METLIFE AUTO AND HOME,
Plaintiff-Respondent,
v.
DONALD PALMER,
Defendant,
and
TRAVELERS PROPERTY CASUALTY COMPANY,
Defendant-Appellant.
_____________________________________
Argued November 13, 2003 - Decided January 6, 2004
Before Judges King, Lintner and Lisa.
On appeal from the Superior Court of New Jersey, Law Division, Cape May
County,
L-160-01.
Edward H. Keiper argued the cause for appellant (Alan P. Bruce, on the
brief).
Michael A. Katz argued the cause for respondent (Crawshaw, Mayfield, Turner, O'Mara, Donnelly
& McBride, attorneys; Mr. Katz, of counsel and on the brief).
The opinion of the court was delivered by
LINTNER, J.A.D.
The issue to be decided in this appeal, not previously addressed in this
State, is whether an insurance carrier providing specialty insurance for an antique automobile
can avoid paying pro rata contribution under the anti-stacking provision, N.J.S.A. 17:28-1.1c, by
excluding uninsured motorist (UM) coverage for injuries sustained by its insured while occupying
an owned vehicle not insured by the antique automobile policy. We hold that
antique automobile insurance policies that limit the use of the insured vehicle and
are offered at a significantly reduced premium are valid and not subject to
the anti-stacking provision, N.J.S.A. 17:28-1.1c. Therefore, such policies may include other insurance clauses
that exclude participation in pro rata apportionment with other available insurance. The underlying
facts are undisputed.
Defendant Travelers Property Casualty Company (Travelers) paid UM benefits totaling $319,500 to its
insured, Donald Palmer, for injuries he sustained while occupying a Ford van it
insured. At the time of the accident, plaintiff, MetLife Auto and Home (MetLife),
administered an Antique Automobile Insurance Policy underwritten by St. Paul Mercury Insurance Company
(St. Paul) issued to Donald's father, Robert, insuring Robert's 1957 Ford Thunderbird at
a significantly lower cost than a standard automobile liability policy.
See footnote 1 The policy provided
bodily injury and property damage liability and UM limits of $300,000 for each
accident. The declaration page names Robert Palmer as the named insured and the
renewal application designates the drivers as Robert Palmer and JoAnn Palmer. Travelers notified
MetLife that it was seeking MetLife's participation in contribution to the extent of
MetLife's pro rata share and amount equal to $73,730.80.
The liability coverage section of the MetLife policy defines "insured" as the named
insured, and "any 'family member' for the ownership maintenance or use of 'your
covered auto.'" Covered auto is defined as "[a]ny 'antique vehicle', 'classic vehicle' or
'special interest vehicle' shown in the Declarations." The section affording UM coverage provides:
A. We will pay compensatory damages which an "insured" is legally entitled to recover
from the owner or operator of an "uninsured motor vehicle" because of "bodily
injury":
1. Sustained by an "insured"; and
2. Caused by an accident.
. . . .
B. "Insured" as used in this Part means:
1. Any person "occupying" "your covered auto."
. . . .
EXCLUSIONS
A. We do not provide Uninsured Motorist Coverage for "bodily injury" sustained by any
person:
While "occupying," or when struck by, any motor vehicle owned by you or
any "family member" which is not insured for this coverage under this policy.
MetLife declined to participate in contribution asserting that it did not have to
participate in pro rata contribution because Donald Palmer was operating an automobile other
than his father's Thunderbird.
MetLife filed a declaratory judgment complaint seeking to enforce its exclusion and Travelers
responded with an answer and counterclaim demanding contribution from MetLife of its proportionate
share, under
N.J.S.A. 17:28-1.1c. Both parties filed cross-motions for summary judgment, and in
a memorandum of decision dated November 13, 2002, the motion judge found the
exclusion in MetLife's policy valid, relying on the holding reflected in an unreported
December 2000 Law Division decision in a similar case. Travelers moved for reconsideration,
citing Rider Insurance Co. v. First Trenton Cos.,
354 N.J. Super. 491 (App.
Div. 2002). On January 10, 2003, the judge denied Travelers' motion, finding that
the decision in Rider was not dispositive of the issue.
On appeal, Travelers contends that the MetLife exclusion is invalid because it (1)
runs counter to the reasonable expectation of the parties to the MetLife policy;
and (2) violates the provisions of N.J.S.A. 17:28-1.1, which mandates the inclusion of
UM coverage in every motor vehicle policy and establishes a statutory apportionment scheme
between carriers. MetLife counters these arguments, essentially claiming that the policy language does
not convey a reasonable expectation of coverage to Donald Palmer, is not adverse
to the applicable statutory provisions, and was approved by the Commissioner of Insurance.
Following appellate argument we granted MetLife's motion to supplement the record with a
letter dated October 17, 1990, from the Commissioner of Insurance approving, effective January
1, 1991, the MetLife policy language. We examine these issues seriatim.
Generally, "[u]nambiguous insurance contracts are enforced in accordance with the reasonable expectations of
the insured." Stiefel v. Bayly, Martin & Fay of Conn., Inc.,
242 N.J.
Super. 643, 651 (App. Div. 1990). The "fundamental principle of insurance law is
to fulfill the objectively reasonable expectations of the parties" to the insurance contract.
Werner Indus., Inc. v. First State Ins. Co.,
112 N.J. 30, 35 (1988);
see also Gibson v. Callaghan,
158 N.J. 662, 671 (1999); American Motorists Ins.
Co. v. L-C-A Sales Co.,
155 N.J. 29, 41 (1998); Aubrey v. Harleysville
Ins. Cos.,
140 N.J. 397, 404 (1995); DiOrio v. New Jersey Mfrs. Ins.
Co.,
79 N.J. 257, 269 (1979). Courts will enforce restrictive terms of a
policy so long as they are (1) consistent with the objectively reasonable expectations
of the parties, DiOrio, supra, 79 N.J. at 269, and (2) "not in
conflict with the provisions of the statute or its underlying policy," Brown v.
Selective Insurance Co.,
311 N.J. Super. 210, 213 (App. Div. 1998). Here, the
policy language was unambiguous, clearly limiting UM coverage to injuries sustained by occupants
of the 1957 Thunderbird and excluding injuries sustained while occupying another motor vehicle
owned by the named insured or a family member not covered by the
policy.
We turn our attention to Travelers' contention that the policy language runs afoul
of N.J.S.A. 17:28-1.1. Travelers places heavy reliance on our recent decision in Rider,
supra,
354 N.J. Super. 491. The pertinent provisions of N.J.S.A. 17:28-1.1 are:
a. [N]o motor vehicle liability policy or renewal of such policy of insurance,
including a standard liability policy for an automobile as defined in section 2
of P.L.1972, c. 70 (C.39:6A-2), insuring against loss resulting from liability imposed by
law for bodily injury or death, sustained by any person arising out of
the ownership, maintenance or use of a motor vehicle, shall be issued in
this State with respect to any motor vehicle registered or principally garaged in
this State unless it includes coverage . . . as follows:
. . . .
(2) . . . for payment of all or part of the sums
which the insured or his legal representative shall be legally entitled to recover
as damages from the operator or owner of an uninsured motor vehicle, or
hit and run motor vehicle, as defined in section 18 of P.L.1952, c.
174 (C.39:6-78), because of bodily injury . . . sustained by the insured,
caused by accident and arising out of the ownership, maintenance, operation or use
of such uninsured or hit and run motor vehicle anywhere within the United
States or Canada . . . .
All motor vehicle liability policies . . . shall also include coverage for the payment
of all or part of the sums which persons insured thereunder shall be
legally entitled to recover as damages from owners or operators of uninsured motor
vehicles . . . because of injury . . . .
. . . .
c. Uninsured and underinsured motorist coverage provided for in this section shall not
be increased by stacking the limits of coverage of multiple motor vehicles covered
under the same policy of insurance nor shall these coverages be increased by
stacking the limits of coverage of multiple policies available to the insured. If
the insured had uninsured motorist coverage available under more than one policy, any
recovery shall not exceed the higher of the applicable limits of the respective
coverages and the recovery shall be prorated between the applicable coverages as the
limits of each coverage bear to the total of the limits.
d. Uninsured and underinsured motorist coverage shall be subject to the policy terms,
conditions and exclusions approved by the Commissioner of Banking and Insurance, including, but
not limited to, unauthorized settlements, nonduplication of coverage, subrogation and arbitration. (Emphasis added.)
In Rider, Roy Jones was injured in an accident with an unidentified hit-and-run
motor vehicle while operating his motorcycle insured by Rider Insurance Company. Rider, supra,
354 N.J. Super. at 494. Rider's policy provided UM coverage in the amount
of $15,000 per person and $30,000 per accident. Ibid. Jones also owned a
1
980 Chevrolet and a 1983 Cadillac insured by the New Jersey Citizens Reciprocal
Exchange providing $100,000/$300,000 in UM coverage. Id. at 494-95. At the time of
Jones's accident he was living with his mother and was insured as a
named driver under his mother's automobile policy with First Trenton, providing $50,000 per
person and $100,000 per accident in UM coverage. Id. at 495. The First
Trenton policy contained an exclusion stating that it did "not cover bodily injury
suffered or property damage incurred by any insured other than you while occupying
any vehicle insured by another motor vehicle policy in which that insured was
a named insured or relative." Ibid.
In affirming the Law Division decision requiring First Trenton to contribute its pro
rata share under N.J.S.A. 17:28-1.1, we noted that there was no warning on
First Trenton's declaration page naming Jones as a driver that would lead him
to conclude that he would be ineligible for UM benefits under the policy
and that his reasonable expectation of coverage could not be contradicted by the
policy's boilerplate without a clear warning on the declaration page. Rider, supra, 354
N.J. Super. at 498. We went on to examine the exclusion in light
of the provisions of N.J.S.A. 17:28-1.1, pointing out that First Trenton's exclusion conflicted
with section a. of N.J.S.A. 17:28-1.1, which provides that "[a]ll motor vehicle liability
policies, except basic automobile insurance policies, shall also include coverage for the payment
of all or part of the sums which persons insured thereunder shall be
legally entitled to recover as damages from owners or operators of uninsured motor
vehicles . . . because of injury . . . ." Id. at
500. We concluded that "[i]f the legislature wanted to limit the number of
policies required to provide pro rata contribution or allow standard policies to eliminate
UM coverage in certain situations, it could easily have done so," rather than
provide for pro rata contribution from policies providing available coverage in section c.
Ibid.
Travelers contends that our holding in Rider is controlling as is the holding
in Motor Club of America Insurance Co. v. Phillips,
66 N.J. 277, 294
(1974), in which the Court held that other insurance escape clauses are invalid
as repugnant to N.J.S.A. 17:28-1.1. See also Beek v. Ohio Cas. Ins. Co.,
135 N.J. Super. 1, 4-5 (App. Div. 1975), aff'd,
73 N.J. 185 (1977).
It maintains that MetLife's exclusion likewise runs counter to the purpose served by
the uninsured motorist statute.
Initially, we point out that the facts in Rider are distinguishable from the
facts before us. Unlike the claimant in Rider, Donald Palmer is not a
named insured on the declaration page nor is he designated as a driver
of the vehicle insured. Moreover, the policy is not a standard automobile policy
but a specialty policy providing coverage for an antique automobile, twenty-five years old
or older, at a significantly lower premium. Coverage is conditioned on a Limitation
of Use provision, which permits MetLife to disclaim if the vehicle is used
for normal driving or races; if it has been altered from its original
condition; if it is driven in excess of 2500 miles per year; or
if it is used for business or commercial purposes. According to the insurance
agent specializing in antique motor car insurance, the policy was issued conditioned upon
the purchaser maintaining an independent "standard or regular motor vehicle insurance policy as
well, to cover motor vehicles that are intended for regular, rather than limited,
use." Unlike the circumstances in Rider, there is no evidence establishing a reasonable
expectation of coverage on behalf of the claimant.
N.J.S.A. 17:28-1.1 serves two legislative purposes. Shaw v. City of Jersey City,
174 N.J. 567, 571 (2002). "It is designed to 'provide maximum remedial protection to
the innocent victims of financially irresponsible motorists' and to 'reduce the drain on
the financially-troubled Unsatisfied Claim and Judgment Fund.'" Ibid. (citations omitted). Here, the exclusion
sought to be validated essentially bars UM coverage for injuries sustained by an
insured or family member while occupying an owned vehicle other than the antique
vehicle covered by the policy; it does not prevent the claimant from obtaining
the maximum remedial protection nor does it place any additional strain on the
Unsatisfied Claim and Judgment Fund. In other words, it simply relies on the
coverage expressly afforded by Travelers in the standard automobile policy issued to its
insured and relieves MetLife from participating in pro rata contribution.
Our determination on this appeal is limited to Travelers' entitlement to a pro
rata contribution. Donald Palmer is not seeking coverage from the MetLife policy. Further,
issuance of the policy was conditioned on the insured maintaining an independent standard
insurance policy covering motor vehicles that are intended for regular, rather than limited,
use. Therefore, we need not address the validity of the provisions of the
MetLife policy, which would deny Donald Palmer UM coverage in the unlikely situation
where he is injured by an uninsured vehicle while he is not occupying
the Thunderbird and there is no other UM coverage available. (For example if
he were struck as a pedestrian by an uninsured vehicle and the 1957
Thunderbird is the only vehicle in the household.)
Travelers contends that the other insurance exclusion in the MetLife policy is contrary
to the legislative intent expressed in the provisions of N.J.S.A. 17:28-1.1c, which mandates
pro-rating of coverage between "applicable coverages," as those limits bear to the highest
applicable limits of other UM coverage available to the insured. However, we conclude
that the MetLife policy is not "applicable coverage" as envisioned by N.J.S.A. 17:28-1.1c.
Not only does MetLife's policy specifically exclude coverage when an insured is occupying
a vehicle owned by the insured or a family member who is not
insured by its policy, but it conditions coverage on continued maintenance of a
standard policy covering other vehicles used by the insured on a regular basis.
Several of our sister States have confronted the same issue with varying results.
Florida, Louisiana, New Hampshire, and Pennsylvania have enforced the restrictive language in similar
antique automobile policies as against the named insured seeking to recover UM benefits.
Martin v. St. Paul Fire & Marine Ins. Co.,
670 So.2d 997
(Fla. Dist. Ct. App. 1996); Sanner v. Zurich-Am. Ins. Co.,
657 So.2d 252 (La. Ct. App.), writ denied
660 So.2d 852 (La. 1995); Turner
v. St. Paul Prop. & Liab. Ins. Co.,
676 A.2d 109 (N.H. 1996);
St. Paul Mercury Ins. Co. v. Corbett,
630 A.2d 28 (Pa. Super. Ct.
1993). Minnesota, on the other hand, has found that UM coverage is provided
to an insured for accidents not involving the antique auto. State Farm Mut.
Auto. Ins. Co. v. Zurich Ins. Co.,
439 N.W.2d 751, 754 (Minn. Ct.
App. 1989). However, the Minnesota court permitted the antique automobile policy to enjoy
favorable treatment when apportioning contribution with a standard automobile policy. Ibid. By contrast,
Wisconsin has refused to enforce similar restrictions in an antique automobile policy, holding
that they violate statutory provisions permitting stacking of UM coverage. St. Paul Mercury
Ins. Co. v. Zastrow,
480 N.W.2d 8 (Wis. 1992).
See footnote 2
As we noted in
Rider, the intent of the Legislature was to
require pro rata contribution amongst carriers providing "standard policies." Rider, supra, 354 N.J.
Super. at 500. The states which have validated the restrictive provisions of antique
automobile insurance have essentially agreed that "a specialty or limited use policy such
as the antique automobile policy" is "distinguish[able] from an ordinary policy covering a
personal use automobile" because the coverage is limited to activities associated with antique
cars, a specific mileage allotment and a corresponding premium reduction. Corbett, supra, 630
A.2d. at 32. These restrictions do not contradict the public policy of this
State as our Legislature has provided a special classification for such vehicles. A
motor vehicle, which is "at least twenty-five years old . . . owned
as a collector's item and used solely for exhibition and educational purposes by
the owner" is considered to be an "historic motor vehicle." N.J.S.A. 39:3-27.3. Owners
of "historic motor vehicles" may register their vehicles at a reduced registration fee
and obtain specially designated historic license plates. N.J.S.A. 39:3-27.4. Thus, like the restricted
insurance coverage, these statutes recognize that the limited use of antique automobiles should
not subject them to the same costs associated with standard motor vehicles. Further,
they express the legislative desire to encourage the maintenance of these vehicles for
their educational and historical value.
Finally, although the Commissioner has "no power to approve a provision violative of
the statutory intent," where "the question of statutory intent remains open" the Commissioner's
approval is evidential. Motor Club, supra, 66 N.J. at 286. In such situations,
a reviewing court should typically defer to an administrative agency's expertise. Clowes v.
Terminix Int'l, Inc.,
109 N.J. 575, 587 (1988). Accordingly, we are satisfied that
the MetLife policy provision excluding it from participating in pro rata contribution does
not offend the UM statutory purpose or intent and is not repugnant to
N.J.S.A. 17:28-1.1.
Affirmed.
Footnote: 1
The renewal application indicates that the premium charge for the policy was $279.60.
Footnote: 2
Zastrow has since been superceded by Wis. Stat. § 632.32(5)(f)-(5)(j), which validates anti-stacking
and reducing clauses to "avoid the duplication of benefits permitted under prior case
law," and authorizes the exclusion of uninsured motorist coverage under certain circumstances. Blazekovic
v. City of Milwaukee,
610 N.W.2d 467, 471-72 (Wis. 2000).