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Appellate Division Finds Coverage Under Loading and Unloading Doctrine for Donut Shop Sued in Serving Customer Hot Tea Through Drive Through Window

By: Victoria M. Adeleke, Law Clerk
Edited by: Betsy G. Ramos, Esq.

Plaintiffs Bridgewater Donuts, LLC and Tamar, Inc. filed a lawsuit against defendant Geico Indemnity Co. seeking coverage under an automobile liability policy issued to Susan Mendelsohn-Hall. Mendelsohn-Hall alleged she suffered injuries when hot tea spilled on her at the Dunkin’ Donuts drive-through, leading to a lawsuit against Plaintiffs. Plaintiffs then sought coverage under Mendelsohn-Hall’s auto policy issued by Geico, invoking the “loading and unloading” doctrine. However, Geico denied coverage, prompting this legal dispute. The issue in Bridgewater Donuts, LLC v. Geico Indemnity Co., 2024 N.J. Super. Unpub. LEXIS 1505 (App. Div.  July 9, 2024) was whether Plaintiffs qualified as additional insured under Mendelsohn-Hall’s auto policy under the loading and unloading doctrine.

Mendelsohn-Hall had a New Jersey Family Automobile Insurance policy that provided coverage for bodily injury sustained by a person arising out of the ownership, maintenance or use of the automobile. The policy defined the persons insured to include Mendelsohn-Hall and any other person using the auto with her permission.

On the day of the accident, Mendelsohn alleged she was scalded by hot tea as it was delivered to her at the drive thru window by plaintiffs’ employees and that her injuries were proximately caused by plaintiffs’ negligence.  

Plaintiffs filed a complaint against Defendant Geico, seeking a declaratory judgment that they were additional insureds under Mendelsohn-Hall’s policy. Defendant moved for summary judgment, arguing plaintiffs had not been using Mendelsohn-Hall’s vehicle when she sustained her injuries and, therefore, were not additionally insured as users of the automobile. The trial court granted Geico’s motion for summary judgment and dismissed Plaintiffs’ complaint. The trial court determined that Plaintiffs did not qualify as additional insureds under Mendelsohn-Hall’s auto policy because her injuries were not directly attributable to the loading of the tea by plaintiffs into her vehicle.

The Appellate Division reversed. The appellate court first explained that N.J.S.A. 39:6A-3 requires that automobile owners have auto insurance that covers loss arising out of the ownership, maintenance, operation and use of an automobile. The Court then explained that unloading and loading had always been a verified use of the vehicle under the statute, and implicit in this requirement is the obligation to provide omnibus liability coverage to all persons who use the named insured vehicle by participating in its loading or unloading.

The Appellate Division relied on the N.J. Supreme Court case of Penn Nat’l Ins. Co. v. Costa, where the Court found that to determine whether an injury arises out of the use of a motor vehicle thereby triggering coverage, that there must be a substantial nexus between the injury suffered and the asserted negligent use of the motor vehicle. Use of a motor vehicle has been interpreted broadly to include the acts of loading and unloading the automobile.

The Appellate Division found that in Bridgewater Donuts, LLC, the record supported a finding of the requisite substantial nexus. The Appellate Division pointed to the undisputed fact that plaintiffs’ drive-up window was available to customers to purchase and pick up their items and load the items into their car. Plaintiffs’ employee loading the hot tea she had purchased into her vehicle was integral to the completion of the transaction between Mendelsohn-Hall and plaintiffs. Therefore, the Court determined her injuries bore a substantial and not incidental nexus to Plaintiffs’ alleged negligent use during the loading process under her automobile policy.

Thus, the Court reversed the trial court’s order granting summary judgment to defendant Geico and denying Plaintiffs’ motion for summary judgment and remanded the case back to the trial court for further proceedings.

The Enforcement and Application of Shortened Limitations Period Clauses in Insurance Policies

In the State of New Jersey, breach of contract claims are subject to a 6-year statute of limitations.  However, this often changes in the context of homeowners’ insurance policies.  Often, those policies contain provisions which provide that any suit against the insurer must be initiated within one year of the date of loss.  Other policies provide that any suit against the insurer must be initiated within one year of the insurer’s denial of the claim.  

The enforceability of shortened limitations clauses contained in insurance policies was first addressed in Weinroth v. N.J. Mfrs. Ass’n Fire Ins. Co., 117 N.J.L. 436 (E. & A. 1937).  In Weinroth, the Court upheld a provision in an automobile insurance policy which required that any suit against the insurer be brought within 90 days of the insurer’s denial of coverage.  Because the insured did not file suit until 106 days after the insurer denied coverage, his claim was dismissed. 

Thirty-one years later, the Appellate Division applied Weinroth’s holding in the context of a homeowners’ insurance policy.  In Staehle v. American Employers’ Ins. Co., 103 N.J. Super. 152 (App. Div. 1968), the homeowners’ insurance policy at issue provided that any suit against the insurer must be commenced within twelve months of the inception of the loss.  Because the insured did not initiate suit until 1 year and 6 days after the loss, the Court affirmed the grant of summary judgment in favor of the insurer.  In doing so, the Court noted that “the New Jersey rule [enforcing shortened limitations clauses] seems to be the one followed in the majority of the states.” 

Since Weinroth and Staehle, the courts of New Jersey have continued to enforce 1-year limitations provisions contained in insurance policies and other contracts.  See, e.g., Azze v. Hanover Ins. Co., 336 N.J. Super. 630, 636 (App. Div. 2001) (noting that the 6-year statute of limitations for contract actions “may be shortened by the terms of an insurance contract”); Peloso v. Hartford Fire Insurance Co., 56 N.J. 514 (1970) (enforcing a 1-year limitations period contained in a fire insurance policy); PPG Indus., Inc. v. American Home Assur. Co., 2007 N.J. Super. Unpub. LEXIS 1494 *27 (App. Div. 2007) (quoting Weinroth and noting “the validity of suit-limitation clauses in insurance policies has long been recognized in this state”).

In calculating the limitations period under an insurance policy, it is important to note that the shortened limitations period does not necessarily run uninterrupted from the date of loss.  This is particularly so where the insurer spends some time investigating the claim before issuing a denial.  This situation was addressed in Azze, citing the Supreme Court of New Jersey’s prior decision in Peloso.  There, the Azze court noted as follows:

In Peloso…the Court determined that contractual limitation provisions should not be read literally, with the one-year period running uninterrupted from the date of the loss.  According to the Court, such a reading of these provisions would be unfair, because it would allow, in effect, a ticking away of the limitations period while the insurance company investigated the loss.  Peloso stated that:

The fair resolution…is to allow the period of limitation to run from the date of the casualty but to toll it from the time an insured gives notice until liability is formally declined.  In this manner, the literal language of the limitation is given effect; the insured is not penalized for the time consumed by the company while it [investigates the loss]; and the central idea of the limitation provision is preserved since an insured will have only 12 months to institute suit.

The Azze court noted that “from the passage above, it becomes evident that between the time the insured gives notice of loss and the time that the insurance company formally denies coverage, the statutory period is tolled,” or paused.

A case I recently handled provides a good example of how this is applied in practice.  As in the above-referenced cases, the homeowners’ policy at issue required any lawsuit to be initiated within one year of the date of loss.  The loss at issue occurred on May 20, 2022.  However, the homeowners did not report the loss until March 22, 2023 (306 days later).  Our client, the insurer, investigated the loss and issued a partial denial letter on May 1, 2023 (40 days after the loss was reported).  Thereafter, the homeowners did not file a lawsuit until July 26, 2023 (432 days after the date of loss).

Utilizing the above-referenced timeline, we argued that even after accounting for the tolling of the limitations period during the 40 days the insurer investigated the claim, it still took the homeowners 392 days to file suit (432 total days – 40 days to investigate and issue a denial = 392 days).  Because that 392-day period exceeded the 1-year limitations period set forth in the policy, we argued that the homeowners’ lawsuit was barred.  The Court agreed and granted our Motion for Summary Judgment, dismissing the case. 

The above example demonstrates that the proper calculation of a limitations period requires strict identification of the date of loss; the date the loss is reported; the date a clear, formal denial is issued; and the date a lawsuit is ultimately filed.  Under appropriate circumstances, a policy’s shortened limitations period can be used to defeat an untimely filed lawsuit at the outset, saving time and resources.

Court Finds That Plaintiff Not Entitled to PIP Benefits For Injury While Operating an Electric Scooter

Plaintiff David Goyco was involved in an accident in which an automobile struck him while he was operating a low-speed electric scooter.  He applied to his auto insurance company, Progressive Insurance Company, for personal injury protection (PIP) benefits to pay for his medical expenses. The issue in Goyco v. Progressive Insurance Company, 2023 N.J. Super. Unpub. LEXIS 1117 (App. Div. July 5, 2023) was whether the plaintiff could recover PIP benefits for his injuries suffered in the accident.

The accident happened while plaintiff was operating a Segway Ninebot KickScooter Max when he was struck by an automobile on West Grand Street in Elizabeth.  This scooter has a maximum speed of 15.5 miles per hour and qualified as a “low-speed electric scooter”  (“LSES”) under N.J.S.A. 39:1-1.

At the time of the accident, plaintiff had automobile insurance with Progressive Insurance Company.  This policy provided personal injury benefits pursuant to N.J.S.A. 39:6A-4.  Accordingly, plaintiff filed a claim with Progressive for PIP benefits. 

However, Progressive denied plaintiff’s claim.  In its denial letter, Progressive stated that plaintiff was ineligible for PIP benefits under the policy because New Jersey No-Fault benefits were only available if the accident involved a qualifying automobile.  The scooter did not meet the definition of a qualifying automobile under New Jersey Auto Insurance Law. 

Further, the denial letter stated that plaintiff also did not meet the definition of a pedestrian, which was defined as “any person who is not occupying, entering into, alighting from a vehicle propelled by other than muscular power and designed primarily for use on highways, rails and tracks.” Therefore, Progressive denied plaintiff’s application for PIP benefits. 

Plaintiff filed this lawsuit to challenge this denial.  Plaintiff argued that New Jersey Law recognized bicycles as pedestrians for purposes of no-fault coverage.  Plaintiff argued that, by extension, an electric scooter should be considered the equivalent of a bicycle.

The trial court judge found that the plaintiff was operating a scooter powered by motor at the time of the incident.  It was clearly not a motor vehicle and neither in the statute nor the insurance policy would plaintiff be considered a pedestrian.  Therefore, the trial court judge entered an order denying plaintiff’s PIP application and dismissing the complaint.  This appeal ensued.

The Appellate Division conducted a “de novo” review of the trial court’s rulings of law and issues regarding the applicability, validity, or interpretation of laws and statutes.  The Court agreed with the trial court that under the plain language of the statute, the plaintiff did not qualify as a pedestrian.  It noted that an LSES is a vehicle propelled by other than muscular power.  By definition, an LSES is a vehicle that has an electric motor and, hence, plaintiff’s operation of the scooter disqualified him from being defined as a pedestrian and entitled to PIP benefits.

The Appellate Division also rejected the plaintiff’s argument that the operation of an LSES should be equivalent to a bicycle.  Thus, the Court upheld that portion of the trial court’s decision as well.

Accordingly, the Appellate Division affirmed the trial court’s decision. It agreed with the trial court that the plaintiff’s accident while operating a low-speed electric scooter did not entitle him to personal injury protection benefits to pay for his medical bills. 

Breaching the Verbal Threshold for an Automobile Accident Injury through Scarring or a Permanent Injury

The Verbal Threshold is a requirement set by the New Jersey Legislature for an individual to be compensated for bodily injuries suffered in an auto accident. The Verbal Threshold, or the Limitation on Lawsuit option, was created to reduce the cost of car insurance by limiting a person’s ability to seek compensation for noneconomic damages. The Verbal Threshold is codified at N.J.S.A. 39:6A-8.

When selecting a car insurance policy, a person has an option to select a lower premium in exchange for a limited right to seek compensation for damages occurring in a car accident. However, a person still has the option of selecting an unlimited right to seek compensation in exchange for a higher premium.

The Verbal Threshold is not a complete bar in seeking compensation for pain and suffering as the statute lists six exceptions. A person may proceed with a claim for pain and suffering if their injuries meet one of the following exceptions:

  1. Death
  2. Dismemberment
  3. Significant disfigurement or scarring
  4. Displaced fractures
  5. Loss of a fetus
  6. Permanent injury

Death, dismemberment, displaced fractures and loss of fetus are more clear-cut exceptions than significant disfigurement or scarring, or a permanent injury. Significant disfigurement or scarring, and permanent injuries are the most likely claims to be litigated. 

The Supreme Court of New Jersey has defined a “significant” scar or disfigurement as one that “an objectively reasonable person could find that the scar or disfigurement substantially impairs or injures the beauty, symmetry, or appearance of a person, rending the bearer unsightly, misshapen or imperfect, deforming the person in some manner.” Soto v. Scaringelli, 189 N.J. 558, 574 (2007). Other factors that courts are to consider are the “appearance, coloration, existence and size of the scar, as well as, shape, characteristics of the surrounding skin, remnants of the healing process, and any other cosmetically important matters.” Id.

In Soto, the court found a scar on a person’s shoulder was not “significant” enough to breach the threshold. The judge reviewed the scar in person and verbally described it for the record and noted that the surgeon had done a remarkable job. The judge described the scar as approximately four inches in length and that it was not noticeable absent a strong light. The judge dismissed the case without permitting a jury to decide whether the person should be awarded compensation.

A permanent injury is defined as one that has not healed and will not heal to function normally even with further medical treatment. N.J.S.A. 39:6A-8(a). This injury must be proven with objective medical evidence. A person’s subjective complaints alone will not overcome the threshold.

A doctor must certify that a person has suffered a permanent injury as a prerequisite to filing a lawsuit. The doctor must state that their opinion is based on objective medical evidence and not solely dependent on the person’s subjective complaints. This certification must be provided to a defendant during the early stages of litigation for the case to continue. A court will dismiss a case absent this certification.

The Supreme Court of New Jersey has found that an MRI showing a herniated disc as certified by a doctor is sufficient objective evidence to allow a case to proceed to a jury. Pungitore v. Brown, 379 N.J. Super. 165 (App. Div. 2005). A jury will then deliberate whether the plaintiff’s injuries combined with any testimony, that may include subjective complaints and limitations on their activities of daily living, amount to a permanent injury. If a permanent injury is found, a jury then may award the plaintiff compensation for the injuries caused by the car accident. 

The Verbal Threshold is not a complete bar to recovery but is a prerequisite for a person to overcome. This is in furtherance of the New Jersey Legislature’s goal of reducing the cost of car insurance by limiting car accident claims to those with severe injuries.

Joint Insurance Fund’s Self-Insurance Found Not To Trigger Other Insurance Clause

The issue in the Supreme Court case, Statewide Insurance Fund v. Star Insurance Co., 2023 N.J. LEXIS 205 (2023), was whether the Statewide Insurance Fund (the “Fund”) or Star Insurance Company (“Star”), a commercial general liability insurance company, had the primary responsibility to pay the settlement of a negligence claim brought against Long Branch.  This lawsuit involved a tragic accident in which a boy died from injuries while at the beach with his family in the City of Long Branch.  After the case settled, an insurance coverage dispute arose between the Fund and Star to determine which entity was responsible to pay the balance of the settlement after Long Branch paid its $1 million dollar self-retention under the Star policy. The issue was which policy was primary and which one was excess based upon their respective “other insurance” clauses.

The boy had been visiting the beach with his family in the City of Long Branch and dug a tunnel in the sand near a lifeguard stand.  Unfortunately, the sand collapsed on the boy and he died the next day from his injuries.

The boy’s parents filed a negligence action, suing Long Branch, Long Branch Beach Patrol, and seasonal beach police officers who were responsible for patrolling the area.  The underlying negligence action was settled but the payment of the balance of this settlement awaited the conclusion of this appeal.

The Supreme Court noted that Long Branch had joined the plaintiff Statewide Insurance Fund, which is a public entity JIF created under the Joint Insurance Fund Act. Through the JIF, Long Branch was entitled to receive $10 million dollars in liability coverage per each occurrence.  However, the Fund’s contracting document contained a clause which limited recovery from the Fund to liability in excess over other “insurance or self-insurance” coverage.  Thus, based upon this provision, Long Branch could recover from the Fund only after it exhausted any other insurance or self-insurance coverage to which it was entitled.

Long Branch had also purchased a commercial insurance policy from the defendant Star.  Under that policy, Long Branch had $10 million dollars in liability insurance coverage with a $1 million dollar self-insured retention (“SIR”).  Star’s policy had a provision making its coverage excess over “other insurance.”

Payment of the SIR was not an issue on this appeal.  That amount was paid to the plaintiffs.  The question in this case was whether the Fund or Star had the primary responsibility to pay the remaining settlement amount. 

At the trial court level, both Star and the Fund filed for a summary judgment.  The trial court granted the Fund’s motion and denied Star’s motion.  The trial court judge concluded that Long Branch’s membership in the Fund did not trigger Star’s “other insurance” clause.  Further, the judge determined that the Fund did not provide insurance coverage to its members.  Rather, Long Branch self-insured by joining the Fund.  Thus, the plaintiffs in the underlying negligence lawsuit could look to Star’s primary policy limits, above the SIR, for the balance of their settlement with Long Branch.

This matter went up on appeal to the Appellate Division.  The Appellate Division agreed with the trial court judge that the Fund was not an insurance company and that the Fund did not qualify as an insurer under New Jersey law.  The Appellate Division determined that Fund membership protected Long Branch against liability claims through “self-insurance” and it upheld the Fund’s summary judgment order.

The Supreme Court accepted this appeal upon petition for certification.  Star’s main argument was that, regardless of the statutory framework, the Fund issued what Star characterized as an insurance policy to Long Branch and is bound by its terms.  Under that purported policy, Star claimed that the Fund provided “insurance,” not “self-insurance.”  Thus, Star argued that its own “other insurance” clause is therefore triggered, making Star’s coverage excess to the “insurance” provided by the Fund. 

The Fund rebutted this argument based upon two reasons.  First, it asserted that the Legislature “explicitly exempted JIFs from insurance statutes and regulations, conclusively precluded JIFs from acting as insurers, and unambiguously declared that authorized JIF activities do not constitute the transaction of insurance or doing insurance business.”  Secondly, the Fund argued that because claims against Long Branch are satisfied from member assessments, rather than from an authorized insurance policy, Long Branch “self-insured – and retained risk by joining the Fund.”  Because its members protected against liability through self-insurance, rather than insurance, the Fund argued that Star’s “other insurance” clause would not be triggered and, therefore, Star should cover the damages that exceeded the SIR up to Star’s policy limit.  The Fund contended that it would only provide excess coverage after Star’s policy limit was exhausted.

The New Jersey Supreme Court reviewed the JIF enabling statute and found that the Fund was not an insurance company.  Rather, its authorized activities do not constitute either the transaction of insurance or doing the business of insurance.  More importantly, the Fund was not subject to the extensive insurance laws contained in New Jersey statutes.  Hence, the New Jersey Supreme Court ruled that JIFs cannot insure members.  Instead, “JIFs enable members to self-insure, spread risks, and reduce insurance costs.”

Thus, the Court rejected Star’s argument that general references to “insurance” in the Joint Insurance Fund Act “should be interpreted to mean that JIFs are providing insurance to their members.”  Further, the Supreme Court found that the word “insurance” in the Fund’s contracting documents do not override the Legislature’s clear mandate that JIFs are not insurance companies.  The Supreme Court found that “[a]s a matter of law, Long Branch’s liability protection as a Fund member is through ‘self-insurance,’ not insurance.”

The Supreme Court found that because self-insurance is not the same as insurance under the law and because membership in the Fund protected against liability claims rather than by insurance, the Supreme Court agreed with the trial court and Appellate Division that Star’s “other insurance” clause was not triggered.  Unlike the Fund’s contracting document, which specified that the Fund’s obligation were excess over “insurance or self-insurance,” the Court noted that Star’s clause states only that insurance coverage available under the Star policy is “excess over . . . any of the other insurance.”  The Supreme Court held that because Star’s clause did not encompass the self-insurance available to members through the Fund, Star’s insurance policy was primary in covering the underlying plaintiff settlement of the negligence action against Long Branch. 

Hence, the Supreme Court affirmed the Appellate Division decision.

New Jersey Enacts New Automobile Insurance Law Raising Minimum Amounts of Liability Insurance Required

Just signed into law on August 5, 2022, by Governor Murphy, is a new law raising the minimum policy amounts of automobile insurance that must be provided for automobiles registered or principally garaged in the State of New Jersey. Previously, the minimum automobile insurance policy limit for a policy of insurance (except for a basic policy), was $15,000. Depending on when the policy renews, the new limits increase up to $35,000 for injury or death to one person and $70,000 as an aggregate limit, if more than one person is injured in the accident.

For plans that renew prior to January 1, 2023, the minimum amount remains $15,000 for injury or death of one person and $30,000 for injury or death of more than one person. For plans issued or renewed on or after January 1, 2023, but prior to January 1, 2026, the minimum policy limits will increase to $25,000 for an injury or death of one person and $50,000 for more than one person. Finally, for plans that are issued or renewed on or after January 1, 2026, the minimum policy limits increase further to $35,000 for an injury or death of one person and $70,000 for more than one person.

Minimum policy limits for property damage coverage from an automobile accident will rise from $5,000 to $25,000 as of January 1, 2023.

These same minimum policy limits apply to uninsured/underinsured coverage as well.

New Jersey Appellate Division Rules that Injured Plaintiff May Sue His Insurance Carrier for Bad Faith Damages Due to Delay in Approving Medical Test and Surgery

Plaintiff Miguel Vera injured his right shoulder in a September 10, 2016 automobile accident. Thereafter, he submitted a personal injury protection (“PIP”) claim to his automobile insurance company, State Farm Indemnity Company (“State Farm”), to pay for his medical expenses incurred by his injuries suffered from his accident. In Vera v. State Farm Indem. Co., 2022 N.J. Super. Unpub. LEXIS 1081 (App. Div. June 16, 2022), the issue was whether the plaintiff could sue State Farm for his damages claimed by State Farm’s delay in approving needed shoulder surgery or if he was limited to the statutory damages of attorneys’ fees and interest under the PIP statute.

Plaintiff began treatment on September 16, 2016 with Dr. Gregory Gallick, an orthopedic surgeon, for his right shoulder injury suffered in the auto accident. Dr. Gallick recommended that Plaintiff undergo an MRI of his right shoulder to assess his injuries. He submitted a request for authorization for the MRI to State Farm, which was initially denied, but, later, approved on November 19, 2016.

Plaintiff treated with Dr. Gallick on two subsequent dates in December 2016 and January 2017, and his doctor recommended shoulder surgery both times. On January 20, 2017, Plaintiff was examined by a State Farm IME doctor who conducted his own evaluation. Thereafter, State Farm approved the surgery and it was performed on February 23, 2017.

In performing the surgery, Dr. Gallick found a complete tear of the bicep tendon of plaintiff’s right shoulder. Dr. Gallick opined that State Farm’s delay in authorizing the MRI and authorizing the surgery, resulted in a more significant injury to Plaintiff’s right shoulder, than would have occurred if State Farm had given appropriate authorization at the appropriate time. Dr. Gallick stated that the delay prevented him from repairing Plaintiff’s bicep tendon had left him with a significant injury to his right shoulder and permanent damage to the bicep tendon.

In 2018, Plaintiff sued State Farm, claiming that it “arbitrarily and capriciously breached its contractual obligations” by delaying the approval of his MRI and surgery. He sought compensatory and punitive damages, as well as attorneys’ fees and costs.

At the trial court level, State Farm was granted a summary judgment dismissal of the complaint. The trial court judge found that Plaintiff’s claims for the wrongful denial of PIP benefits were subject to the PIP statute, N.J.S.A. 39:6A-5(h), which only permitted the recovery of interest and attorneys’ fees for a successful claim. Thus, the court concluded that the Plaintiff’s claims for compensatory and punitive damages were barred.

This decision was appealed to the Appellate Division. The Plaintiff argued that his claims do not involve the denial of coverage but, rather, were claims for the delay in authorizing testing and treatment. He contended that these claims were not barred by the PIP statute.

Upon appeal, State Farm argued that Plaintiff’s exclusive remedies were limited to the statutory remedy when an insurer fails to issue payments in a timely manner. However, the Court noted that, while the statute addressed payment of PIP claims, it did not address authorization or precertification. Thus, the Appellate Division concluded that the PIP statute did not expressly preclude plaintiff’s claim.

The Court then examined whether Plaintiff asserted a viable claim against State Farm. Plaintiff’s claim was based upon an alleged breach of State Farm’s obligations under its insurance policy. The Appellate Division noted that, under New Jersey law, the obligation to act in good faith is “an implied term in every contract,” including insurance policies. Further, the Court pointed to a Supreme Court decision that recognized “an insurance company’s duty of good faith and fair dealing in the processing of insurance claims.”

The Appellate Division found that an insurer’s duty of good faith “can apply to matters such as timely authorization and precertification decisions.”  Because this type of claim is governed by contract principles, punitive damages would only be available in egregious circumstances. The Plaintiff would need to “show something other than a breach of the good-faith obligation” to obtain this type of damages.

However, the Court ruled that New Jersey law does permit claims for damages caused by delayed authorization where a plaintiff can prove a breach of contract. The Appellate Division set forth the elements that Plaintiff must show to pursue a claim for damages in State Farm’s delay in authorizing testing and treatment as follows:

  1. State Farm had a good-faith obligation in its policy to authorize the MRI and surgery;
  2. State Farm unreasonably delayed that authorization, and those decisions were not ‘fairly debatable,’ thus failing to fulfill its contractual obligations;
  3. and that the unreasonable delay caused him damages.

Under the fact as presented on appeal, the Court found that Plaintiff had not established the elements necessary to prove his claim. For example, he did not provide a copy of his insurance policy, present proofs that Dr. Gallick needed preauthorization to conduct the MRI, nor that State Farm acted unreasonably in having its own doctor examine Plaintiff before it would approve the surgery.

But, the Appellate Division also found that the record did not show that Plaintiff cannot prove his claim. Thus, it reversed the summary judgment order granted to State Farm and remanded the case back to the trial court to permit Plaintiff to continue to pursue his claim against State Farm. The Court took no position whether Plaintiff can prove his claim or that his claimed damages were “consequential economic losses that are fairly within the contemplation of the insurance company.” Those issues would need to be examined by the trial court upon remand.

New Jersey Driver With New York Auto Policy Considered To Be Uninsured And Barred From Pursuing Personal Injury Claim

Plaintiff Adam Haber was involved in an automobile accident with the defendant Faith Geruldsen on March 7, 2019.  At that time, plaintiff resided in New Jersey with his car garaged in New Jersey but he had a New York auto insurance policy.  The issue in Haber v. Geruldsen, 2021 N.J. Super. Unpub. LEXIS 2943 (App. Div. Dec. 3, 2021) was whether plaintiff’s personal injury claim from the automobile accident was statutorily barred because he had a New York insurance policy and, hence, would considered to be “culpably” uninsured on the date of the accident. If he was uninsured, by statute, he would not be entitled to make a claim for personal injuries suffered in the auto accident.

Plaintiff’s automobile insurance policy was issued by State Farm.  Plaintiff claimed that State Farm knew he had relocated to New Jersey in 2017 because State Farm sent insurance premium bills to his New Jersey address.  However, the declaration page for the State Farm policy expressly indicated that the plaintiff’s New York address was used to determine the rate charged.  The notice stated that the amount charged would be “determined by many factors such as the coverages you have, where you live, the kind of car you drive, how your car is used, who drives the car, and information from consumer reports.” 

In December 2019, Haber sued the defendant Geruldsen to recover for damages from the personal injuries he suffered in the March 2019 accident.  Thereafter, the defendant filed a motion for summary judgment, claiming that plaintiff failed to insure his vehicle pursuant to N.J.S.A. 39:6A-4, which rendered him “culpably” uninsured under N.J.S.A. 39:6A-4.5(a).  Plaintiff opposed that motion, arguing that he was not uninsured because his vehicle was insured under a New York policy. 

The trial court judge granted the motion for summary judgment, dismissing the lawsuit.  The judge found that plaintiff’s vehicle was continuously and principally garaged in the State of New Jersey for over one year and plaintiff failed to obtain personal injury protection insurance coverage through a New Jersey policy, as obligated under New Jersey law.  Instead, plaintiff obtained coverage through a New York policy through State Farm Insurance Company.  Thus, the judge found that under N.J.S.A. 39:6A-4.5, the plaintiff had “no cause of action for recovery of non-economic [loss] sustained as the result of an accident while operating an uninsured automobile.”

The judge noted that N.J.S.A. 39:6B-1 required that all owners of vehicles registered or principally garaged in New Jersey had to maintain a minimum amount of standard, basic, or special liability insurance coverage for bodily injury, death and property damage caused by their vehicle.  The judge dismissed the plaintiff’s complaint based upon a law which precluded recovery of economic and non-economic damages for drivers not insured in accordance with N.J.S.A. 39:6A-4.5.

The plaintiff appealed this dismissal to the Appellate Division.  The plaintiff argued that his vehicle was fully insured under a New York automobile insurance policy issued by State Farm and, hence, fulfilled the coverage requirements to be fully insured under New Jersey law.  The Appellate Division rejected that argument. 

The Court found that “there is no statutory provision allowing a New Jersey resident with a vehicle principally garaged in New Jersey to procure ‘equivalent’ insurance from another state.”  Further, the Appellate Division pointed out that to accept plaintiff’s argument “would invite potential insurance fraud and encourage drivers residing in New Jersey to obtain insurance policies from other states offering lower insurance rates despite the policy holder having no connection with the state issuing the insurance policy.” 

The Appellate Division reviewed the New York automobile insurance policy and it revealed various coverage differences from the New Jersey’s automobile insurance law. Because plaintiff was subject to various coverage provisions under the New York policy that are not authorized in New Jersey, the Appellate Division found that plaintiff could not rely on purchasing equivalent insurance to allow him to pursue claims for economic and non-economic damages in New Jersey as a result of an automobile accident.

The plaintiff’s automobile insurance premiums were calculated based upon his address in Piermont, New York and reflected the demographic information relevant to a car garaged in New York.  There was no evidence that the New York issued State Farm policy contained provisions approved by New Jersey’s Commissioner of Banking and Insurance.  Further, the Court pointed out that the plaintiff’s automobile insurance premiums funded a New York insurance pool and he never contributed to the New Jersey Automobile Liability Insurance Pool. 

Finally, the Appellate Division found that allowing the plaintiff to recover for injuries under these circumstances would be “contrary to the Legislature’s stated purpose in enacting automobile insurance laws designed specifically to reduce insurance costs to New Jersey’s drivers and alleviate the burden on New Jersey’s courts.”  Thus, the Appellate Division was satisfied that the trial court judge correctly concluded that the plaintiff failed to satisfy the requirements of N.J.S.A. 39:6A-4.5(a), rendering plaintiff culpably uninsured.  Hence, the trial court judge correctly dismissed the plaintiff’s complaint on summary judgment.

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. 

Governor Murphy Signs Into Law New Automobile Policy Limits Disclosure Law

On July 22, 2021, New Jersey Governor Murphy signed legislation which requires the disclosure of the policy limits of a private passenger automobile insurance policy to a New Jersey admitted attorney representing an insured injured in a motor vehicle accident.  This new law requires a written disclosure of the policy limits to the attorney no later than 30 days from the receipt of the request.

According to this law, it only appears to apply to policies under a private passenger automobile insurance policy issued by the insurer to an insured.  A request for a disclosure of policy limits shall be in writing and must include the following:

  1. A statement that the attorney represents an individual who has suffered bodily injury or death alleged to be caused by a motor vehicle accident with an insured under a private passenger automobile insurance policy issued by the insurer.
  2. The name and last known address of the insured.
  3. The date and approximate time of the motor vehicle accident. 
  4. A copy of the accident report, if available.
  5. A statement from the claimant or an attorney representing the claimant, providing insurance information which must include the claimant’s: (a) insurer, policy number, and policy name, (b) tort threshold selection, and (c) personal injury protection coverage limit.

According to this law, the disclosure is only to be made to an attorney admitted to the practice of law in New Jersey.  The disclosure must indicate the limits of all private passenger automobile insurance policies and any applicable umbrella or excess liability insurance policies issued by the insurer to the insured. 

This new law specifically states that disclosure of policy limits shall not constitute an admission that the alleged injury or damage is subject to the policy.  Further, information concerning the insurance policy shall not be admissible as evidence at trial by reason of disclosure.  Last, the disclosure shall be confidential and available only to the individual injured and the attorney representing the injured person and personnel in the office of the attorney.

Pursuant to the new law, the Department of Banking and Insurance shall publish on its website the e-mail address of each insurer, which shall be supplied by each insurer issuing private passenger automobile policies in the State, for the purpose of receiving these disclosure requests. According to the law, it shall take effect immediately, except for the e-mail portion of the statute, which was not to take effect until the 60th day following the enactment (i.e. September 20, 2021).

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