(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Christine Dillard v. Hertz Claim Management, et al. (A-33-95)
(NOTE: The Court wrote no full opinion in this case. Rather, the Court's affirmance of the
judgment of the Appellate Division is based substantially on the reasons expressed in Judge
Vallaneuva's written opinion below. This is a companion case to Marotta v. New Jersey
Automobile Full Insurance Underwriting Association, also decided today.)
Argued October 23, 1995 -- Decided June 11, 1996
PER CURIAM
Christine Dillard was injured while a passenger in a car operated by Deborah Dillard, her sister.
The Dillard car was struck by a car operated by Ester Kim. Just prior to the accident, Deborah had applied
for insurance through Hertz Claim Management and/or EDS Systems, as a servicing agent for the New
Jersey Automobile Full Insurance Underwriting Association (NJAFIUA). Deborah paid the premium by a
check that was later dishonored for insufficient funds. When NJAFIUA discovered, after the accident, that
the check had been dishonored, it retroactively revoked Deborah's insurance policy.
Christine Dillard filed a complaint for damages against Deborah and Ester Kim. Christine also
sought benefits from the Unsatisfied Claim and Judgment Fund (UCJF). Thereafter, Christine brought the
declaratory judgment action against Hertz Claim Management and/or EDS Systems, as servicing agent for
the NJAFIUA. NJAFIUA's motion to dismiss the complaint against Hertz Claim Management and EDS
Systems was granted.
At a bench trial, based on stipulated facts, the trial judge entered a declaratory judgment holding
NJAFIUA liable for benefits payable to Christine. The court concluded that voidance of the policy does not
apply to a passenger who is an innocent third party and, therefore, Dillard was entitled to PIP coverage. The
court also found that Christine was entitled to make a claim against her driver for liability and any verdict in
Christine's favor was to be paid by NJAFIUA. In addition, the court found that Christine had a right to
make a claim for uninsured motorists (UM) coverage because Kim's car was not insured.
NJAFIUA appealed to the Appellate Division, seeking a determination as to whether the retroactive
revocation of the insurance policy affects the right of a third-party plaintiff/passenger. NJAFIUA argued
that under the terms of the application for insurance executed by Deborah, the insurance contract never went
into effect and, therefore, no policy existed to provide any benefits.
The Appellate Division affirmed the decision of the trial court, reasoning that the distinction
between first and third party claims against a cancelled or voided policy is of primary importance in
determining whether coverage is afforded. Any agreement pursuant to the policy in respect of the voidance
of coverage if the premium is dishonored is between the insured (Deborah Dillard) and the insurance
company, not between the insurance company and an innocent third party such as Christine Dillard. The
Appellate Division also found that although there was no provision establishing a financial responsibility law
in the enabling legislation that established the NJAFIUA, coverage is generally afforded when an innocent
third party seeks to recover from the cancelling NJAFIUA insurer.
The Appellate Division also concluded that UM benefits are not excluded from coverage. According to the Appellate Division, the fact that Christine has a claim against the UCJF is irrelevant since the UCJF would merely provide supplemental relief. The Appellate Division recognized the unfairness to a carrier that
is held liable to a third party on a policy for which it receives no payment. However, the court noted that
the carrier could have prevented this by requiring payment in cash, or by money order, certified check, bank
check or credit card. The carrier chose to accept an uncertified check and, therefore, must suffer the same
consequences as any merchant who sells goods and is paid by a bad check.
The Supreme Court granted the NJAFIUA's petition for certification.
HELD: Judgment of the Appellate Division is AFFIRMED substantially for the reasons expressed in Judge
Villaneuva's opinion. The retroactive revocation of a driver's liability policy, when the check for a
premium payment was dishonored for insufficient funds, does not affect the right of an innocent
third-party passenger to recover under the liability and uninsured motorist provisions of that policy.
The remedy of the New Jersey Automobile Full Insurance Underwriting Association was against the
defaulting driver.
1. Coverage afforded under the policy is limited to the statutory coverage required by N.J.S.A. 39:6A-3 and
N.J.S.A. 39:6B-1 in accordance with the holding in Marotta v. New Jersey Automobile Full Insurance
Underwriting Association, also decided today. (pp. 1-2)
Judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI,
STEIN and COLEMAN join in this opinion.
SUPREME COURT OF NEW JERSEY
A-
33 September Term 1995
CHRISTINE DILLARD,
Plaintiff-Respondent,
v.
HERTZ CLAIM MANAGEMENT and/or EDS
SYSTEMS, as servicing agent for the
NEW JERSEY AUTOMOBILE FULL
INSURANCE UNDERWRITING ASSOCIATION
(NJAFIUA),
Defendants,
and
NEW JERSEY AUTOMOBILE FULL
INSURANCE UNDERWRITING ASSOCIATION
(NJAFIUA),
Defendant-Appellant.
Argued October 23, 1995 -- Decided June 11, 1996
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
277 N.J. Super. 448 (1994).
Robert G. Engelhart argued the cause for
appellant (Gebhardt & Kiefer, attorneys).
Raymond T. Sheldon argued the cause for
respondent (Surdovel & Sheldon, attorneys).
PER CURIAM.
The judgment is affirmed, substantially for the reasons
expressed in the opinion of the Appellate Division, reported at
277 N.J. Super. 448 (1994). We add that the coverage afforded
under the policy is limited to the statutory coverage required by
N.J.S.A. 39:6A-3 and N.J.S.A. 39:6B-1 in accordance with the
holding in Marotta v. New Jersey Automobile Full Insurance
Underwriting Association, ___ N.J. ___ (1996), also decided
today.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN,
GARIBALDI, STEIN and COLEMAN join in this opinion.
NO. A-33 SEPTEMBER TERM 1995
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
CHRISTINE DILLARD,
Plaintiff-Respondent,
v.
HERTZ CLAIM MANAGEMENT et al.,
Defendants,
and
NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING
ASSOCIATION (NJAFIUA),
Defendant-Appellant.
DECIDED June 11, 1996
Chief Justice Wilentz PRESIDING
OPINION BY Per Curiam
CONCURRING OPINION BY
DISSENTING OPINION BY