NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4929-07T34929-07T3

LINDA A. BORITZ,

Plaintiff-Appellant,

v.

NEW JERSEY MANUFACTURERS

INSURANCE COMPANY,

Defendant-Respondent.

Argued February 3, 2009 - Decided

Before Judges Winkelstein, Gilroy and Chambers.

On appeal from the Superior Court of New Jersey, Law Division, Cumberland County, L-565-07.

Michael J. Gaffney argued the cause for appellant (Radano & Lide, attorneys; Melville D. Lide, on the brief).

Robert M. Kaplan argued the cause for respondent (Margolis Edelstein, attorneys; Mr. Kaplan, on the brief).

The opinion of the court was delivered by

WINKELSTEIN, P.J.A.D.

Plaintiff, Linda Boritz, was injured in a traffic accident while a passenger in an automobile driven by Sally Iacono. She appeals from a Law Division order limiting her claim for underinsured motorist (UIM) benefits based on a "step-down" clause in a policy defendant New Jersey Manufacturers Insurance Company (NJM) issued to Iacono. The policy has a UIM limit of $100,000. The step-down clause capped plaintiff's entitlement to UIM benefits at $25,000, the coverage limit in her own automobile insurance policy issued by the Government Employees Insurance Company (GEICO).

Plaintiff does not challenge the validity of the step-down clause, but asserts that NJM should be estopped from enforcing it. She claims that she would not have settled with the tortfeasor for its $15,000 policy limits had she not been led to believe by NJM, by consenting to her settlement with the tortfeasor for the tortfeasor's policy limits, see Longworth v. Van Houton, 223 N.J. Super. 174, 194 (App.Div. 1988) (insured receiving acceptable settlement offer from tortfeasor should seek consent to settle from UIM carrier), that she would have access to the full $100,000 in UIM coverage available under its policy. The trial court rejected plaintiff's argument and limited her recovery to $10,000, the difference between the $25,000 UIM limit in her GEICO policy and the $15,000 she recovered from the tortfeasor. We reverse.

I.

On October 9, 2005, plaintiff was injured when Iacono's vehicle was stopped at a red light and was struck in the rear by a vehicle owned and operated by Monique Vinson, who was insured by GEICO under a policy with a $15,000 liability limit. Plaintiff's attorney subsequently informed NJM of Vinson's coverage limits, and that plaintiff would look to Iacono's UIM coverage with NJM for additional compensation. Later, in a letter dated October 3, 2006, from a GEICO claims examiner, plaintiff's counsel learned that NJM had policy limits of $100,000. The letter said: "the host vehicle is primary for the UM/UIM coverage. I have contacted NJM . . . and they have accepted this claim as a valid claim, also note their limits are $100/$300 in Bodily Injury and I have lower coverage so, therefore, there is no valid [GEICO] UM/UIM coverage for this loss."

Also by letter dated October 3, 2006, Gina Grainey, an NJM claims representative, requested that plaintiff's counsel provide her with "medical reports, specials, your client's policy declaration page verifying their chosen tort threshold, and any other information you feel will assist us in evaluating your client's case." Without mentioning the step-down provision, Grainey confirmed, by telephone with plaintiff's counsel, that the NJM policy coverage was primary, with limits of $100,000 per person, $300,000 per accident.

Approximately two months later, plaintiff's counsel notified NJM that Vinson's insurance company, GEICO, had offered plaintiff the policy limit of $15,000 "in full and final settlement of the claim against [Vinson]." The letter asked for confirmation of NJM's consent to the settlement pursuant to Longworth. In response, NJM provided plaintiff's counsel with a "Consent to Settle." Plaintiff consequently released Vinson in exchange for payment of her $15,000 policy limits.

From December 2006 through April 2007, plaintiff's counsel negotiated with NJM for UIM benefits. NJM initially offered plaintiff $17,023 to settle her UIM claim. Plaintiff rejected the offer, and counter-offered to settle for $75,000. In response, NJM increased its settlement offer to $32,023.

Meanwhile, although NJM had requested plaintiff's policy declaration page in its letter to plaintiff's counsel on October 3, 2006, NJM did not receive it until May 2007. When it did, and it discovered that plaintiff's UIM limits were $25,000, NJM notified plaintiff's counsel that it would exercise the step-down provision in Iacono's policy, which stated:

A. The limit of liability shown in the Declarations for this coverage is our maximum limit of liability for all damages resulting from any one accident. However, subject to our maximum limit of liability for this coverage:

1. If:

a. An insured is not the named insured under this policy;

b. That insured is a named insured under one or more other policies providing similar coverage; and

c. All such other policies have a limit of liability for similar coverage which is less than the limit of liability for this coverage;

then our maximum limit of liability for that insured, for all damages resulting from any one accident, shall not exceed the highest applicable limit of liability under any insurance providing coverage to that insured as a named insured.

Because plaintiff's GEICO UIM coverage had a $25,000 limit and plaintiff had recovered $15,000 from the tortfeasor, NJM thus limited the available UIM coverage to $10,000.

Plaintiff filed this declaratory judgment action against NJM, claiming she was entitled to a UIM coverage limit of $85,000 — the NJM UIM policy limit of $100,000, less her $15,000 recovery from the tortfeasor. On cross-motions for summary judgment, plaintiff argued that had she been aware that the NJM UIM limits would be $25,000, rather than $100,000, she would not have settled with the tortfeasor but would have sought recovery from the tortfeasor's personal assets.

The Law Division rejected plaintiff's estoppel argument and granted defendant's motion for summary judgment. The court found that plaintiff did not detrimentally rely on NJM's consent to settle.

II

An "insurance policy is an agreement that 'set[s] forth in fundamental terms, the general outlines of coverage.'" Hardy v. Abdul-Matin, ___ N.J. ___, ___ (2009) (slip op. at 8) (quoting Weedo v. Stone-E-Brick, 81 N.J. 233, 237 (1979)). The premium paid for insurance coverage "does not buy coverage for all . . . damage but only for that type of damage provided for in the policy." Ibid. "[I]n the absence of a statutory prohibition to the contrary, an insurance company has a right to impose whatever conditions it desires prior to assuming its obligations." Royal Ins. Co. v. Rutgers Cas. Ins. Co., 271 N.J. Super. 409, 419 (App. Div. 1994). "Absent enunciation by the legislature of a contrary rule or a contrary strong public policy recognized in case law, courts have enforced 'other insurance' provisions [included in other policies] as written." Prudential Prop. & Cas. Ins. Co. v. State Farm Ins. Co., 306 N.J. Super. 315, 320 (App. Div. 1997).

"A 'step-down' clause is a contractual device inserted in an auto insurance policy." Olkusz v. Brown, 401 N.J. Super. 496, 498 (App. Div. 2008). These clauses have been held enforceable "even though they may result in differential treatment of similar plaintiffs based on the existence of other available insurance." Pinto v. N.J. Mfrs. Ins. Co., 183 N.J. 405, 412 (2005), superseded in part by N.J.S.A. 17:28-1.1(f) (prohibiting step-down provisions in policies naming corporate or business entities as insureds). The step-down clause at issue here limits the amount of UIM coverage available to an insured, other than the named insured, to the amount of UIM coverage provided in that insured's own auto policy. Plaintiff contends that NJM is barred from exercising this step-down provision under a theory of estoppel.

"'Estoppel is an equitable doctrine, founded in the fundamental duty of fair dealing