Coverage

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.

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.

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.

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.