Court noted that the plaintiff had made representations in his opposition to defendant’s Law Division stay motion and in his motion in the bankruptcy court for relief from the automatic stay that he was pursuing only $200,000, which were the funds provided by defendant’s insurance coverage.  The bankruptcy court granted plaintiff’s motion based upon this representation to lift the automatic stay.

The Court further found that Plaintiff thereafter submitted this order to the Law Division in support of his opposition to defendant’s stay of the Law Division action.  Based upon those orders, plaintiff was able to proceed to trial.  It was only after the jury had rendered its verdict that plaintiff changed his position and was now asserting that he was pursuing not only the insurance proceeds but the full amount of the verdict.

The Appellate Division found that “having represented to both courts, he was pursuing a judgment limited to the amount of the insurance coverage and having received relief based on that representation, plaintiff was judicially estopped from changing his position.”  Thus, the Court concluded that the trial court made a mistake in denying defendant’s motion to mold the verdict to the $200,000 coverage limit.  It reversed the trial court decision and remanded the case back for an entry of an order, molding the verdict to the $200,000 insurance coverage limit.

Plaintiff Found to Be Eligible for PIP Benefits for Burns Suffered From Hot Tea Spilled on Her at Dunkin’ Donuts Drive-Through

Plaintiff, Shani Harrell, made a claim against her automobile insurance company, Progressive Garden State Insurance Company (“Progressive”), for personal injury protection (PIP) benefits when she suffered severe burns to her body after a restaurant employee spilled a hot beverage on her at a Dunkin’ Donuts drive-through.  She applied to Progressive for PIP benefits under her policy, which Progressive denied.  The issue in Harrell v. Mody Management, LLC d/b/a Dunkin’ Grand Group, Inc., 2024 N.J. Super. Unpub. LEXIS 2579 (App. Div. Oct. 23, 2024) was whether plaintiff was entitled to PIP benefits for her injuries.  (PIP benefits can include payment of medical bills, wage loss, and essential service benefits.)

At the trial court level, Progressive filed for summary judgment on the coverage issue.  The trial court granted summary judgment for Progressive, ruling that plaintiff was not operating her vehicle at the time she was injured and that there was no causal relationship between her use of the vehicle and her injuries. Hence, the judge found there was no coverage under her policy for PIP benefits.

This decision was appealed to the Appellate Division, which reversed. 

The Appellate Division noted that the facts showed that plaintiff was stopped in the drive-through while purchasing hot tea.  When the tea was passed to her through her window, the beverage cup and its top became dislodged, and the contents spilled into the driver’s compartment of the car onto plaintiff.  The hot tea flowed under her lap between her legs and onto the seat beneath her, burning her. 

She subsequently filed a claim for PIP benefits pursuant to her auto insurance policy.  According to her policy, PIP benefits would be paid “because of bodily injury caused by an accident and sustained by an injured person while occupying, entering into, alighting from, getting on, getting off of, loading, unloading, or using an automobile . . .”  Progressive had argued that there was no connection between the injuries claimed and her automobile.  Further, it argued that her injuries were not caused by the result of occupying, entering into, alighting from or using an automobile.

The trial court had agreed that there was no nexus between the use of the automobile and her injuries.  The Appellate Division, however, disagreed with that analysis.  It noted that the question required the court to consider whether a substantial nexus existed between the accident plaintiff suffered and the use of her car.

The Court noted that she was injured when hot tea was spilled and burned her as it was passed into her car.  She was obviously occupying her vehicle and sitting in the driver’s seat at the time she was injured.  She was clearly using her vehicle “to acquire her hot beverage from a business that expressly offers customers the option to pick up their food and drinks while remaining in their cars.”

Thus, the Court found that there was a substantial nexus between the burn incident and her vehicle use.  Therefore, the Appellate Division concluded that plaintiff was covered under her insurance policy’s PIP terms.  It reversed the order granting defendant summary judgment and remanded the matter back to the trial court.

Insurance Carrier Not Estopped From Denying Coverage After Affording Defense of Its Insured From an Automobile Accident

This case involved an insurance coverage dispute from an automobile accident involving an employee of defendant Century Waste Services, LLC (“Century”).  The employee was driving a vehicle owned by a manager’s mother, which was a vehicle not covered under the insurance policy issued to Century by United Specialty Insurance Company (“USI”).  The trial court had ruled that USI was not required to indemnify Century for this accident.  In the case of United Specialty Insurance Co. v. Century Waste Services, LLC, 2023 N.J. Super. Unpub. LEXIS 2097 (App. Div. Nov. 20, 2023), the issue on appeal was whether USI was estopped from denying coverage because USI’s reservation of rights letter did not inform Century that it could accept or reject USI’s assigned counsel.

This accident happened when a manager employed by Century asked another employee to drive from Elizabeth, New Jersey to Bronx, New York to pick up a check from a Century customer.  The employee was given permission by the manager to drive a vehicle owned by the manager’s mother.  However, the employee was involved in a car accident on the way to pick up the check.

The passengers in the other vehicle sued Century, the Century employee who drove the borrowed vehicle, and the owner of the borrowed vehicle to recover damages for injuries they suffered in the car accident.  Thereafter, USI’s claim administrator sent a letter to Century advising it had retained counsel to defend Century in the underlying action.  The letter also advised Century that, if Century chose to retain its own attorney, it would be at its expense. 

GEICO was the borrowed vehicle’s insurer and assigned counsel to defendant both the vehicle’s owner and the Century employee driving the vehicle at the time of the accident.

USI wrote to Century offering to continue defend it in the underlying lawsuit, subject to a reservation of rights.  The letter stated as follows:

“If we do not hear from you to the contrary, we will assume that you consent to the retention of Meaghan Lipton, Esq., for this matter.” 

Century did not object to USI’s continued representation in the underlying action.

Thereafter, USI filed a lawsuit seeking a declaratory judgment that USI did not owe Century a defense or indemnity in the underlying lawsuit.  USI filed a motion for summary judgment in the declaratory judgment action.  Century filed a cross-motion for summary judgment, seeking to require USI to provide a defense and indemnify Century in the underlying lawsuit.  The trial court heard both motions and denied them both.

Thereafter, USI filed a second motion for summary judgment, seeking a declaratory judgment that it did not owe Century a defense or indemnity in the underlying suit.  Again, Century cross-moved for summary judgment and opposed USI’s motion.  This time, the trial court entered an order granting USI’s summary judgment motion and denying Century’s cross motion. 

In making its ruling, the trial court reasoned that there was never any coverage for Century on the underlying action under the USI policy in the first place and that Century cannot be allowed to create that coverage through estoppel.  The court made a determination that the letter from USI reserving its rights was not insufficient simply because it did not include “certain magic words.”   Further, the court determined that Century had suffered no prejudice. 

Century appealed this ruling and contended that USI should be estopped from denying coverage because the reservation of rights letter did not contain the required language “to inform Century it could accept or reject the offer of a defense,” and also because Century incurred prejudice as a result of USI’s control of the legal defense. 

The Appellate Division explained that estoppel is a doctrine applied at law and in equity for the purpose of precluding a party “from asserting rights which might perhaps have otherwise existed . . . as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worst.”  The Court also noted that the “predominant view” is that a loss which is not within the coverage of a policy cannot be bought within such coverage by invoking the principles of waiver or estoppel.

In this matter, Century did not dispute that the borrowed vehicle did not qualify as a “covered auto” under the USI policy.  Its argument rested on the principle of estoppel, which in turn hinged on whether Century was properly informed of its right to choose either to consent to legal representation by the lawyer provided by USI or to retain its own attorney at its own expense. 

The Appellate Division noted the well-settled law that “without the insured’s consent or circumstances that suggest the insured acquiesced in the insurer’s control of the defense, an insurer will be estopped from later disclaiming coverage.”  Further, the Court noted that reservation of rights letters have been regarded as “proper defense mechanisms for insurance companies.” 

In this situation, the Court found that it was dealing with a variation of acquiescence by silence.  It noted that there are no magic words that need to constitute a valid reservation of rights.  In this case, the Appellate Division was satisfied that “if we do not hear from you” language in the reservation of rights letter adequately communicated that Century had the option to reject the use of the attorney by USI.  The Court inferred that Century elected not to exercise its option to retain its own counsel when it chose not to advise USI that it did not want its interest represented by the attorney retained by USI.  Thus, the Appellate Division concluded that Century had consented to allow the attorney retained by USI to control the defense of the underlying lawsuit.

Under these circumstances, the Appellate Division found that Century failed to provide a basis upon which to apply the estoppel doctrine.  Further, the Court found that Century had not suffered any prejudice.  It was unable to show how the case would have been handled differently had it chosen to retain a different attorney at its own expense.  Thus, the Appellate Division affirmed the trial court’s ruling that USI was not estopped from denying coverage because of the lack of specific language in its reservation of rights letter.

Homeowner Did Not Have Insurance Coverage for Accident of Person Who Lived With Insured

Plaintiff Mary Ann Iaeck lived with Patricia Barnaba in a condominium owned by Defendant Barnaba.  Plaintiff fell down a flight of stairs in the condominium and sued Barnaba, claiming that Barnaba’s negligence caused her fall.  Barnaba had a homeowner’s insurance policy with personal liability coverage with Federal Insurance Company (“Federal”).  The issue in Iaeck v. Barnaba, 2023 N.J. Super. Unpub. LEXIS 1768 (App. Div. Oct. 16, 2023) was whether the Federal insurance policy provided coverage for this personal injury claim or whether the exclusion for liability to persons who live with the policyholder was triggered.

Plaintiff had lived with Barnaba in the condominium since 2008.  She had a verbal lease with Barnaba and paid Barnaba rent.  However, it was undisputed that they shared parts of the condominium, including the kitchen, the garage, the mailbox and the space where the washing machine and dryer were located.  Plaintiff used the bedroom and bathroom on the fourth floor of the condominium.

After living with Barnaba for about 11 years, plaintiff fell down the stairway in the condominium.  She claimed that she tripped because the lights were out, the handrail was loose and Barnaba had placed boxes and other things on the steps.

As a result of her fall, plaintiff suffered a fracture of her left leg and compartment syndrome. Plaintiff was required to have multiple surgeries, which left her with permanent scarring.

At the time of the accident, Barnaba had a homeowner’s insurance policy with Federal.  The policy did cover Barnaba’s home and provided her with personal liability coverage which provided coverage for damages Barnaba was legally obligated to pay for personal injuries.

However, the policy contained numerous exclusions.  The pertinent one was entitled “Covered person’s or dependent’s personal injury.”  According to that exclusion, Federal stated that it would not cover damages for personal injuries for any covered person or their dependents where the ultimate beneficiary is the offending party or defendant.  Further, the exclusion stated that Federal would not cover any damages for personal injury “for which you or a family member can be held legally liable in any way, to a spouse, a family member, a person who lives with you, or a person named in the Coverage Summary.”

After the plaintiff’s fall, counsel for plaintiff sent Federal a letter advising of the fall and asking Federal to open a bodily injury claim under its policy.  Thereafter, Federal denied any obligation to provide Barnaba with coverage for plaintiff’s injuries.  Federal advised that Barnaba’s personal liability coverage was excluded under the policy’s “Covered person’s or dependent’s personal injury exclusion.”

Thereafter, plaintiff sued Barnaba with plaintiff claiming that Barnaba was negligent in causing her injuries.  Thereafter, plaintiff amended her complaint to assert a direct claim against Federal and sought a declaratory judgment that the policy issued by Federal to Barnaba provided coverage for plaintiff’s injuries.  She also requested a default against Barnaba.  Sometime later the trial court conducted a proof hearing concerning plaintiff’s injuries, for which Barnaba did not appear.  A judgment in the amount of $766,330 was entered in favor of plaintiff against Barnaba.

Cross-motions for summary judgment were filed between Federal and plaintiff as to the coverage issue.  The trial court granted summary judgment to Federal and declared that Federal did not have any indemnity or defense obligations as to plaintiff’s personal injury claims against Barnaba and dismissed all claims against Federal with prejudice.  That order was appealed to the Appellate Division.

The issue upon appeal was whether the “Covered person’s or dependent’s personal injury” exclusion applied to plaintiff’s personal injury claims because plaintiff lived with Barnaba.  The Appellate Division noted the well settled concepts that coverage provisions are to be read broadly and exclusions are to be read narrowly with any potential ambiguities being resolved in favor of the insured. Further, the policy is to be read in a manner that fulfills the insured’s reasonable expectations.  However, if the plain language of the policy is unambiguous, the court is not to engage in a strained construction to support the imposition of liability or write a better policy for the insured than the one purchased.

In applying these principles, the Appellate Division found that the “Covered person’s or dependent’s personal injury” exclusion did apply.  The Appellate Division explained that Barnaba’s liability to plaintiff for her personal injuries was excluded under the policy because plaintiff did live with Barnaba at the time of the accident.  It found that the language was “plain and unambiguous.”  The Court found that the exclusion applied to personal injury suffered by plaintiff because plaintiff was living with Barnaba at the time of the accident.  It found no ambiguity in this exclusion, even if read narrowly, and also found that it was not contrary to public policy because “it is reasonable for an insurer to exclude coverage for liability for personal injuries to people who live with the covered person.”

One of the arguments made by plaintiff upon appeal was that the exclusion should be read to apply only to individuals who are part of the covered person’s household or who have a romantic or familial relationship with the covered person.  The Appellate Division rejected that argument as inconsistent with the plain language of the exclusion.  It noted that the exclusion did not use the term “household” members.  Rather, it stated that there was no liability coverage for personal injuries to “a person who lives with” the covered person.

Further, the Appellate Division found that if the exclusion was meant only to apply to household members or family members, there would be no need to list “a spouse, a family member or a person who lives with you.”  By separately listing “a person who lives with you,” the Court found that “Federal was clearly stating that the exclusion applied to people who are not in a familial relationship.”  There was nothing in the terms “a person who lives with you” that require that there be a romantic relationship between that person and the covered person.

The Court rejected all of the plaintiff’s other arguments and upheld the trial court’s decision. Thus, the summary judgment entered in favor of the Federal Insurance Company dismissing the case against it was affirmed. 

Employee Exclusion Bars Coverage For Injured Pool Worker Employee

Plaintiffs were a Condominium Association and a Management Corporation responsible for a condominium property whose pool was maintained by Preferred Pool Management, Inc. (“PPM”).  PPM employee James Visconti (“Visconti”) fell on Plaintiffs’ property while performing maintenance on the condominium’s pool in the course of his employment with PPM and allegedly suffered injuries.   In a state court lawsuit, Visconti asserted various tort claims (personal injury claims) against Plaintiffs, claiming that he was injured because Plaintiffs failed to keep the pool’s premises in a safe condition.  Plaintiffs joined PPM as a third-party defendant in the underlying tort action, seeking contribution and indemnification under the Pool Maintenance Contract.  The dispute in the federal court case of Harmon Cove IV Condominium Association, Inc. v. Indian Harbor Insurance Company, 2023 U.S. Dist. LEXIS 71960 (D.N.J. Apr. 25, 2023) was who should be responsible for the cost of defending Plaintiffs and any damages that might be awarded in the underlying tort action.

Defendants Indian Harbor Insurance Company (“Indian Harbor”) and Ohio Security Insurance Company (“Ohio Security”) each issued a general liability policy to PPM which had a blanket additional insured endorsement providing coverage to parties with whom PPM agreed in writing to add as additional insureds and Scottsdale issued an excess liability policy to PPM for damages covered by, but in excess of limits of, the Indian Harbor policy.  In the Pool Maintenance Contract, PPM agreed to add Plaintiffs as additional insureds to these policies.  Thus, Plaintiffs claimed that they were additional insureds under both the Indian Harbor and Ohio Security policies, as well as Scottsdale’s excess liability policy.

The issue before the court was whether Scottsdale owed coverage for the underlying tort claims. Scottsdale filed a motion before the District Court claiming that its policy did not provide coverage and the complaint should be dismissed as to it.

The Scottsdale excess policy contained an “Injury to Worker Exclusion” which excluded coverage for an injury to an “employee . . . of any insured . . . if such injury arises out of and in the course of their employment.”  This exclusion also expressly excluded from coverage any “obligation of any insured to defend, indemnify or contribute with another because of injury to  . . . [an] employee  . . . of any insured.”  As for additional insured coverage, it noted that such coverage would not be broader than coverage provided by the controlling underlying policy which, would be the Indian Harbor policy.

The District Court found that the Injury to Worker Exclusion in the Scottsdale Excess Policy unambiguously barred Plaintiffs from seeking coverage for Visconti’s injuries and Plaintiffs’ defense in the underlying tort action.  The complaint had alleged that Visconti was an employee of PPM and that, on the day he fell, PPM had directed him to perform pool service and maintenance work on the condominium’s pool.  Specifically, it alleged that Visconti was carrying a heavy bucket and containers of liquid shock while walking up wooden steps to the pool house when he suffered his injuries.

The District Court noted that the Injury to Worker Exclusion excluded from coverage any injury to an employee of any insured if such injury arose out of and in the course of their employment.  Although the Complaint alleged that Visconti was an employee of PPM, and not Plaintiffs, the Court found that the exclusion plainly applied here because it excluded coverage for employees of “any” insured, which included PPM’s employees and because the Complaint alleged that Visconti was injured in the course of his pool maintenance work for PPM.

The District Court found no ambiguity in the Injury to Worker Exclusion, nor any public policy reason for not enforcing it.  It found that it was written in plain terms and prominently featured in the policy.  Further, by plain terms, the Plaintiffs were precluded from seeking coverage that was broader than that provided to PPM.

Based upon all of these reasons, the District Court held that it must enforce the plain terms of the Injury to Worker Exclusion and dismiss Plaintiffs’ claims against Scottsdale, which had sought indemnification and defense from a party that it had no contractual obligation provide such coverage.  Hence, Scottsdale’s motion to dismiss was granted and Plaintiffs’ claims against Scottsdale were dismissed for a failure to state a claim. 

Plaintiff’s Underinsured Motorist Claim Barred Due to a Failure To Purchase a New Jersey Automobile Insurance Policy

In 2016, the plaintiff Juan Guiterrez-Ganan was injured in an auto accident when his car was struck by a car driven by an underinsured motorist.  Plaintiff sued his automobile insurance company, defendant Allstate Insurance Company, to collect underinsured motorist benefits for his claimed injuries and losses from the automobile accident.  The issue in Guiterrez-Ganan v. Allstate Insurance Co., 2022 N.J. Super. Unpub. LEXIS 526 (App. Div. April 1, 2022), was whether plaintiff was precluded from collecting underinsured motorist benefits due to his failure to insure his vehicle in New Jersey, despite living in New Jersey for at least 1½ years before the accident.

The facts of the accident were not in dispute.  Plaintiff’s vehicle was rear ended while he was driving his vehicle and was struck in the rear by an intoxicated and underinsured driver.  He claims to have suffered personal injuries as a result of this collision.

Previously, he had lived in Georgia.  While in Georgia, he had registered his vehicle and obtained insurance coverage in Georgia from Allstate.  Thereafter, he moved to New Jersey but plaintiff continued to register his car in Georgia and continued to purchase a Georgia-issued automobile insurance policy from Allstate.  On his insurance application in 2016, plaintiff listed his address at a street in Savannah, Georgia.  However, at that time, plaintiff had a New Jersey driver’s license, listing his address in Galloway, New Jersey.  The plaintiff’s 2016 Georgia policy from Allstate did not include automobile medical payments or personal injury protection.

Plaintiff acknowledged that, as of the date of the accident in April 2016, he was a resident of New Jersey and maintained and garaged his car in New Jersey for at least 1½ years before the accident.

Initially, Allstate paid for some of plaintiff’s medical expenses but thereafter refused to pay additional monies.  In February 2019, plaintiff filed a lawsuit against Allstate, asserting a claim for underinsured motorist benefits.  Allstate successfully filed a motion for summary judgment, arguing that plaintiff’s underinsured motorist claim was barred due to his failure to register and insure his vehicle in New Jersey.

The Appellate Division noted that, pursuant to New Jersey statute, “every owner of an automobile principally garaged in New Jersey must maintain minimum liability insurance coverage, including no-fault PIP coverage at $15,000 per person.”  Further, it pointed out to determine whether an automobile is principally garaged in New Jersey, the key consideration was where the vehicle is kept most of the time.  Any driver moving to New Jersey must obtain a New Jersey driver’s license and register his or her car within sixty (60) days of becoming a resident.

Under the New Jersey statute, N.J.S.A. 39:6A-4.5, the law limits the ability of a person injured in a motor vehicle accident to sue persons responsible for their injuries.  Pursuant to this statute, any person who, at the time of the automobile accident, is required to but fails to maintain medical expense benefits coverage “shall have no cause of action for recovery of economic or non-economic loss sustained as a result of an accident while operating an uninsured automobile.”

The rationale for this statute is that “an injured, uninsured driver does not draw on the pool of accident-victim insurance funds to which he [or she] did not contribute.”  This statutory provision provides a “powerful incentive” for someone to obtain automobile liability insurance coverage or lose the right to sue for economic and non-economic injuries incurred in an automobile accident.

Thus, the Appellate Division found that despite the requirement under New Jersey law, the plaintiff failed to maintain medical expense benefits coverage.  Although that coverage was available to him in his Georgia policy, he elected not to pay for it.  Thus, the Court found under the plain language of N.J.S.A. 39:6A-4.5(a), the plaintiff was “barred from seeking recovery of economic or non-economic losses.”

Plaintiff made a further argument that this statutory provision should not apply to him because he was not operating an uninsured automobile at the time of the accident.  Because of the New Jersey Deemer Statute, “an automobile insurance company that sells insurance both in New Jersey and in other jurisdictions is deemed to have provided the minimum PIP coverage required by New Jersey law.” 

Plaintiff argued that by virtue of the Deemer Statute, his policy was “deemed” to include PIP benefits and, therefore, he was not uninsured.  The Court held that even if the Deemer Statute applied, plaintiff’s lawsuit was still barred because he failed to maintain PIP benefits as required by New Jersey law.  Hence, the Appellate Division upheld the trial court decision, dismissing plaintiff claims against Allstate for uninsured motorist benefits for both economic and non-economic losses stemming from his April 2016 automobile accident.

Court Finds That NJM Had No Duty To Pay For Defense Of Guest Who Committed Assault Until Incident Is Determined To Be Negligent Or Intentional

This matter arises from the physical assault of a guest, plaintiff Colin Yurcisin, who attended a party hosted by defendant Justin Magariello.  While at the party, plaintiff alleges that a fellow guest, Ryan Fleming, who was intoxicated, punched him in the face multiple times causing serious injury. Plaintiff Yurcisin sued Fleming for his injuries. In the case of Yurcisin v. Fleming, 2022 N.J. Super. Unpub. LEXIS 457 (App. Div. March 21, 2022), the issue was whether NJM owed a duty to defend and indemnify the defendant guest (Fleming) who committed the assault upon plaintiff. 

Fleming had been charged with second degree aggravated assault as a result of the incident.  At his plea hearing, Fleming testified that plaintiff was sitting at a chair at the party, “minding his own business” when Fleming struck him about six times in the face.  He admitted that his contact was purposeful and knowing.  However, his admission at the plea hearing was made under a civil reservation that the plea would not be evidential in any civil proceeding.

Thereafter, the plaintiff filed a personal injury action against Fleming and the homeowners who hosted the party (the Magariellos).  Plaintiff alleged that Fleming was liable for negligently and/or intentionally causing injury to him or his improper, unauthorized and/or illegal conduct and maliciously and/or negligently assaulting him.

Fleming was insured under his parents’ NJM homeowner’s policy and he requested that NJM provide him with a defense and indemnification against plaintiff’s claims.  NJM denied coverage, claiming that the incident between Fleming and Yurcisin was not a covered occurrence as defined in the policy.

NJM contended that the incident would not be classified as an accident because the plaintiff’s claimed bodily injury was “expected or intended” by an insured, which was excluded under its policy.  NJM also considered Fleming’s actions intentional.

The parties did not dispute that the policy did not provide coverage or a duty to defend for Fleming’s intentional acts.  The issue was whether the acts could be deemed negligent and, hence, covered under the NJM policy.

NJM filed a complaint for a declaratory judgment, seeking a declaration that it had no obligation to provide a defense or liability coverage to Fleming for the plaintiff’s claims.  The declaratory action and the personal injury action were thereafter consolidated.

Fleming was defended in the personal injury and declaratory judgment action by privately retained counsel.  The plaintiff moved for summary judgment in the declaratory judgment action to compel NJM to defend and indemnify Fleming against plaintiff’s claims.  In turn, NJM cross-moved for summary judgment for a ruling that it had no obligation to cover Fleming against the plaintiff’s claims and, thus, no duty to defend or indemnify Fleming for those claims.  Fleming also moved for summary judgment to compel NJM to defend and indemnify him against plaintiff’s claims.

The trial court issued three orders, denying all three motions for summary judgment but still required NJM to defend Fleming.  It found that there was a genuine issue of material fact whether plaintiff’s injuries were caused by Fleming’s negligent, reckless or intentional acts.  The Court also directed that the declaratory judgment action be tried before the personal injury action was tried.

Despite denying the summary judgment motions, the trial court found that NJM had a duty to defend Fleming and was responsible for Fleming’s attorney’s fees in the actions.  The Court ordered NJM to assign counsel to defend Fleming and to pay his attorney’s fees and costs he had incurred in the consolidated actions. 

NJM filed a motion for reconsideration, which was also denied.  Thereafter, NJM appealed the orders directing it to provide counsel to Fleming and to pay the attorney’s fees incurred for the services rendered by Fleming’s personal attorney in both actions and denying its motion for reconsideration and directing it to pay the attorney’s fees and costs to Fleming’s personal counsel.

Under prior case law, the New Jersey Supreme Court explained when there are covered and noncovered claims in a complaint, “the insurer has two options: (1) it can assume the defense if the insured agreed, with a reservation of its rights to, dispute coverage; or (2) it can refuse to defend and dispute its obligations later, so as to translate its obligation into one to reimburse the insured if it is later adjudged that the claim was one within the policy covenant to pay.”  The Supreme Court also recognized in prior case law that it might be appropriate to decide the coverage issue and, thus, the insurer’s duty to defend, before trial of the underlying claim.

The Appellate Division noted that, given the underlying facts and allegations, it was not surprising that NJM’s position diverged from Fleming’s position, NJM contended that the plaintiff’s injuries were caused by Fleming’s intentional assault, not negligence.  The Court stated that if NJM prevailed on that issue, NJM would not owe a duty to defend or indemnify Fleming from the plaintiff’s claims because the occurrence would be excluded from coverage.

The Appellate Division had no issue with the trial court directing that the declaratory judgment action be tried before the personal injury action.  It noted that under the circumstances, “the better course is for the declaratory judgment action to be decided on the merits before the personal injury action.”  The Court stated that “[w]hether coverage exists for the occurrence is a legal issue to be decided by the Court, not a jury.”  Thus, the Appellate Division affirmed the ruling that the declaratory judgment action be tried and decided before the trial of the personal injury action.  The Court remanded for that purpose but stayed the personal injury action until that decision is rendered.

However, the Appellate Division disagreed with the trial court’s order directing NJM to provide counsel to Fleming in the consolidated actions.  It noted that an “insurer is obligated to provide the insured with a defense against all actions covered by the insurance policy.”  But, the duty to defend arises only when the complaint states a claim constituting a risk insured against. 

The Appellate Division noted that the declaratory judgment had not yet been tried and the issue of whether the incident was a covered occurrence remained undecided.  Under the language of the policy, it did not obligate NJM to provide Fleming with a defense to the declaratory judgment action.

The Appellate Division vacated the order requiring NJM to provide defense counsel in the personal injury action.  It found that NJM was only obligated to provide defense counsel in the personal injury action if Fleming prevailed on the declaratory judgment action.  It also reversed the order directing NJM to provide counsel to Fleming in the declaratory judgment action, noting that NJM owed no such duty.

The Appellate Division also disagreed with the trial court’s award of counsel fees and costs to Fleming’s privately retained counsel.  Attorney’s fees may be awarded in favor of a successful claimant under New Jersey Court Rules.  The term successful claimant is broadly defined as a party that “succeeds on any significant issue and litigation which achieves some benefit the parties sought in bringing suit.”

The Appellate Division stated that Fleming was not a successful claimant until he prevailed on the coverage issue.  Because the coverage issue remained undecided, Fleming was not yet a successful claimant and not yet entitled to a counsel fee award.  The Appellate Division found that the counsel fee awards in both actions were premature and vacated those awards without prejudice to Fleming who may renew his claim for counsel fees and costs if he prevailed in the declaratory judgment action.

Parent Witnessing Children Struck By Car Not Entitled To Underinsured Motorist Benefits

The plaintiff, B.G., drove his two children to school and parked his car next to the curb and across the street from the school building.  He got out of his car and helped his children exit the car, leaving the engine in his car running.  After walking his children one block to a crosswalk staffed by a crossing guard, he watched his children cross the street and saw the driver of a car strike his children.  In C.G. v. Cheheli, 2021 N.J. Super. Unpub. LEXIS 3092 (App. Div. Dec. 14, 2021), the issue was whether the parent, B.G., could pursue a claim for underinsured motorist benefits under his automobile insurance policy for his emotional distress suffered from witnessing his children being struck by the car.  (B.G.’s claim for negligent infliction of emotional distress was based upon Portee v. Jaffee, 84 N.J. 88 (1980)).

B.G. was insured under a commercial automobile policy issued by NJM for B.G.’s business vehicle.  Under the NJM policy, underinsured motorist benefits (“UIM”) benefits are available to “anyone occupying a covered auto.”  Under the NJM policy, “occupying” is defined as “in, upon, getting in, on, out or off.”

At the trial court level, NJM filed a motion for summary judgment asserting that the children and B.G. were not entitled to UIM benefits because they were not occupying B.G.’s vehicle when the accident occurred.  While the trial court judge granted the motion as to the children, he denied the motion as to B.G. without prejudice at that time. 

Upon the completion of discovery, NJM refiled its motion for summary judgment as to B.G.’s claim, arguing that B.G. was not occupying his car at the time of his injury.  The trial court judge found that B.G. “had every intention of returning to his running car after briefly walking his children to the crosswalk.”  Thus, he found that there was a reasonable inference that B.G. had a substantial nexus to his running vehicle, which was insured by NJM.  Finding that B.G. satisfied the substantial nexus test, the trial court judge determined that B.G. was entitled to UIM befits under NJM’s policy.  Thus, he entered an order denying NJM’s motion for summary judgment.

NJM filed a motion for reconsideration, which was also denied.  Thereafter, NJM appealed this decision to the Appellate Division, arguing that B.G.’s use of the car was coincidental to his arrival at the location where the injury occurred.  Further, it contended that there was no substantial nexus between the insured vehicle and B.G.’s injury.  NJM asserted that “B.G. was not engaged with his car at the time of his injury and therefore he failed to satisfy the substantial nexus test for entitlement to UIM coverage.” 

The Appellate Division agreed with this argument.

The Court pointed out that for B.G. to be entitled to UIM coverage, he had to be “occupying” it at the time of the accident.  Whether a person is deemed “occupying” a motor vehicle for purposes of uninsured or underinsured motorist coverage “must be determined on a case-by-case basis, depending on the facts of the accident and the use of [the] vehicle.” 

After reviewing the facts of this case, the Appellate Division found that B.G. was not occupying the insured vehicle when he witnessed the oncoming car strike his children.  Further, the Court found that B.G. failed to establish the requisite “substantial nexus” between the accident and his insured vehicle.

The Court noted that B.G. had parked his car, exited his vehicle with his children and walked with his children to a nearby crosswalk.  When he saw his children struck by an oncoming car, he was a block away from his own car.  Thus, the Appellate Division noted that B.G.’s insured vehicle was “simply coincidental” to the injury he suffered.  The Court pointed out that “[n]ot every act of driving to a location, parking, and exiting a car satisfies the definition of ‘occupying’ a car to be entitled to UIM coverage.” 

In summary, the Appellate Division found that B.G.’s emotional distress claim was “merely coincidental to the use of his car.”  The Court ruled that “[b]ecause B.G. was not occupying the insured vehicle at the time he witnessed the accident, he was not entitled to UIM coverage under NJM’s policy.”  Accordingly, the Appellate Division found that the motion judge erred in denying NJM’s motion for summary judgment and granting B.G.’s cross motion for summary judgment.  Thus, it reversed the trial court’s order, entering an order in favor of NJM.

Injured Passenger Involved In Auto Accident Not Entitled To Underinsured Motorist Coverage Under Owner’s Business Insurance Policy

Plaintiff, Maria Lopez Menjivar, and her friend and plaintiff’s boyfriend, had just returned from visiting a casino in Pennsylvania.  Plaintiff’s friend had driven her minivan and parked it on the side street in Plainfield, near where the plaintiff and her boyfriend lived.  While plaintiff was a back seat passenger of the vehicle, the defendant Neltson Wilfredo rear ended the vehicle and, as a result, plaintiff suffered personal injuries.  The issue in Menjivar v. Ramirez, 2021 N.J. Super. Unpub. LEXIS 3145 (App. Div. Dec. 22, 2021) was whether plaintiff was entitled to underinsured motorist (UIM) benefits under her friend’s business auto policy.

The defendant Wilfredo was driving a vehicle owned by Gloria Ramirez.  Ms. Ramirez had a basic automobile insurance policy that did not include bodily injury liability coverage.  The friend’s minivan was owned by a limited liability company J&Y Drywall (J&Y) which had an automobile insurance policy issued by State Farm.  Neither plaintiff, nor her friend were employees of J&Y.  The record does not explain what a relationship, if any, plaintiff’s friend had to J&Y.  It was undisputed, however, that at the time of the accident, the vehicle was not being used for business purposes related to J&Y.

Plaintiff sued Wilfredo who was operating the vehicle that struck them and Ramirez, the owner of the vehicle.  Neither responded to the complaint and both had their claims administratively dismissed for lack of prosecution.

Thereafter, plaintiff amended her complaint to add State Farm as a defendant, claiming that she was entitled to uninsured motorist coverage under the State Farm policy.  State Farm filed a motion for summary judgment to dismiss the case.  It argued that the plaintiff’s actual claim was for UIM coverage because the Ramirez car had a basic insurance policy and, therefore, under the law, a vehicle with a basic policy was not considered to be “uninsured.”  Further, State Farm contended that its policy did not provide UIM coverage to plaintiff because the policy limited UIM benefits to J&Y, the named insured, resident relatives, and “anyone who may seek indemnity due to injury to a named insured or a resident relative.”

At the trial court level, the judge heard the arguments on the summary judgment motion, found no ambiguity in State Farm’s policy and agreed that the State Farm policy did not provide UIM coverage to the plaintiff under the circumstances.  Thus, it granted summary judgment to State Farm.

Plaintiff appealed that ruling to the Appellate Division.  She argued that the State Farm policy was ambiguous and should be construed against State Farm.  Additionally, the New Jersey Association for Justice (“Association”) filed a brief to appear as amicus curiae.  It argued that the Legislature did not intend to leave someone like plaintiff without coverage.  It further argued that the basic policy on Ramirez’s vehicle should be treated as providing no coverage and hence, plaintiff should be able to recover under State Farm’s uninsured motorist coverage.

The Appellate Division rejected the arguments made by plaintiff and the Association.  It found that the State Farm policy was clear and unambiguous and did not provide UIM coverage to plaintiff.  Further, it found that the argument made by the New Jersey Association for Justice was inconsistent with the plain language of the statute.

The Court considered the State Farm policy language and found that UIM coverage was limited to an “insured,” “resident relatives,” and any person entitled to recover damages due to injury to the named insured or a resident relative.  The Appellate Division pointed out that the named insured on the policy was J&Y and that plaintiff was not a named insured, nor was she an employee of J&Y.  Thus, the Court found under the clear language of the State Farm policy, she was not entitled to UIM coverage.

Plaintiff argued that the policy was ambiguous because it discussed uninsured and underinsured motorist coverage in the same section.  The Appellate Division commented that “[w]hile State Farm’s policy is not a model of clarity, there is no ambiguity concerning the limitations on the UIM coverage.”  The Court further pointed out that uninsured coverage and underinsured motorist coverage were discussed in separate sections within the policy.  Moreover, the policy clarified that its definition of an “uninsured motor vehicle” did not include an “underinsured motor vehicle.”

The Appellate Division noted that the Ramirez automobile insurance policy was a basic policy which did exclude bodily injury liability coverage.  Further, the Court pointed out that the Legislature has stated that an automobile covered by a “basic” insurance policy is not considered to be an “uninsured motor vehicle.”  N.J.S.A. 17:28-1.1(2)(d).  Therefore, the Appellate Division found no ambiguity in State Farm’s policy concerning the distinction between uninsured coverage and UIM coverage.

Further, the Court considered the plaintiff’s argument that the term “resident relative” created an ambiguity concerning plaintiff.  The Appellate Division noted that where the named insured is a corporation, the corporation has no “resident relatives.”  The Court found that this definition did not render the coverage “illusory” because the governing statute did state that an individual employed by an insured corporation is deemed to be provided with a maximum UIM coverage available under the policy.  Thus, the Appellate Division found that State Farm’s coverage would extend to some individuals, but not to plaintiff.

Last, the Appellate Division rejected the Association’s argument that a car insured by a basic policy lacking bodily injury liability insurance should be considered an uninsured vehicle for coverage purposes.  The Court found this argument to be inconsistent with the plain language of the relevant statutory provisions.  The Legislature gave insurers options to have various types of coverage under a basic automobile insurance policy.  The statute made personal injury liability coverage optional.  Further, the statute specifically states that a vehicle covered by a basic policy is not considered an uninsured vehicle.

Thus, the Appellate Division rejected the Association’s argument that it should construe plaintiff’s claim as a claim for uninsured motorist coverage.  The Court noted that this argument must be made to the Legislature and declined to create an exception that was foreclosed by the plain language of the statute. 

Appellate Division Finds That Umbrella Insurance Policy Was Unambiguous In Its Exclusion Of Underinsured Motorist Coverage

In 2014, Plaintiff Yvonne Zabala-Lugo was a passenger in a car driven by Jasmine Lugo when the vehicle struck a phantom car that swerved into her lane to avoid hitting a pedestrian.  After that impact, the Zabala-Lugo vehicle was struck from behind by another car driven by Betsey Tavares.  Plaintiff discovered that the Tavares’ insurance policy did not provide bodily injury liability insurance and asserted an underinsured motorist (UIM) claim under her auto and homeowners insurance policy with Skylands Insurance Association (“Skylands”) and also submitted a UIM claim with defendant Stillwater Property & Casualty Insurance Company (“Stillwater”) under her umbrella policy.  The issue in Zabala-Lugo v. Stillwater Property & Casualty Insurance Co., 2021 N.J. Super. Unpub. LEXIS 1349 (App. Div. July 2, 2021) was whether the Stillwater umbrella policy provided UIM coverage for this accident. 

After plaintiff discovered that the Tavares insurance policy did not provide bodily injury liability insurance, it notified Stillwater that she intended to file a UIM claim under her policy. Stillwater informed plaintiff that her policy did not provide UIM coverage.

The declarations page of the Stillwater policy contained a schedule on the underlying insurance coverage that plaintiff was required to maintain during the term of the Stillwater policy.  As to the UIM coverage, the required coverage column was blank but Stillwater described its coverage as “available in states where required by law” and that the required underlying coverage limit is described as “limit must be the same as that carried for automobile liability.”  However, New Jersey does not require UIM coverage.  The Stillwater policy also contained a summary of current coverages which did not include UIM coverage.

Zabala-Lugo contacted Stillwater to notify the company that Skylands had offered her $100,000 to settle her UIM claim under her underlying policy and that she intended to file a UIM claim under the Stillwater policy.  Stillwater denied the claim because her policy did not include UIM coverage.  Further, Stillwater advised the plaintiff that because she did not have UIM coverage, she need not request its consent to accept the Skyland settlement.

Thereafter, plaintiff filed a declaratory judgment action, seeking a declaration that her Stillwater umbrella policy did include UIM coverage.  Stillwater filed a motion for summary judgment, seeking a dismissal of the complaint. 

At the trial court level, the court issued an order granting Stillwater’s motion and dismissed the plaintiff’s complaint.  It found that the Stillwater policy unambiguously stated that it did not provide UIM coverage.  The court also found that Zabala-Lugo could not have a reasonable expectation of having obtained such coverage.  This appeal followed because the plaintiff argued that the trial court made a mistake in finding that the Stillwater policy was not ambiguous and it should be read in her favor.  She also asserted a public policy argument, arguing that it should be construed to provide UIM coverage.

The Appellate Division noted that insurance policies are to 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 Court also noted that “the words of an insurance policy should be given their ordinary meaning.”  Further, the Court stated that “in the absence of an ambiguity, the Court should not engage in a strained construction to support the imposition of liability or write a better policy for the insured then the one purchased.”

Last, the Court noted that “an insured will be charged with what the average insured person would understand from reading the policy.”

The Appellate Division agreed with the trial court’s conclusion that the Stillwater policy is unambiguous in its exclusion of UIM coverage.  The Court found that there were several provisions of the policy, including the exclusions page, which clearly stated that UIM coverage was not included.  Absent an express endorsement of UIM coverage, which was not found in the policy, plaintiff did not obtain such a coverage.  The Appellate Division agreed with the trial court’s assessment that “to interpret the Stillwater policy to provide UIM coverage, as argued by Zabala-Lugo, would strain the plain language of the agreement and give her coverage for what she has not paid a premium.”

Further, the Appellate Division adopted the trial court’s conclusion that public policy did not require that it adopt the plaintiff’s interpretation of the Stillwater policy. The Court noted that the Legislature “had enacted a number of requirements for automobile insurance policies, including minimum coverage and limits,” but it has not extended those requirements to umbrella policies.  The Court did not find any of the plaintiff’s arguments convincing for a judicial declaration that the New Jersey “[s]tatutes provide insufficient protection from a public policy perspective to policy holders who elect to obtain coverage under an umbrella policy.”  Thus, the Appellate Division affirmed the trial court’s decision, granting summary judgment in favor of Stillwater and finding that the plaintiff’s policy from Stillwater was unambiguous in its exclusion of UIM coverage.

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