(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).
Argued April 29, 1997 -- Decided July 9, 1997
COLEMAN, J., writing for a majority of the Court.
This appeal focuses on the scope of permission to use an automobile. The specific question
addressed by the Court is whether the initial permission rule, first enunciated in Matits v. Nationwide Mutual
Insurance Co., should be applied to excess catastrophe ("umbrella") policies.
General Accident Insurance (GAI) issued a $300,000 single-limit-liability policy to Timothy P. Heim,
covering a 1989 Chevrolet Caprice and a 1989 Ford Mustang. GAI also issued to Timothy Heim an
umbrella policy with a liability limit of $1,000,000. That policy provided coverage for damages arising from a
person driving a covered vehicle "with your permission." The Heim's son, Michael, was the primary driver of
the Mustang that was registered in the name of Barbara Heim, Michael's mother. The umbrella policy is in
issue because the Heim and Tartamosa insurance policies are likely to be insufficient to cover the claims
against Tartamosa.
On May 9, 1993, Tartamosa was driving the Heim's Mustang southbound on Route 42. Tartamosa
had been given permission to drive the Mustang by Michael. Tartamosa lost control of the vehicle, drove
across the median into oncoming traffic, and caused a collision with another car. David Martusus, the sole
passenger in the Mustang, was killed in the accident.
Three people involved in the accident filed separate complaints against Tartamosa as the driver of
the car and against Barbara Heim as the owner of the car. Liberty Mutual Insurance Company, the primary
carrier for Tartamosa, and GAI, the Heim's primary and excess carrier, were also named as defendants in
order to determine coverage and priority of coverages. All actions were consolidated.
GAI filed a motion for summary judgment, claiming that its umbrella policy did not cover
Tartamosa because he had not been given permission to drive the Mustang either by Timothy or Barbara
Heim, the named insured and his spouse. The trial court agreed and granted GAI's motion denying
coverage under the umbrella policy.
The Appellate Division summarily reversed the decision of the trial court.
The Supreme Court granted leave to appeal.
HELD: The initial permission rule applies to excess catastrophe ("umbrella") policies.
1. It must be determined, by a review of the language of the policy in light of controlling legal principles,
whether Michael's permission to Tartamosa to drive the Mustang was sufficient to trigger coverage.
(pp. 5-6)
2. Under Matits, once a person obtains permission to drive a vehicle, the driver becomes an additional insured under a typical omnibus clause in an automobile liability policy for the duration of the driver's use of the car. This rule applies to any deviation from the initial scope of the permitted use, so long as the
subsequent use does not constitute theft or a similar offense. This rule is to be liberally construed in favor
of insureds. (pp. 6-9)
3. There is a public policy of protecting innocent victims of automobile accidents by broadly interpreting: 1)
which users are "permissive users;" and 2) which actions should be covered by the insured's policy. Absent
statutory or policy language stating otherwise, the same public policy should prevail, regardless of whether a
primary automobile or umbrella policy is involved. (pp. 9-11)
4. GAI relies on Weitz v. Allstate Insurance Co. to support its position that the initial permission rule
should not apply to umbrella policies because those policies are different and primary policies are mandated
by law. Weitz is distinguishable. In that case, an express exclusion under the policy was controlling and the
driver's permission to operate the vehicle was not at issue. (pp. 11-13)
5. The fact that primary automobile coverage is mandatory and umbrella policies are optional changes
neither the principles of interpreting insurance policies nor the public policy underlying the initial permission
rule. The policy of ensuring collectability of damages caused to innocent victims is advanced by applying the
permissive user rule to umbrella policies. Moreover, the reasonable expectation of the insured should
control to the extent permitted by the policy language. (pp. 13-15)
6. The disparity between the premiums charged for the umbrella policy and the primary liability policy does
not demonstrate that the Heim's did not reasonably expect coverage under their umbrella policy for this type
of accident. (pp. 15-16)
Judgment of the Appellate Division is AFFIRMED and the matter is REMANDED to the Law
Division for disposition of the personal injury complaints.
JUSTICE O'HERN, dissenting, is of the view that the legislative policies that sustain a broad
interpretation of compulsory automobile liability insurance are inapplicable in the context of this case. The
purpose behind the excess policy is different from the liability policy and the public policies undergirding the
permissive user rule do not extend with equal force to umbrella policies.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, GARIBALDI and STEIN join in JUSTICE
COLEMAN'S opinion. JUSTICE O'HERN filed a separate dissenting opinion in which JUSTICE
POLLOCK joins.
SUPREME COURT OF NEW JERSEY
A-
124 September Term 1996
SUSAN MARTUSUS, Administratrix ad
Prosequendum, and SUSAN AND ERNEST
MARTUSUS, Co-Administrators of the
Estate of David E. Martusus,
Deceased,
Plaintiffs-Respondents,
v.
THOMAS J. TARTAMOSA,
Defendant-Respondent,
and
BARBARA L. HEIM, STEPHEN P. SERALE,
RENEE C. LIBERONI, JOHN DOES I and
II (fictitious names of persons
more fully described herein),
jointly, severally and/or in the
alternative,
Defendants,
and
GENERAL ACCIDENT INSURANCE COMPANY,
Defendant-Appellant.
RENEE C. LIBERONI,
Plaintiff,
v.
THOMAS J. TARTAMOSA,
Defendant-Respondent,
and
TIMOTHY HEIM, BARBARA L. HEIM,
STEPHEN SERALE, JOHN DOE I to V,
John Doe Partnerships I to V, John Doe
Corporations I to V, individually,
jointly, severally and/or in the
alternative,
Defendants.
STEPHEN SERALE,
Plaintiff,
v.
THOMAS J. TARTAMOSA,
Defendant-Respondent,
and
TIMOTHY HEIM, BARBARA L. HEIM,
JOHN DOE I to V, John Doe Partnerships
I to V, John Doe Corporations I to V,
individually, jointly, severally and/or
in the alternative,
Defendants.
Argued April 29, 1997 -- Decided July 9, 1997
On appeal from the Superior Court, Appellate
Division.
Joseph A. Venuti, Jr., argued the cause for
appellant (Swartz, Campbell & Detweiler,
attorneys).
G. Wesley Manuel, Jr., argued the cause for
respondents Susan Martusus, Administratrix ad
Prosequendum, and Susan and Ernest Martusus,
Co-Administrators of the Estate of David E.
Martusus, Deceased (Montano, Summers, Mullen,
Manuel, Owens & Gregorio, attorneys).
Elizabeth A. Dalberth submitted a letter in
lieu of a brief on behalf of respondent
Thomas J. Tartamosa (Murphy and O'Connor,
attorneys).
The opinion of the Court was delivered by
COLEMAN, J.
The focus of this appeal is on the scope of permission to
use an automobile. The narrow issue is whether the initial
permission rule, first enunciated in Matits v. Nationwide Mutual
Insurance Co.,
33 N.J. 488 (1960), should be applied to excess
catastrophe ("umbrella") policies. The trial court held that the
Matits rule should not apply. The Appellate Division granted
leave to appeal and summarily reversed by order. We granted
leave to appeal,
146 N.J. 562 (1996), and now affirm.
General Accident Insurance Co. ("GAI") issued a $300,000 single-limit-personal-automobile-liability policy to Timothy P. Heim covering a 1989 Chevrolet Caprice and a 1989 Ford Mustang. GAI also issued to Timothy P. Heim an umbrella policy with a liability limit of $1,000,000. That policy provided coverage for damages arising from a person driving a covered vehicle "with your permission." The premium for the primary policy was $380 and the premium for the umbrella policy was $114 for the same period. The Heims's son Michael was the primary driver of the Mustang that was registered in the name of Michael's mother, Barbara Heim. Michael gave permission to defendant Thomas
Tartamosa to drive the Mustang at the time of an accident that
spearheaded this litigation. The umbrella policy is important as
an excess policy because the two automobile policies, purchased
by Tartamosa and Heim, are likely to be insufficient to cover the
claims against Tartamosa.
The accident occurred on May 9, 1993, while Tartamosa was
driving the Heims's Mustang southbound on State Route 42. He
lost control of the car and drove across a grass median and into
northbound traffic, causing a collision with another car. David
Martusus, Tartamosa's sole passenger, was killed in the accident.
Three people involved in the accident filed separate
complaints against Tartamosa as the driver of the Mustang and
Barbara Heim as the owner. Liberty Mutual Insurance Company, the
primary carrier for Tartamosa, and GAI, the Heims's primary and
excess carrier, were also named as defendants. The insurance
companies were joined as parties to determine coverage and
priority of coverages. All of the actions were consolidated.
GAI filed a motion for summary judgment, claiming that its
umbrella policy provided no coverage to Tartamosa for the
accident because he had not been given permission to drive the
Mustang by either Timothy or Barbara Heim, the named insured and
his spouse. The trial court agreed and granted summary judgment,
denying Tartamosa any coverage under GAI's umbrella policy.
A determination of whether Tartamosa was covered by the GAI
umbrella policy requires us to first identify the controlling
facts and the pertinent policy language. Tartamosa had been
given permission to drive the vehicle by Michael, the son of
Timothy and Barbara Heim. Although the vehicle was registered in
Barbara's name, Michael drove and maintained it. In view of
those facts, we must examine the language of the policy in light
of controlling legal principles to resolve whether Michael's
permission to Tartamosa to drive the Mustang was sufficient to
trigger coverage.
Part 2, Paragraph 9 of the policy defines an insured as:
a. You or a relative.
b. Any person using, with your permission, an
auto, pleasure vehicle or boat you own, rent
or borrow. ( Insured does not mean the owner
of an auto, pleasure vehicle, or boat you
rent or borrow).
Part 2, Paragraph 1 of the umbrella policy provides that "you"
and "your" refer to "the Named Insured in Declarations item 1 of
the Declarations and spouse who lives in the same home." The
named insured on the umbrella policy is Timothy P. Heim. Part 3,
Paragraph A of that policy provides that when an accident is
"covered by both a primary insurance policy and this policy . . .
[and] an insured is responsible for that harm or damage, we will
pay the insured for the part of the loss that exceeds the primary
limit."
Plaintiffs and Tartamosa argue that the Appellate Division properly applied the broad definition of "permissive user" followed in Matits, supra, 33 N.J. 488, and its progeny because this Court has consistently deemed drivers "permissive users" even when the person giving permission to the driver was not a "named insured" as required by the insurance policy.
The Matits Court held that once a person is given permission to use a vehicle, "any subsequent use short of theft or the like while it remains in his possession, though not within the contemplation of the parties, is a permissive use within the
terms of a standard omnibus clause in an automobile liability
insurance policy." Matits, supra, 33 N.J. at 496-97.
In Matits, the husband of a named insured allowed his
neighbor to borrow his wife's vehicle to visit her mother. Id.
at 490-91. The insurance policy covered any person using the
vehicle with the "permission" of either the named insured or her
husband. Id. at 492. After briefly visiting her mother, the
neighbor drove out of her way to a restaurant in Paterson. Id.
at 491. After consuming a few highballs, she took several trips
between that restaurant and a bar in Paterson. Ibid. On her way
home, she was involved in an auto accident. Ibid. The trial
court deemed the neighbor "an additional insured" under the
policy. Id. at 492. The Appellate Division and this Court
affirmed. Id. at 492, 497.
In adopting the initial permission rule, this Court reasoned
that once a person obtains permission to drive a vehicle, the
driver is an additional insured under a typical omnibus clause
for the duration of the driver's use of the car. Id. at 496-97.
That rule applies to any deviation from the initial scope of
permitted use, so long as the subsequent use does not constitute
theft or a similar offense. Ibid. The Matits holding promoted
the public policy of "`collectibility of damages wrongfully
inflicted in the operation of motor vehicles.'" Id. at 495
(quoting Rikowski v. Fidelity & Cas. Co.,
117 N.J.L. 407, 410
(E. & A. 1937)); see also Motor Club of Am. Ins. Co. v. Phillips,
66 N.J. 277, 292 (1974) (emphasizing state objective to provide
for "adequate indemnification of innocent automobile accident
victims"). The Matits Court also concluded that because
liability insurance policies are drafted by insurers, they should
be construed liberally in favor of insureds. Matits, supra, 33
N.J. at 495.
In Small v. Schuncke,
42 N.J. 407 (1964), this Court dealt
more directly with an insured who had not given express
permission to the person who was involved in the accident. In
that case, the insured was hospitalized. Id. at 410. He asked
his nephew to use the insured's car to run errands for the
insured. Ibid. They did not discuss any other use of the car by
the nephew. Ibid.
The nephew drove to New York with a friend. Ibid. While
the friend was driving with the nephew's permission, he was
involved in an accident. Ibid. The Court held that the policy
covered the accident, even though (1) the nephew did not have
explicit permission to use the car for personal errands; and (2)
the nephew's friend did not have the owner's express permission
to drive the car. Id. at 415.
Odolecki v. Hartford Accident & Indemnity Co.,
55 N.J. 542
(1970), like Small, involved a person who received permission to
drive a car from a person other than the named insured. The
standard omnibus clause of the policy in that case covered "the
named insured, her spouse, and `any person while using the
automobile [. . .] provided the actual use of the automobile is
by the named insured or such spouse or with the permission of
either.'" Id. at 544. The insured permitted her son to use her
car while he was home from college during the summer but told him
not to allow anyone else to drive the vehicle. Ibid. When the
insured's son allowed the plaintiff to drive the car, the
plaintiff was involved in an accident. Ibid.
Odolecki held that the plaintiff was an additional insured
under the omnibus clause of the policy. Id. at 550. The Court
reiterated the initial permission rule of Matits, supra, 33 N.J.
at 495, and the policy of ensuring that innocent victims of
automobile accidents have insurance coverage. Odolecki, supra,
55 N.J. at 546. The distinction between an unintended use by an
otherwise-permitted user, as in Matits, and such use by an
unpermitted user, as in Odolecki, was of no consequence because
such a distinction would lead to unnecessary litigation to
determine how far beyond the intended use a driver is permitted
to use a vehicle. Id. at 549-50.
A more indirect illustration of "permissive" use is found in
Motor Club Fire & Casualty Co. v. New Jersey Manufacturers
Insurance Co.,
73 N.J. 425 (1977). In that case, the insured was
driving her car, with her neighbor and her neighbor's son as
passengers. Id. at 428-29. When the insured became lost, the
neighbor's son forced the insured from behind the wheel, took
control of the car, and caused an accident. Id. at 429. The
omnibus clause in the insured's policy limited coverage to
injuries that occurred while the driver was using the vehicle
within the scope of the insured's permission. Id. at 430, 436.
The omnibus clause was invalidated because it was
inconsistent with N.J.S.A. 39:6-46 (repealed 1979), which
controlled. Motor Club, supra, 73 N.J. at 434-36. The statute
provided that auto insurance policies must cover the named
insured and
any other person using or responsible for the
use of any [covered] motor vehicle with the
express or implied consent of the insured,
against loss from the liability imposed upon
the insured or other person by law, for
injury to or the death of a person . . .
growing out of the maintenance, use or
operation of the motor vehicle.
[N.J.S.A. 39:6-46(a) (repealed 1979).]
The Court held that the statute's reference to the insured's
"express or implied consent" was clearer and broader than the
policy, which required the insured's "permission." Motor Club,
supra, 73 N.J. at 434. Under the initial permission rule, the
insurer was required to provide coverage because the neighbor's
son's initial use of the vehicle as a passenger was consensual
and his actions did not constitute "theft or the like." Id. at
438-39. Thus, Motor Club is an illustration of a broad
definition of "initial permission" in the context of automobile
liability insurance.
In Verriest v. INA Underwriters Insurance Co.,
142 N.J. 401
(1995), the Court held that an insured's implicit grant of
permission to a relative to make repairs to the insured's vehicle
was sufficient to render that relative a permissive user. Id. at
415. The Verriest Court held that by giving his car keys to his
relative and watching him repair the car, the insured had given
his relative permission to use the car. Id. at 412. The Court
acknowledged that the insured had not intended for his relative
to drive the vehicle on a public highway, but because the use was
not "theft or the like," it was permissive use under the initial
permission rule. Id. at 414-15.
The controlling principle to be extracted from the foregoing
cases is that we have a public policy of protecting "innocent
victims" of automobile accidents by broadly interpreting both (1)
which users are "permissive users," and (2) which actions of
those users should be covered by the insured's policy. Absent
statutory or policy language stating otherwise, the same public
policy should prevail irrespective of whether a primary
automobile policy or an umbrella policy is involved.
Notwithstanding the well established initial permission rule
for primary automobile policies, GAI maintains that the initial
permission rule should not be applied to umbrella policies
because those policies are different and the primary policy is
mandated by law. GAI relies on Weitz v. Allstate Insurance Co.,
273 N.J. Super. 548, 550 (App. Div. 1994), to support its
position.
In Weitz, the Appellate Division held that the wife of an
umbrella policy holder could not recover under that policy
because the plain language of the policy excluded her from
coverage. Id. at 549-50, 552. There, the wife sued her husband
for injuries that she had suffered in a motor vehicle accident,
alleging that her injuries had been caused by his negligence.
Id. at 549. The plaintiff also sought a declaratory judgment
ordering Allstate to cover her husband under his umbrella policy
for any damages awarded for her injuries in excess of his
automobile insurance coverage. Ibid. GAI contends that the
Weitz holding represents a principle of strict construction of
umbrella policies.
Weitz is distinguishable from the present case for two
reasons: (1) an express exclusion under the insurance policy was
controlling, and (2) the driver's permission to operate the
vehicle was not at issue. The umbrella policy provided that
"`this policy will not apply . . . to personal injury to an
insured.'" Id. at 549 (alteration in original). The wife was an
insured under the policy. Ibid. Thus, her claim for coverage
was rejected, not because of the initial permission rule, but
because of the policy's express exclusion. Id. at 552. No novel
legal principle was implicated.
Similarly, Stiefel v. Bayly, Martin & Fay of Connecticut,
Inc.,
242 N.J. Super. 643 (App. Div. 1990), does not support
GAI's position. There, the Appellate Division held that the
umbrella policy in question did not provide excess underinsured
coverage to the plaintiff. Id. at 644, 654. The issue there was
the nature of coverage provided by the various policies rather
than whether the driver had permission to drive the vehicle. Id.
at 644-46.
We are unable to discern any principled distinction for not
applying the permissive user rule to umbrella policies. The fact
that primary automobile coverage is mandatory and umbrella
policies are optional, changes neither the principles of
interpreting insurance policies nor the public policy which
undergirds the initial permission rule.
The public policy at the root of the initial permission rule
is to ensure the "`collectibility of damages wrongfully inflicted
in the operation of motor vehicles.'" Matits, supra, 33 N.J. at
495 (quoting Rikowski, supra, 117 N.J.L. at 410); see also Motor
Club, supra, 66 N.J. at 292 (promoting provision of "adequate
indemnification of innocent automobile accident victims"); cf.
Doto v. Russo,
140 N.J. 544, 553 (1995) (explaining policy of
broadly protecting public from automobile accidents in context of
underinsured motorist statute). The same public policy of
ensuring collectibility of damages caused to innocent victims who
are involved in automobile accidents is advanced by applying the
permissive user rule to umbrella policies. The initial
permission rule is not designed to protect the liability risks of
the insureds because they were not exposed in any of the reported
initial permission decisions. Therefore, the absence of any risk
exposure is not a valid reason to deny application of the rule to
umbrella policies.
The fact that neither Timothy nor Barbara gave Tartamosa
permission to use the Mustang, as opposed to giving him limited
permission that he then exceeded, does not prevent application of
the permissive user rule. "Once an owner [of an automobile]
voluntarily hands over the keys to his [or her] car, the extent
of permission he [or she] actually grants is as irrelevant in the
one case as in the other." Odolecki, supra, 55 N.J. at 550. "In
other words, a liability insurance contract is for the benefit of
the public as well as for the benefit of the named or additional
insured." Id. at 549.
Unless umbrella policies clearly and unambiguously state
that permission to use the covered vehicle can only come from a
named insured and that there is no coverage for any other user, a
named insured's reasonable expectation may be otherwise. It is
well settled that coverage provisions should be construed broadly
and liberally, in favor of the insured. Sandler v. New Jersey
Realty Title Ins. Co.,
36 N.J. 471, 479 (1962); Franklin Mut.
Ins. Co. v. Security Indem. Ins. Co.,
275 N.J. Super. 335, 340
(App. Div.), certif. denied,
139 N.J. 185 (1994); Sinopoli v.
North River Ins. Co.,
244 N.J. Super. 245, 250 (App. Div. 1990),
certif. denied,
127 N.J. 325 (1991). Ambiguities should be
resolved in favor of the insured. Mazzilli v. Accident & Cas.
Ins. Co.,
35 N.J. 1, 7 (1961); Franklin, supra, 275 N.J. Super.
at 340. Additionally, insurance policyholders are entitled to
"`the broad measure of protection necessary to fulfill their
reasonable expectations.'" Franklin, supra, 275 N.J. Super. at
340 (quoting Kievit v. Loyal Protective Life Ins. Co.,
34 N.J. 475, 482 (1961)); see also Salem Group v. Oliver,
128 N.J. 1, 4
(1992). The insured's reasonable expectations should govern "to
the extent the policy's language allows." Salem Group, supra,
128 N.J. at 4.
If, for example, the Heims had a second child living in a
different residence and if Michael were to give that sibling the
same permission to drive the Mustang that he gave Tartamosa, one
would reasonably conclude that if that child were involved in an
accident under the same circumstances, the named insureds would
expect that either of their children would be covered by the
umbrella policy. This illustrates a substantial reason why the
Heims's reasonable expectation was that the initial permission
rule would be applied.
Finally, we reject GAI's contention that the disparity
between the Heims's $114 premium for their umbrella policy and
their $380 premium for their primary liability coverage
demonstrates that they did not reasonably expect that their
umbrella policy would cover an accident such as the one that
occurred in the present case.
The lower premium charged for the umbrella policy is a
reflection of underwriting considerations based on the assumption
that claims under that policy will usually arise less frequently
than will claims under a primary liability policy because the
primary policy will cover most claims. See 8C John Alan Appleman
& Jean Appleman, Insurance Law and Practice § 5071.65, at 107
(1981) (stating that umbrella polices cover "uncommon, but
possible, enormous verdicts . . . at a small premium").
We affirm the judgment of the Appellate Division holding
that Tartamosa is a permissive user under the Heims's umbrella
policy. The matter is remanded to the Law Division for
disposition of the personal injury complaints.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, GARIBALDI and
STEIN join in JUSTICE COLEMAN'S opinion. JUSTICE O'HERN filed a
separate dissenting opinion in which JUSTICE POLLOCK joins.
SUPREME COURT OF NEW JERSEY
A-
124 September Term 1996
SUSAN MARTUSUS, Administratrix ad
Prosequendum, and SUSAN AND ERNEST
MARTUSUS, Co-Administrators of the
Estate of David E. Martusus,
Deceased,
Plaintiffs-Respondents,
v.
THOMAS J. TARTAMOSA,
Defendant-Respondent,
and
BARBARA L. HEIM, STEPHEN P. SERALE,
RENEE C. LIBERONI, JOHN DOES I and
II (fictitious names of persons
more fully described herein),
jointly, severally and/or in the
alternative,
Defendants,
and
GENERAL ACCIDENT INSURANCE COMPANY,
Defendant-Appellant.
RENEE C. LIBERONI,
Plaintiff,
v.
THOMAS J. TARTAMOSA,
Defendant-Respondent,
and
TIMOTHY HEIM, BARBARA L. HEIM,
STEPHEN SERALE, JOHN DOE I to V,
John Doe Partnerships I to V, John Doe
Corporations I to V, individually,
jointly, severally and/or in the
alternative,
Defendants.
STEPHEN SERALE,
Plaintiff,
v.
THOMAS J. TARTAMOSA,
Defendant-Respondent,
and
TIMOTHY HEIM, BARBARA L. HEIM,
JOHN DOE I to V, John Doe Partnerships
I to V, John Doe Corporations I to V,
individually, jointly, severally and/or
in the alternative,
Defendants.
O'HERN, J., dissenting.
The majority creates a paradox in this case. Even though an
umbrella policy is anything but an automobile policy, the
majority treats it as though it were. The majority adopted the
reasoning of the Appellate Division in its unreported decision,
"that there is no difference in the application of the permissive
user rule under a primary or excess policy of automobile
liability insurance. The rule of Matits v. Nationwide Mutual
Insurance Company,
33 N.J. 488 (1960), and its progeny is equally
applicable to an excess policy."
This reasoning is understandable but unsound. To begin
with, umbrella policies are a special form of excess coverage.
"Umbrella policies serve an important function in the industry.
In this day of uncommon, but possible, enormous verdicts, they
pick up this exceptional hazard at a small premium. However,
because of the misunderstanding of the courts as to the nature of
such coverages, they have been held to fall within the definition
of automobile liability insurance." Mass v. U.S. Fidelity &
Guar. Co.,
610 A.2d 1185, 1190 (Conn. 1992) (quoting 8C J. & J.
Appleman, Insurance Law and Practice, § 5071.65 (1981)).
In Doto v. Russo,
140 N.J. 544 (1995), the Court held that
if an umbrella carrier held out to a policy holder that there
would be underinsured motorist coverage under the policy, that
representation would have to be met. In doing so, however, the
Court clearly acknowledged that the purpose of umbrella coverage
"is fundamentally different from a primary [automobile] liability
policy." 140 N.J. at 552. The Court emphasized that
an "umbrella policy," clearly intended as
excess insurance to protect against
catastrophic judgments and issued as
supplementary insurance to existing primary
policies themselves sufficient to meet the
requirements of the law, is neither an
automobile liability nor motor vehicle
liability policy within the scope of the
uninsured motorist statute, even though one
of the primary policies may itself insure
automobiles.
[Ibid. (citing Trinity Universal Ins. Co. v.
Metzger,
360 So.2d 960, 962 (Ala. 1978)).]
"[A]ny other interpretation would distort the actual purpose of
the umbrella policy." Id. at 553 (quoting Matarosso v.
Continental Cas. Co.,
440 N.Y.S 2d 40, 41 (App. Div. 1981),
aff'd,
436 N.E.2d 1305 (N.Y. 1982)).
Umbrella policies provide:
a needed form of coverage which picks up,
above the limits of all other contracts, such
as automobile and homeowners coverages, to
give the security and peace of mind so
necessary today where jury verdicts, or court
awards, may be very substantial, to discharge
the unexpected, but potentially bankrupting,
judgment. The premium is comparatively
small, for the size of the risk, so that the
company cannot be expected to prorate with
other excess coverages; and public policy
should not demand that this be done.
[8A Appleman, supra, § 4906 at 348.]
That same reasoning should apply to coverage issues. Thus,
while "an automobile policy must be construed, if possible, so as
not to defeat a claim to indemnity," 13 Appleman, supra, § 7483
at 573, that public policy does not extend with equal force to
umbrella policies. In Motor Club Fire & Casualty Company v. New
Jersey Manufacturers Insurance Company,
73 N.J. 425, cert.
denied,
434 U.S. 923,
98 S. Ct. 402,
54 L.Ed.2d 281 (1977),
Judge Carton, when temporarily assigned, explained that in
interpreting automobile insurance policies the Court had in
Matits, supra, adopted "the broadest and most liberal approach,
known as the `initial permission rule.'" 73 N.J. at 432. In
interpreting the omnibus clauses of automobile liability
insurance policies, they must be read "in light of the settled
legislative policy designed to provide financial compensation to
those who are wrongfully injured in motor vehicle accidents."
Id. at 433.See footnote 1 That interpretation is plainly justified on the
basis of the statutory directives that governed the language of
automobile insurance policies. That provision, N.J.S.A. 39:6-46(a) (repealed 1979), required that an automobile policy shall
"insure the insured named therein and any other person using or
responsible for the use of any such motor vehicle with the
express or implied consent of the insured." Id. at 431; see also
Selected Risks Ins. Co. v. Zullo,
48 N.J. 362 (1966) (holding
automobile liability policies restricting omnibus coverage would
be deemed amended to contain omnibus coverage no less broad than
what statute required).
The legislative policies that sustain such a broad
interpretation of compulsory automobile liability insurance are
simply inapplicable in this context. The umbrella policy is
designed to protect the policyholder in the event of a rainy day.
No rain is falling on this policyholder because there was no
agency involved in the use of the vehicle. The case against the
policyholder has been dismissed. It may be that a claim can
validly be made under this umbrella policy but not on the
rationale advanced by the majority.
Justice Pollock joins in this opinion.
NO. A-124 SEPTEMBER TERM 1996
ON APPEAL FROM Appellate Division, Superior Court
ON CERTIFICATION TO
SUSAN MARTUSUS, etc., et al.,
Plaintiffs-Respondents,
v.
THOMAS J. TARTAMOSA,
Defendant-Respondent,
and
BARBARA L. HEIM, et al.,
Defendants,
and
GENERAL ACCIDENT INSURANCE COMPANY,
Defendant-Appellant.
(and other related matters)
DECIDED July 9, 1997
Chief Justice Poritz PRESIDING
OPINION BY Justice Coleman
CONCURRING OPINION BY
DISSENTING OPINION BY Justice O'Hern
Footnote: 1In his dissent, Justice Clifford described the Motor Club opinion as reaching "what surely must be the outer limits of the `hell or high water doctrine'" of coverage. 73 N.J. at 439 (quoting Small v. Schunke, 42 N.J. 407, 416 (1964) (Hall, J., concurring)).