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NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-6588-06T36588-06T3
JAMES J. WATSON,
Plaintiff-Appellant/
Cross-Respondent,
v.
JEFFREY R. WATSON, ERIK J.
NADEAU, and THE HERTZ EQUIPMENT
RENTAL CORPORATION,
Defendants,
and
HOWARD J. KRAMER,
Defendant-Respondent/
Cross-Appellant.
HOWARD J. KRAMER,
Third-Party Plaintiff/
Cross-Respondent,
v.
STATE FARM INSURANCE COMPANY,
Third-Party Defendant/
Cross-Appellant.
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Argued November 12, 2008 - Decided
Before Judges Wefing, Parker and Yannotti.
On appeal from Superior Court of New Jersey,
Law Division, Morris County, Docket No. L-710-05.
Kenneth W. Elwood argued the cause for appellant/
cross-respondent James J. Watson (Blume, Goldfaden, Berkowitz, Donnelly, Fried & Forte, attorneys;
Mr. Elwood, on the briefs).
Glenn R. Moran argued the cause for respondent/
cross-appellant Howard J. Kramer (Leary, Bride, Tinker & Moran, attorneys; John G. Tinker, Jr.,
on the briefs).
Robert M. Brigantic argued the cause for
third-party defendant/cross-appellant State
Farm Insurance Company (Maloof, Lebowitz,
Connahan & Oleske, attorneys; Matthew J.
Connahan and Mr. Brigantic, on the briefs).
PER CURIAM
Plaintiff James Watson appeals from trial court orders granting summary judgment to defendant Howard Kramer
and denying plaintiff's motion for reconsideration. Kramer cross-appeals from a trial court order granting summary
judgment to plaintiff James Watson on the issue of liability. Finally, third-party defendant State Farm Insurance
Company ("State Farm") appeals from trial court orders denying its motion for summary judgment against
defendant Kramer, denying its motion for reconsideration and an order entering judgment declaring that
defendant Jeffrey Watson was an insured under its policy. After reviewing the record in light of the contentions
advanced on appeal, we affirm in part and reverse in part.
This litigation was commenced in the wake of an automobile accident that occurred at approximately 7:30 a.m. on
Route 94 in Vernon on July 5, 2003. Defendant Jeffrey Watson was driving; his brother, plaintiff James Watson, was
his passenger. The two brothers had gone to the shore to spend the July 4 weekend. On July 3, they drove to the
Trump Marina in Atlantic City where, plaintiff testified, they drank and gambled. When the two men awoke on July
4, they both had hangovers. They then drove north to Point Pleasant to meet friends. They spent the day on the
beach. In the afternoon, they went to Jenkinson's bar to listen to a band; James Watson testified he had a few beers
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at Jenkinson's, and Jeffrey Watson testified he had nothing to drink there. They then met friends of Jeffrey's from
high school and went to a house party, accompanied by two women they had met at Jenkinson's. They left the
house party at approximately 1:00 a.m. and went to the place where the women were staying. Eventually, when
they learned they could not stay the night there, they decided to drive back to their parents' home in Hamburg.
They set out at approximately 4:00 a.m., with James at the wheel. They drove north to Butler, where they stopped at
a diner on Route 23 and had breakfast. Jeffrey had coffee with his meal and James did not. When they finished
eating, Jeffrey suggested that he take the wheel, saying his brother had driven that whole distance, looked tired,
and he, Jeffrey, was more familiar with the roads in the area. James at first said he was fine to finish the drive but
decided to relinquish the wheel to Jeffrey. They were approximately one mile from their destination when Jeffrey
fell asleep while driving. The car crossed over into the oncoming lane and collided with a truck driven by Erik
Nadeau, rented from defendant The Hertz Equipment Rental Corporation. Both brothers suffered grievous injuries
in the collision and had to be medevaced to Morristown Memorial Hospital, the regional trauma center.
At the time of the accident James Watson was employed as a salesperson for Industrial Paper Tube Corporation
("Industrial"), whose principal is defendant Kramer. The car that the brothers were using had been supplied to
James by Industrial for his use in connection with his business. Industrial placed no restrictions on its usage,
however, and James was free to use it for personal reasons. Plaintiff had had the use of this car for approximately
sixteen months. He lived in New Jersey and kept the car in New Jersey. Industrial was located in New York, and
Kramer is a resident of New York. The car in question was registered in New York and was insured by Allstate
Insurance Company ("Allstate") with a policy limit of $250,000. There is no dispute that plaintiff James was entitled
to coverage under that policy.
Defendant Kramer had another insurance policy with Allstate, a personal umbrella policy with liability coverage in
the amount of $2,000,000. The trial court decided on motions for summary judgment that plaintiff was not covered
under that policy. That determination is the subject of plaintiff's appeal.
At the time of the accident, both James and Jeffrey were residing with their parents in Hamburg. Their mother had
an automobile insurance policy with third-party defendant State Farm that included coverage for non-owned cars.
The trial court also decided on motion for summary judgment that Jeffrey, the driver at the time of the accident,
was insured under that State Farm policy. That determination is the subject of State Farm's cross-appeal.
I
We turn first to the question of whether plaintiff is entitled to coverage under Kramer's umbrella policy. Resolution
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of that issue involves a choice-of-law analysis. New York by statute holds owners of vehicles vicariously liable for an
accident caused by the negligence of a permissive operator. N.Y. Veh. & Traf. Law § 388 (McKinney 2005). New
Jersey, on the other hand, by case law, holds that the owner is not vicariously liable for the negligence of a
permissive driver. Harvey v. Craw, 110 N.J. Super. 68, 73 (App. Div.), certif. denied, 56 N.J. 479 (1970). The trial court
concluded that New Jersey law applied, with the consequence that plaintiff may not seek coverage under Kramer's
umbrella policy.
The determination as to which jurisdiction's law to apply to a given situation is a question of law. Arias v. Figueroa,
395 N.J. Super. 623, 627 (App. Div.), certif. denied, 193 N.J. 223 (2007). We thus review the trial court's decision de
novo, affording it no deference on appeal. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378
(1995).
New Jersey has recently revisited the principles governing analysis of choice-of-law questions. Previously, New
Jersey utilized the governmental interest test. Rowe v. Hoffman-La Roche, Inc., 189 N.J. 615, 621 (2007). That
involves a two-step process, the first of which is to determine if there is a conflict between the laws of the particular
states. Only if there is a conflict with respect to the issue at hand is it necessary to proceed to the second step.
[T]he second step seeks to determine the interest that each state has in resolving the
specific issue in dispute. The Court must identify the governmental policies underlying
the law of each state and determine whether those policies are affected by each state's
contacts to the litigation and to the parties. We must apply the law of the state with the
greatest interest in governing the particular issue.
[Id. at 621-22 (citations and quotations omitted).]
In P.V. ex rel T.V. v. Camp Jaycee, 197 N.J. 132 (2008), the majority of the Supreme Court abandoned the
governmental interest test and adopted in its place the significant relationship test enunciated in the Restatement
(Second) of Conflict of Laws (1971). The Court carefully set forth in Camp Jaycee the framework to be utilized
henceforth in analyzing choice-of-law questions.
The significant relationship test presumes that the law of the place of injury should govern, unless another state has
a more significant relationship. Camp Jaycee, supra, 197 N.J. at 143. The test begins by asking the question whether
there is a conflict in the laws between interested states. Ibid. If there is a conflict, the Court stated that the first
contact to examine is the location of the injury. The law of the place where the injury occurred is presumed to
apply. Id. at 144 (citing Restatement (Second) of Conflict of Laws § 146 (1971)).
That presumption may be overcome by a more significant interest of another state, and thus the next step in
the analysis is to examine whether such an interest exists. Id. at 144-45. The location of the conduct causing the
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injury is the next contact to be examined. Id. at 145 (citing Restatement (Second), supra, § 145). The other contacts
to look at are the domicile of the parties involved, and the place where the relationship is centered. Id. at 146-47.
The analysis of the states' contacts should not focus on quantity over quality. Id. at 147. Even if after
analyzing these contacts, one state has more contacts than another, a court should examine the five principles of
the Restatement (Second), supra, § 6. Camp Jaycee, supra, 197 N.J. at 147. Previously, these principles had been
utilized under the governmental interest test. Fu v. Fu, 160 N.J. 108, 122 (1999). The five principles are: "(1) the
interests of interstate comity; (2) the interests of the parties; (3) the interests underlying the field of tort law; (4) the
interests of judicial administration; and (5) the competing interests of the states." Camp Jaycee, supra, 197 N.J. at
147 (quoting Erny v. Estate of Merola, 171 N.J. 86, 101-02 (2002)).
Examining the facts of this case, it is clear from the outset that New Jersey and New York differ in whether
liability should be imposed on vehicle owners who were not operating the vehicle when an accident occurred. As
stated earlier, New Jersey follows a common law approach under which an owner is not liable for an accident
caused by the negligence of a driver unless that driver was acting on behalf of the owner as an agent or employee.
Fu, supra, 160 N.J. at 117. New York, on the other hand, holds an owner vicariously liable for the negligence of a
driver permitted to use a vehicle. N.Y. Veh. & Traf. Law § 388 (McKinney 2005).
Since the two states present a conflict of laws, we look to the place of injury, which is the presumptive law to apply.
Camp Jaycee, supra, 197 N.J. at 144. Here, that state is New Jersey, as the accident occurred in New Jersey.
However, we must consider whether New York may have a more significant relationship to the matter that
overcomes the presumption that New Jersey's law should apply, as the place of injury. Id. at 144-45.
The next contact to analyze is the location of the conduct that caused the injury. Id. at 145. Here, that location is
also New Jersey, as defendant Watson fell asleep at the wheel in New Jersey.
When analyzing the domicile of all the parties involved, New York does have some contacts. Plaintiff is from New
Jersey, as is his brother, defendant Watson. The driver of the other vehicle, defendant Nadeau, is from Montana. The
car plaintiff was driving was owned by defendant Kramer, a resident of New York and registered in New York.
However, although defendant Kramer owned the vehicle, he gave it to plaintiff, who was permitted to utilize the
car for both business and personal use. Prior to the accident, the car had been garaged at plaintiff's home in New
Jersey for approximately sixteen months. Defendant Nadeau's car was a rental car and registered in New York.
The final contact to analyze is the place where the relationship is centered. Id. at 147. Between plaintiff Watson and
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defendant Watson, it is New Jersey. However, between plaintiff and defendant Kramer, it is New York. Although
plaintiff would use the car for sales in a four-state area, defendant Kramer's office was in New York, and plaintiff
would visit that office. Overall, New Jersey has more contacts, but that does not end the analysis for the quality of
the contacts is of more significance than the quantity.
To determine the quality of the contacts over the quantity, the Restatement (Second), supra, § 6, principles should
be analyzed next. The first principle looks at "the interests of interstate comity" and asks whether a state's policy is
frustrated by the application of another state's law. Camp Jaycee, supra, 197 N.J. at 147. In this case, application of
either law frustrates the law of the other state since the two states follow opposite approaches: New York would
hold defendant Kramer vicariously liable and New Jersey would not. Clearly, the two states have different
underlying policies.
The purpose of New Jersey's common law approach is to shield an owner, where no agency relationship
exists between the owner and the negligent operator of the vehicle, from liability where the owner has not been at
fault. Fu, supra, 160 N.J. at 120 (citing Haggerty v. Cedeno, 279 N.J. Super. 607, 611-12 (App. Div.), certif. denied, 141
N.J. 98 (1995)). New Jersey also has two general policy interests relating to all tort cases: (1) ensuring that New
Jersey domiciliaries are compensated adequately for injuries and (2) deterring domiciliaries from committing torts.
Marinelli ex rel. Marinelli v. K-Mart Corp., 318 N.J. Super. 554, 566 (App. Div. 1999), aff'd, 162 N.J. 516 (2000).
The New Jersey Supreme Court has noted that New York's statute, N.Y. Veh. & Traf. Law, § 388, does not
deserve more weight merely because it is the product of a legislative enactment as opposed to New Jersey's case-
articulated policy. Fu, supra, 160 N.J. at 120-21. The Court went on to note in Fu, however, that New Jersey has
begun moving toward liability without fault. Id. at 121-22. The Court cited two examples: the no-fault insurance law
and the mandatory requirement of insurance. Ibid.
There are three purposes underlying New York's enactment of Section 388. One purpose is "to ensure recourse to
the vehicle's owner, a financially responsible party." Argentina v. Emery World Wide Delivery Corp., 715 N.E.2d 495,
499 (N.Y. 1999) (citations omitted). Another purpose is to discourage owners from allowing irresponsible people
operate their vehicles. Ibid. Finally, and especially applicable to accidents occurring within New York, the state has
an interest in ensuring that medical providers are compensated. Fu, supra, 160 N.J. at 119 (citing Bray v. Cox, 333
N.Y.S.2d 783, 785 (App. Div. 1972)).
The next principle set down by the Restatement is the interests of the parties. This principle calls for
examining the reasonable expectations and the need for a foreseeable result for plaintiff and defendant Kramer. The
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Fu court pointed out that individual car owners generally do not evaluate their choices with the law of different
states in mind. Id. at 123-24. Therefore, in this case it would seem that there are no reasonable expectations of the
parties or at the most, that the parties would have believed New Jersey law would control since plaintiff, residing in
New Jersey, had full possession of the vehicle for any use he desired.
The next principle examines "the interests underlying the field of tort law" and asks if the fundamental tenets of tort
law, compensation and deterrence, would be furthered if the law of New Jersey were applied. Although New
Jersey's law denies compensation vicariously through an owner, the Court in Fu stated that it is still "entitled to
equal consideration in choice-of-law determinations . . .                                                                    ." Id. at 123. Despite this, New York should prevail on this
point, in our judgment, since New Jersey's interest in protecting owners from unforeseeable liability may not apply
strongly to an owner who is not from this state.
Next, "the interests of judicial administration" should be examined. The New Jersey Supreme Court has
stated that this factor is of less importance than others. Id. at 124. If one state clearly has the greater interest in
application of its law, then the interests of judicial administration should yield to that state's interests. Camp Jaycee,
supra, 197 N.J. at 154-55. A New Jersey court applying New Jersey law to an accident occurring in New Jersey,
based on a suit brought by a New Jersey plaintiff, would be in the best interest of judicial administration.
The final principle examines "the competing interests of the states" and asks whether applying a particular
state's law will advance the policies of that state. The quality (not quantity) of a state's contacts should be analyzed
under this principle. Fu, supra, 160 N.J. at 125. The Fu court pointed out that when both the conduct that caused
the injury, and the actual injury, occur in the same state, that state's law should apply. Id. at 125-26. The Court in
Camp Jaycee further built upon this concept by employing a significant relationship test with its presumption that a
court should apply the law of the place of injury. Camp Jaycee, supra, 197 N.J. at 144.
We analyze the facts of this case in light of that principle. Although New Jersey clearly has the greater
number of contacts with this case, the quality of the contacts in light of the policy considerations of the states must
be considered. The trial court found that New York's policy considerations would not be implicated by applying
New Jersey law in this case. We agree with the trial court's conclusion in this regard.
As we noted earlier, there are three policies underlying New York's law, the first of which is to see that
medical providers are compensated. That is not applicable here. Plaintiff received medical care in New Jersey, from
New Jersey providers. Plaintiff testified, moreover, that his medical bills had been paid. Likewise, New York's interest
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in ensuring that owners do not lend their cars to irresponsible individuals is not implicated by this case, as the trial
court expressed clearly in the decision on plaintiff's motion for reconsideration, because plaintiff did safely operate
the vehicle for approximately sixteen months.
The final policy consideration, providing financial recourse for an injured party, may be implicated. That policy
consideration, however, is not driven by considerations of which law affords the greater recovery.
[I]t would indeed be anomalous to apply foreign law solely to gain access to a deep
pocket when local law denies that access. . .                                                                              . Accordingly New Jersey would not invoke
New York law solely to afford its injured resident a remedy.
[Fu, supra, 160 N.J. at 132 (citation and quotation omitted).]
Here, on balance, we agree with the trial court that New Jersey, the site of the accident, the residence of the injured
party, the state where those injuries were treated and the state where the car was garaged and principally driven,
has the most significant relationship, and our law should apply. We thus affirm the order of June 9, 2006, granting
summary judgment to defendant Kramer and the order of September 22, 2006, denying reconsideration.
II
Defendant Kramer had moved for summary judgment on the question of whether plaintiff bore any liability for
permitting his brother to drive this car. The trial court had denied his motion, and that is the subject of his cross-
appeal. That cross-appeal, however, has been made moot by our determination that New Jersey law governs, thus
excluding any liability on Kramer's part.
III
The remaining issue is whether the trial court was correct in concluding that the State Farm policy obtained by the
mother of the Watson brothers provided coverage for the car under its non-owned vehicle provisions. State Farm
agreed that both Watson brothers were "an insured" under this policy which provided that its "liability coverage
extends to the use, by an insured, of a newly acquired car, a temporary substitute car or a non-owned car." The
policy defines a non-owned car in the following manner:
a car not owned, registered or leased by:
1. you, your spouse;
2. any relative unless at the time of the accident or loss:
a. the car currently is or has within the last 30 days been insured for liability coverage;
and
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b. the driver is an insured who does not own or lease the car;
3. any other person residing in the same household as you, your spouse or any relative;
or
4. an employer of you, your spouse or any relative
The policy provides further that the term non-owned car "does not include a . . . car which has been operated or
rented by or in the possession of an insured during any part of each of the last 21 or more consecutive days." Under
this policy language, if the car supplied to plaintiff James qualifies as a non-owned car, coverage would be afforded.
If it does not, coverage would not be available.
The trial court found the policy language ambiguous and under well-established principles governing the
construction of insurance policies, construed the ambiguity in favor of the insured. Zacarias v. Allstate Ins. Co., 168
N.J. 590, 595 (2001). We are unable to agree.
The policy clearly excluded from the scope of a non-owned vehicle one which had been "in the possession of an
insured during any part of each of the last 21 or more consecutive days." It is undisputed that plaintiff had had
possession of this car for the sixteen months preceding the accident. The trial court found the policy ambiguous
because at the time of the accident, Jeffrey Watson was the driver and he had not been in possession of the car for
the preceding 21 days.
In considering polices of insurance, the Supreme Court has instructed that
members of the public . . . are entitled to the broad measure of protection necessary to
fulfill their reasonable expectations. They should not be subjected to technical
encumbrances or to hidden pitfalls and their policies should be construed liberally in
their favor to the end that coverage is afforded "to the full extent that any fair
interpretation will allow."
[President v. Jenkins, 180 N.J. 550, 563 (2004) (citing Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475,
482 (1961)).]
In our judgment there could not have been a reasonable expectation of coverage under the State Farm policy by
plaintiff James in light of that clear policy language. And if James could not have had a reasonable expectation of
coverage, we are unable to see how Jeffrey could have had a reasonable expectation of coverage. We thus reverse
the trial court order of September 22, 2006, denying State Farm's motion for summary judgment and the
subsequent implementing orders of December 28, 2006, and August 3, 2007.
IV
On plaintiff's appeal, we affirm. On State Farm's cross-appeal, we reverse. We dismiss the cross-appeal of defendant
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Kramer as moot.
(continued)
(continued)
18
A-6588-06T3
April 6, 2009
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