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Appellate Division Revisits Contract and Insurance Policy Interpretation

The Appellate Division on January 22, 2019 decided an interesting case regarding insurance coverage which has been approved for publication. The matter is Katchen v. GEICO et al., No. A-5685-16T4, 2019 WL 272926 (App. Div. Jan. 22, 2019).

In December 2015, Plaintiff Katchen was injured in a motor vehicle accident. Significantly, at the time of the accident, he was operating a Harley-Davidson motorcycle which he owned. Before settling with the other driver or that driver’s $25,000 policy limit, Katchen submitted a UIM claim under three separate insurance policies he maintained:

1. A motorcycle policy issued by Rider Insurance Company;
2. A commercial automobile policy issued by Farmers Insurance Company of Flemington; and
3. A personal auto policy issued by GEICO.

GEICO “disclaim[ed] coverage” pursuant to an exclusion in Section IV of its policy, which addresses both uninsured motorist, or “UM,” and underinsured motorist, “UIM,” coverages.  That provision stated:

“LOSSES WE PAY.

We will pay damages for bodily injury and property damage caused by an accident which the insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle or underinsured motor vehicle arising out of the ownership, maintenance[,] or use of that vehicle.”

However, Section IV also contained an exclusion of coverage for “bodily injury sustained by an insured while occupying a motor vehicle owned by an insured and not described in the declarations and not covered by the Bodily Injury and Property Damage liability coverages of this policy.”

Because while the motorcycle was owned by Plaintiff Katchen, it was not listed on the policy issued and GEICO determined that it did not constitute an “owned auto,” which the policy defined as a “vehicle described in this policy for which a premium charges shown for these coverages.”  As a result, GEICO denied the claim.

Plaintiff Katchen then filed a declaratory judgment action naming the three carriers, seeking a declaratory judgment that the UIM coverage of all three carriers applied to the subject accident. GEICO responded by filing a motion urging the court to find its “owned motor vehicle exclusion” to be “valid, unambiguous and enforceable.” The Motion Court denied that motion, finding that the language of GEICO’s policy was ambiguous.

The parties subsequently came to an agreement that Rider and Farmers would pay their respective pro rata share of the total of $975,000.00 in UIM coverage owed to Plaintiff Katchen, and GEICO would pursue this appeal. If GEICO did not prevail, it would pay its pro rata share as well. Plaintiff, Rider and Farmers all opposed GEICO’s appeal.

Accordingly, the Appellate Division indicated that “in this appeal, we consider whether an auto insurance form may combine uninsured (UM) and underinsured motorist (UIM) coverage in a single section and include exclusions not listed on the policy’s declaration page. We also consider if an insurer may exclude UIM coverage for an accident involving a vehicle owned by the insured but not covered under the subject policy.”

The Appellate Division accordingly held that “Because we find the exclusion does not violate public policy or result in ambiguity, we reverse.”

On appeal, contract interpretation is de novo.  Manalapan Realty, L.P. v. Twp. Committee of Manalapan, 140 N.J. 366, 378 (1995).  When an insurance contract terms are clear and unambiguous, the Court interprets the policy as written, using the “plain, ordinary meaning” of the words used.  Zacarias v. Allstate Insurance Co., 168 N.J. 590, 595 (2001).  But where an ambiguity arises, the policy is interpreted in favor of the insured and against the insurer. President v. Jenkins, 180 N.J. 550, 562-63 (2004).

An ambiguity exists when “the phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage.”  Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979).

Insurance policies are to be interpreted narrowly, but the provisions within are presumed valid and effective if “specific, plain, clear, prominent and not contrary to public policy.”  Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997).

The Respondents argued that GEICO’s policy, which addressed both UM and UIM coverage in the same section, violated various statutory mandates. GEICO responded that the exclusion unambiguously bars UIM coverage for loss sustained by Plaintiff while operating a motor vehicle he owned but did not insure under GEICO’s policy.

The Appellate Division agreed with GEICO, finding that the policy was not ambiguous.  For example, the Court observed that any ordinary reasonable person understands that a motorcycle is a type of motor vehicle.

While acknowledging that the exclusions did not appear on GEICO’s declaration page, the Appellate Division noted that requiring such would result in even more “fine print” and run the risk of making insurance policies more difficult for the average insured to understand, and would also “eviscerate the rule that a clause should be read in the context of the entire policy.”

Thus, the Appellate Division stated that “The failure to list the exclusion at issue on the declaration page does not automatically render the contract ambiguous. Reading the GEICO policy in its totality, we conclude the exclusion is clear and unambiguous. The fact that the exclusion is not mentioned on the declaration sheet does not bar its enforcement.”

Accordingly, the Katchen opinion is a very instructive recent summary by the Appellate Division of the procedure that will be utilized in analyzing contracts and insurance policies.

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Unmarried, Same-sex Partner Permitted to Bring Negligent Infliction of Emotional Distress Claim for Death of Partner’s Biological Child

I’Asia Moreland and Valerie Benning were a same-sex couple who lived with Moreland’s two biological children, I’Maya and I’Zhir, and Benning’s godson, Armonti.  On January 30, 2009, the five of them were waiting to cross the street to attend a “Disney on Ice” show in Trenton, New Jersey, when a fire truck and a pickup truck collided.  The collision caused the pickup truck to strike two-year-old I’Maya, propelling her body sixty-five feet from where she had been holding hands with Benning.  Tragically, I’Maya died as a result of the accident.  I’Asia Moreland and Valerie Benning filed several claims against the defendants, including bystander negligent infliction of emotional distress (“NIED”).

The main issue in the published Appellate Division decision of Moreland v. Parks, 456 N.J. Super. 71, 191 A.3d 729 (App. Div. 2018), was whether Valerie Benning could establish an “intimate, familial relationship” with I’Maya to satisfy the requirements for bringing an NIED claim.

Moreland and Benning were not married at the time of I’Maya’s death.  However, I’Asia Moreland and Benning had cohabitated for at least 17 months and shared similar responsibilities for the care of the three children, including I’Maya.  I’Maya’s biological brother, I’Zhir, referred to Benning and Moreland has his “two moms.”  Benning testified at her deposition that she had suffered extreme emotional distress over I’Maya’s death, and that she had lost one that she loved like her own that day.

Defendants filed a motion for partial summary judgment, seeking dismissal of Benning’s NIED claim.  The motion judge dismissed Benning and Moreland’s relationship as being mere “lovers.”  Additionally, the judge pointed out that Benning and Moreland were not engaged at the time of I’Maya’s death.  The motion judge went as far as to say that Benning was only part of I’Maya’s life for 17 months and “[t]here’s no evidence that there was any permanent bond or that the relationship that she shared with the decedent was one that was deep, lasting, and genuinely intimate.”

In the New Jersey Supreme Court’s decision in Portee v. Jaffee, the Court created the tort of negligent infliction of emotional distress to allow a narrow class of litigants the right to seek damages for emotional trauma caused by a tortfeasor’s negligence.  Justice Pashman fashioned four elements for this cause of action: “(1) the death or serious physical injury of another caused by defendant’s negligence; (2) a marital or intimate, familial relationship between plaintiff and the injured person; (3) observation of the death or injury at the scene of the accident; and (4) resulting in severe emotional distress.” Portee, 84 N.J. at 101. In Moreland, the Appellate Division focused on the second element and whether Benning’s relationship with I’Maya rose to the level of an “intimate, familial relationship.”

In a later New Jersey Supreme Court decision, Dunphy v. Gregor, 136 N.J. 99 (1994), the Court extended the limited class of plaintiffs able to seek damages for NIED to a fiancé of the decedent.  In allowing the fiancé to seek damages, even though she was not married to the decedent, the Court crafted a new standard to define the second prong of the Portee test—what exactly constitutes an “intimate, familial relationship.”  The factors used in finding if such a relationship exists are (1) the length of the relationship, (2) the degree of mutual dependence, (3) the degree of shared contributions to a life together, (4) the extent and quality of joint experience, and (5) whether the plaintiff and the decedent were members of the same household, and other factors.

With that legal background, the Appellate Division in Moreland examined whether Valerie Benning had an intimate, familial relationship with I’Maya at the time of her death.  In making its decision, the Appellate Division noted that the definition of what a “family” is has greatly expanded since Portee was decided in 1980 and even since Dunphy was decided in 1994. The Appellate Division held that an “intimate, familial relationship” supporting a claim for NIED could include the relationship between a mother’s cohabitating same-sex partner and the mother’s biological child.  Therefore, the trial court improperly dismissed Benning’s claim because it was possible that a jury could find Benning maintained an intimate, familial relationship with I’Maya at the time of her death.