Vanessa Rivera v. Elmer F. McCray, III, and New Jersey

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2337-14T1
VANESSA RIVERA,
APPROVED FOR PUBLICATION
Plaintiff-Appellant,
May 2, 2016
v.
APPELLATE DIVISION
ELMER F. McCRAY, III,
Defendant,
and
NEW JERSEY RE-INSURANCE COMPANY,
Defendant-Respondent.
___________________________________
Argued April 6, 2016 – Decided May 2, 2016
Before Judges Ostrer, Haas1 and Manahan.
On appeal from the Superior Court of New
Jersey, Law Division, Atlantic County,
Docket No. L-2796-13.
Melville D. Lide argued the cause for
appellant (Radano & Lide, attorneys; Mr.
Lide, on the brief).
Daniel J. Pomeroy argued the cause for
respondent (Pomeroy, Heller & Ley, LLC,
attorneys; Mr. Pomeroy and Karen E. Heller,
on the brief).
1
Judge Haas did not participate in oral argument. He joins the
opinion with consent of counsel. R. 2:13-2(b).
The opinion of the court was delivered by
OSTRER, J.A.D.
This appeal requires us to interpret an underinsured
motorist (UIM) coverage step-down provision in a personal
automobile insurance policy, issued by defendant New Jersey Re-
Insurance Company (NJM)2. The issue presented is whether a
"special policy," see N.J.S.A. 39:6A-3.3, which provides no UIM
coverage at all, provides "similar coverage" so as to trigger
the step-down provision and reduce UIM coverage to zero. Based
on the plain language of the NJM policy and well-established
principles of insurance contract interpretation, we conclude it
does not. We therefore reverse the trial court's order
dismissing plaintiff's claim to UIM coverage under the NJM
policy.
I.
The underlying facts are undisputed. On July 5, 2011,
defendant Elmer F. McCray rear-ended plaintiff Vanessa Rivera
while she operated a vehicle owned by her mother, Janet Torres-
White, who was insured by NJM. Rivera was separately insured
under a special policy issued by National Continental Insurance
Company.
2
The policy form is used by the New Jersey Manufacturers
Insurance Group, of which NJ Re-Insurance Co. is a part.
2 A-2337-14T1
Rivera alleged she sustained significant and permanent
personal injuries. Rivera settled her negligence claim against
McCray for his policy's liability limit of $15,000. Rivera then
sought recourse to $85,000 of the $100,000 of UIM coverage
available under her mother's policy. Rivera's special policy
provided no UIM coverage whatsoever.
NJM denied Rivera's claim based on a step-down provision.
The provision applies to an insured who is not a named insured
under the NJM policy, but is a named insured under another
policy "providing similar coverage" that is less than the NJM
policy's UIM liability limit. The provision states that the
maximum liability limit for such an insured shall step down to
the liability limit "under any insurance providing coverage to
that insured as a named insured." The provision states:
LIMIT OF LIABILITY
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, but
is a family member, under this policy;
b. That insured is a named insured under one
or more other policies providing similar
coverage; and
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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.
[(Emphasis added).]
Rivera filed an amended complaint against NJM seeking a
declaratory judgment that she had recourse to UIM benefits under
the NJM policy. NJM denied coverage and interposed other
defenses. The parties then cross-moved for summary judgment on
the step-down issue, asserting opposing interpretations of what
constituted "similar coverage." NJM also argued, in the
alternative, that Rivera did not have recourse to the $85,000 of
UIM coverage because she was not a "family member" as defined in
the NJM policy, as she resided elsewhere.
The trial court concluded that Rivera had "similar
coverage" that triggered the step-down provision, which in turn
left her with zero UIM benefits because she had no benefits
under her own special policy. The court considered it illogical
that the step-down provision would reduce the coverage of a
person who had even a modicum of UIM coverage, but not the
coverage of a person who had no UIM coverage at all.
4 A-2337-14T1
Accordingly, the court denied Rivera's motion for partial
summary judgment and granted NJM's motion for summary judgment
dismissal. The court did not reach the issue of plaintiff's
residency.
II.
We exercise de novo review of the trial court's
interpretation of an insurance policy on a motion for summary
judgment. Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins.
Co. of Pittsburgh, 224 N.J. 189, 199 (2016). We are also bound
by well-established principles of insurance contract
interpretation, which the Supreme Court recently summarized:
"In attempting to discern the meaning of a
provision in an insurance contract, the
plain language is ordinarily the most direct
route." Chubb Custom Ins. Co. v. Prudential
Ins. Co. of Am., 195 N.J. 231, 238, 948 A.2d
1285 (2008). If the plain language of the
policy is unambiguous, we will "not 'engage
in a strained construction to support the
imposition of liability' or write a better
policy for the insured than the one
purchased." Ibid. (quoting Progressive Cas.
Ins. Co. v. Hurley, 166 N.J. 260, 273, 765
A.2d 195 (2001)).
When the provision at issue is subject
to more than one reasonable interpretation,
it is ambiguous, and the "court may look to
extrinsic evidence as an aid to
interpretation." Ibid. Only where there is
a genuine ambiguity, that is, "where the
phrasing of the policy is so confusing that
the average policyholder cannot make out the
boundaries of coverage," should the
reviewing court read the policy in favor of
5 A-2337-14T1
the insured. Progressive Cas. Ins. Co.,
supra, 166 N.J. at 274, 765 A.2d 195(quoting Weedo v. Stone-E-Brick, Inc., 81
N.J. 233, 247, 405 A.2d 788 (1979)). "When
construing an ambiguous clause in an
insurance policy, courts should consider
whether clearer draftsmanship by the insurer
'would have put the matter beyond reasonable
question.'" Ibid. (quoting Doto v. Russo,
140 N.J. 544, 547, 659 A.2d 1371 (1995)).
[Templo Fuente De Vida, supra, 224 N.J. at
200.]
Our courts have enforced UIM step-down provisions if
"expressed in clear and unambiguous language." Morrison v. Am.
Int'l Ins. Co. of Am., 381 N.J. Super. 532, 538 (App. Div.
2005). Step-down provisions are legitimate "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
certain business auto insurance policies). In particular, "a
step-down clause in an insurance policy can restrict the amount
of UIM coverage available to an individual who is not named in
that policy to the limit of UIM coverage that the individual may
recover under his or her own insurance policy." Id. at 413.
It is undisputed that Rivera is an "insured" under the NJM
policy because she was operating her mother's vehicle at the
time of the accident. NJM contends she is not entitled to UIM
6 A-2337-14T1
benefits under its policy, because she may recover zero UIM
benefits under her own policy. However, the language of the NJM
policy does not achieve that result.
The step-down provision at issue applies if all of the
following three conditions are met: (1) the "insured is not the
named insured, but is a family member, under this policy"; (2)
"[t]hat insured is a named insured under one or more other
policies providing similar coverage"; and (3) "[a]ll such other
policies have a limit of liability for similar coverage which is
less than the limit of liability for this coverage . . . ." As
for the first condition, Rivera is not the named insured under
the NJM policy, but we assume, for the purposes of our analysis,
that she is a family member. We note that NJM separately
challenges that status.
The second and third conditions establish separate
requirements. The second describes the nature of the insured's
other policy. The insured making the claim under the NJM policy
must be a named insured under the other policy, and that other
policy must "provid[e] similar coverage." The third condition
compares the limits of liability of the two policies: the other
policy must "have a limit of liability for similar coverage
which is less than the limit of liability for this coverage."
If the other policy's "similar coverage" is less than the
7 A-2337-14T1
coverage provided under the NJM policy, "then [NJM's] maximum
limit of liability for that insured . . . shall not exceed the
highest applicable limit of liability under any insurance
providing coverage to that insured as a named insured."
We conclude that the special policy does not provide
"similar coverage" because it provides no UIM coverage
whatsoever. The special policy, authorized by N.J.S.A. 39:6B-
1(c), and described in N.J.S.A. 39:6A-3.3, is available only to
certain Medicaid recipients of limited income. By law, a
special policy "shall not provide . . . underinsured motorist
coverage." N.J.S.A. 39:6A-3.3(c). The policy, sold to Rivera
for $360 a year, provides only limited first-party benefits for
emergency medical expenses, and a death benefit. N.J.S.A.
39:6A-3.3(b). It was designed to provide a mechanism for
drivers of severely limited economic means to comply with the
compulsory insurance law, instead of driving uninsured.
N.J.S.A. 39:6A-3.3(a).
Although the NJM policy does not define "coverage" or
"similar coverage," the term "coverage" is used in reference to
distinct categories of risk. See Delcampo v. Ins. Underwriting
Ass'n, 266 N.J. Super. 687, 700 (Law Div. 1993) ("[T]he term
'coverage' . . . connotes a distinct part of an insurance policy
providing . . . insurance as to a definite risk or risks coming
8 A-2337-14T1
within its terms. . . .") The policy refers to "liability
coverage," "personal injury protection coverage," "coverage for
damage to your auto," and "uninsured motorist coverage." Thus,
in the context of the step-down provision, we construe "similar
coverage" to mean "coverage similar to UIM coverage." See
Prather v. American Motorists Ins. Co., 2 N.J. 496, 502 (1949)
(an insurance contract must be "read and considered as a
whole.")
NJM conflates the second and third conditions. It argues
the step-down provision applies because Rivera "has her own
policy . . . on which she is the named insured that provides a
limit of liability 'for similar coverage' that is less than the
NJM UM/UIM limits of liability." We recognize that the third
condition is susceptible to two interpretations, one of which
favors NJM's position. Construing "similar coverage" to mean
"coverage similar to UIM coverage," one may contend that Rivera
has a policy with a zero "limit of liability for [UIM coverage]
which is less than the limit of liability" in the NJM policy.
Alternatively, one may contend Rivera has no limit of liability
for UIM coverage because she has no UIM coverage at all.
However, we need not resolve the ambiguity in the third
condition, inasmuch as Rivera does not satisfy the second
condition. In describing the other policy, the second condition
9 A-2337-14T1
requires that the other policy is "providing similar coverage."
The word "similar" allows for "some degree of difference." Pine
Grove Manor v. Dir. Div. of Taxation, 68 N.J. Super. 135, 142
(App. Div. 1961). It is "generally interpreted to mean that one
thing has a resemblance in many respects, nearly corresponds, is
somewhat like, or has a general likeness to some other thing
. . . although in some cases 'similar' may mean 'identical' or
'exactly alike.'" Fletcher v. Interstate Chem. Co., 94 N.J.L.
332, 334 (Sup. Ct. 1920) (holding that contract to sell
"similar" printing presses did not require them to be "exactly
alike"), aff'd o.b., 95 N.J.L. 543 (E. & A. 1921).
Regardless of whether "similar" as used in the NJM policy
means "identical" or allows for "some degree of difference,"
Rivera's policy does not provide "coverage similar to UIM
coverage," because it does not provide any form of "UIM
coverage" whatsoever. Even where two policies provided UIM
coverage, we have found the coverage not to be "similar" so as
to trigger a step-down provision where one provided gap
coverage, and the other provided excess coverage. Nat'l Union
Fire Ins. Co. of Pittsburgh, Pa. v. Jeffers, 381 N.J. Super. 13,
19-20 (App. Div. 2005) (comparing UIM coverage in New Jersey and
Pennsylvania policies).
10 A-2337-14T1
A contrary interpretation is not compelled by the fact that
Rivera would be entitled to greater coverage as an insured under
a special policy than if she had purchased a standard policy
with UIM coverage at any limit less than the NJM policy
provided. The result here is a consequence of NJM's own
draftsmanship. See Magnifico v. Rutgers Cas. Ins. Co., 153 N.J.
406, 418 (1998) (noting that "insurers can modify policy
language in an effort to address issues of UIM coverage and
liability"). If Rivera had been a licensed driver who did not
own an automobile at all, she could have gone without her own
insurance entirely. See N.J.S.A. 39:6A-3 (compulsory insurance
law pertains to "owner or registered owner of an automobile
registered or principally garaged" in New Jersey). Had she
driven her mother's vehicle under those circumstances, she would
have been unaffected by the step-down provision.
We recognize that Rivera chose, presumably as a result of
her financial circumstances, to purchase the special policy, and
not to obtain UIM coverage at all. But Torres-White did select
UIM coverage — not only for herself, but for other persons
insured under her policy, such as family members driving her
vehicle. Her reasonable expectations, based on the "similar
coverage" condition of the step-down provision, should not be
frustrated by denying her daughter benefits. See Nav-Its, Inc.
11 A-2337-14T1
v. Selective Ins. Co., 183 N.J. 110, 118-19 (2005); French v.
N.J. School Bd. Ass'n Ins. Group, 149 N.J. 478, 487, 495 (1997).
In sum, the step-down provision does not apply to Rivera
because she is not a named insured under another policy
"providing similar coverage." Consequently, NJM was not
entitled to summary judgment dismissing Rivera's complaint.
III.
NJM argues that even if the step-down provision does not
apply, its liability is limited because Rivera does not qualify
as a "family member" under its policy. The policy provides that
UIM coverage for a person who is neither a named insured nor a
family member "shall not exceed the minimum limits required by
New Jersey law for liability coverage set forth in N.J.S.A.
39:6A-3." That limit would be $15,000 in this case. As that
limit is no greater than the limit of McCray's insurance, no UIM
benefits would be available to Rivera if she is not a family
member. A "family member" must be related to, and resident in
the household of, the named insured. In challenging Rivera's
residency in Torres-White's household, NJM notes that Rivera's
own policy, as well as her amended complaint, indicate that she
resides at an address other than her mother's.
Rivera contended that she was, in fact, a resident in her
mother's household. She also argues that NJM is estopped from
12 A-2337-14T1
challenging her residency, because NJM raised the issue for the
first time in support of its motion for summary judgment. She
contends that she detrimentally relied on NJM's previous silence
in reaching her settlement with McCray.
The trial court did not reach the residency issue, but
noted that a period of discovery would have been required. We
agree. Since we reverse the grant of summary judgment on the
step-down provision as it relates to what constitutes "similar
coverage," we remand so that the trial court may address the
residency issue after a period of discovery. Rivera's estoppel
argument should be addressed initially by the trial court after
completion of discovery.
Reversed and remanded. We do not retain jurisdiction.
13 A-2337-14T1