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Thursday, January 5, 2017

CRUZ-LEON V. IFA INS. CO. : Insurance Coverage Offered to Permissive Driver

                                           CRUZ-LEON V. IFA INS. CO.
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3. Before Judges Messano and Suter. On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-11751-14. Toni A. DeGennaro, attorney for appellant. Robert A. Hoffman, attorney for respondent (Patrick M. Nerney, on the brief). The opinion of the court was delivered by SUTER, J.A.D. (temporarily assigned) 
Defendant IFA Insurance Company (IFA) appeals an order granting uninsured motorist (UM) coverage to plaintiff Maria M. Cruz-Leon under an IFA standard automobile insurance policy, and ordering arbitration of her personal injury claim. We affirm. 

I.

Plaintiff was driving a van that was owned by an individual who was a named insured under a standard personal automobile insurance policy issued by IFA. That insurance policy provided uninsured and underinsured motorist coverage (UM/UIM) with maximum policy limits of $50,000/$100,000. Plaintiff was a named insured under her own automobile insurance policy issued by Praetorian Insurance Company, but that policy was a "special automobile insurance policy" authorized pursuant to the provisions of N.J.S.A. 39:6A-3.3. Special automobile insurance policies are intended to assist low income individuals to comply with mandatory private passenger automobile insurance requirements. They provide emergency personal injury protection (PIP) coverage up to $250,000, death benefits up to $10,000 and are subject to the verbal threshold. N.J.S.A. 39:6A-3.3(b)(1)-(3). Special automobile insurance policies "shall not provide for liability, collision, comprehensive, uninsured or underinsured motorist coverage." N.J.S.A. 39:6A-3.3(c). As such, plaintiff's policy did not provide UM/UIM coverage. 
On October 8, 2010, the van plaintiff was driving was rear-ended by a vehicle driven by Roderick Swan. The parties agree that Swan was uninsured. Plaintiff alleges she sustained personal injuries in the accident. 
IFA denied plaintiff's request for PIP benefits and UM coverage under the IFA policy, and also denied plaintiff's request for arbitration. Plaintiff filed an Order to Show Cause seeking to require IFA to arbitrate the UM claim.
Plaintiff has not appealed the denial of PIP benefits. 
In granting the Order to Show Cause, Judge Travis L. Francis found that plaintiff was not excluded from UM coverage by IFA's UM Exclusion Endorsement, which he construed to be "inapplicable" because plaintiff was not operating her own vehicle at the time of the accident, but was operating a vehicle insured by IFA. He did not find any inconsistency between the "UM statute, N.J.S.A. 17:28-1.1(a), and the IFA policy."
In doing so, the judge rejected plaintiff's contention that the IFA policy conflicted with N.J.S.A. 17:28-1.1 by denying her UM coverage. See Rider Ins. Co. v. First Trenton Cos.354 N.J. Super. 491, 500 (App. Div. 2002) (holding that a policy provision that eliminates UM coverage when multiple insurance policies are available is invalid under N.J.S.A. 17:28-1.1(a)). Plaintiff has not cross-appealed. We have no need to decide whether IFA's policy conflicts with any statutory provision. 
IFA appeals, contending the judge erred in interpreting its UM Exclusion Endorsement so as not to exclude coverage for plaintiff. IFA contends its policy exclusions are clear and unambiguous. On appeal, IFA also contends the judge did not adequately address the policy's UM Limitation of Liability Endorsement. 

II.

A.

We generally defer to the factual findings of the trial court. Rova Farms Resort, Inc. v. Inv'rs Ins. Co. of Am.65 N.J. 474, 483-84 (1974). However, "[t]o the extent that the trial court's decision constitutes a legal determination, we review it de novo." D'Agostino v. Maldonado216 N.J. 168, 182 (2013) (citing Manalapan Realty v. Twp. Comm. of Manalapan140 N.J. 366, 378 (1995)). 
IFA asserts that plaintiff's claim is excluded under its policy. Insurance policies should be interpreted to give effect to their plain and ordinary meaning. Progressive Cas. Ins. Co. v. Hurley166 N.J. 260, 272-73 (2001). An insurance policy "should be construed liberally in [the insured's] favor to the end that coverage is afforded to the full extent that any fair interpretation will allow." Id. at 273 (quoting Kievit v. Loyal Protective Life Ins. Co.34 N.J. 475, 482 (1961) (other citations omitted)). However, it is well established that the insurer bears the burden of demonstrating that an exclusion applies. Flomerfelt v. Cardiello202 N.J.432, 456 (2010); S.T. Hudson Eng'rs, Inc. v. Pa. Nat'l Mut. Cas. Co.388 N.J. Super. 592, 603 (App. Div. 2006), certif. denied189 N.J. 647 (2007). Exclusions in an insurance policy are to be narrowly construed. Doto v. Russo140 N.J. 544, 559 (1995). 
IFA appears largely to have abandoned its initial contention made in opposition to plaintiff's Order to Show Cause that plaintiff was excluded from coverage by IFA's UM Exclusion Endorsement. That exclusion provided: 
A. We do not provide coverage under this endorsement for "property damage" or "bodily injury" sustained by an "insured":

1.
 Who is an owner of a motor vehicle:

a.
 Insured under a basic automobile insurance policy issued in accordance with New Jersey law or regulation; or 
b.
 Required to be insured in accordance with New Jersey law or regulation, but not insured for this coverage or any similar coverage.


This includes a trailer of any type used with a vehicle described in a. and b.above.
However, this Exclusion (A.1.) does not apply to you unless you are "occupying", at the time of the accident, a motor vehicle described in a. and b. above.
[(emphasis in original).]

We apply the plain language of the policy in interpreting this exclusion. See Progressivesupra166 N.J. at 272. Because plaintiff was driving the van insured by IFA and not her own vehicle, the express language of the exclusion did not apply to her because she was not "occupying" a vehicle described in "a or b above." 

B.

IFA contends that because plaintiff's special insurance policy did not include UM coverage, and because IFA's policy has a step-down provision under the UM Limit of Liability Endorsement that restricts coverage, there is therefore no UM coverage for plaintiff under the IFA policy. The applicable provision provides: 

LIMIT OF LIABILITY
 

. . . .
 

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 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).]


In applying paragraph a of the foregoing endorsement, plaintiff is not a named insured under the policy. Under paragraph b, plaintiff is named as an insured under another policy. Under paragraph c, plaintiff's special insurance policy has no UM coverage, while IFA's standard policy has $50,000/$100,00 in coverage. The question then is whether the policies provide similar coverages because "similar coverage" is required for paragraph b and c to apply. 
We are satisfied that the step-down provision does not apply to exclude coverage for plaintiff under the IFA policy because the policies do not offer similar coverages. We recently interpreted a similar step-down provision in a standard personal automobile insurance policy to determine whether the step-down provision applied in the context of UIM coverage. In Rivera v. McCray445 N.J. Super. 315, 323-24 (App. Div. 2016), we reversed a trial court decision that denied UIM coverage. There, a family member who was separately insured under a special automobile insurance policy sought UIM coverage under her mother's standard automobile insurance policy because she was injured while operating her mother's vehicle. Id. at 317. We noted that "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 319 (quoting Pinto v. N.J. Mfrs. Ins. Co.183 N.J. 405, 413 (2005), superseded in part by N.J.S.A. 17.28-1.1(f) (prohibiting step-down provisions in certain business auto insurance policies)). We also observed that a UIM step-down provision can be enforced if its language is clear and unambiguous. Ibid. (citing Temple Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh224 N.J. 189, 200 (2016)). However, in Rivera, we declined to "step-down" the standard policy with UIM coverage to the special insurance policy that had no UIM coverage. Id. at 320. 
Like the policy at issue here, the term "similar coverage" was not defined in Rivera. The word "similar" 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.'" Id. at 321-22 (quoting Fletcher v. Interstate Chem. Co.94 N.J.L. 332, 334 (Sup. Ct. 1920) aff'd o.b.95 N.J.L. 543 (E. & A. 1921)). In Rivera, we found that the policy did not provide "similar coverage" because it did "not provide any form of 'UIM coverage' whatsoever." Id. at 322. As such, we held that the step-down provision did not apply to Rivera "because she [was] not a named insured under another policy 'providing similar coverage.'" Id. at 323. 
IFA's UM Limit of Liability Endorsement uses almost identical language to that used in the Rivera policy. We agree that plaintiff's special insurance policy had no UM coverage. However, we reject the notion that a policy, which by definition has no UM coverage, is then "similar" to the IFA policy that included UM coverage up to certain limits. The policies are not "similar" in coverage when one provides UM coverage and the other is prohibited by statute from providing that coverage. 
We discern no lack of fairness in providing plaintiff UM coverage under IFA's policy. An insured may have coverage under multiple policies that offer UM. N.J.S.A. 17:28-1.1(c) prohibits stacking the policies, but provides instead that "any recovery shall not exceed the higher of the applicable limits of the respective coverages," meaning that a covered individual might receive a higher limit of coverage under a policy he did not purchase. In certain other instances, automobile insurance policies may be "deemed" to include certain provisions that have not been purchased. See N.J.S.A. 17:28-1.4 ("deeming" a policy to include PIP coverage and the verbal threshold). Moreover, in construing the IFA policy to provide coverage, the claims exposure remains with the insurer and not with the Unsatisfied Claim and Judgment Fund (UCJF), which pays claims of victims of uninsured motor vehicle accidents, but is a "remedy of last resort." Sanders v. Langemeier199 N.J. 366, 379 (2009). See also N.J.S.A. 17:30A-2.1.
The issue of coverage under the UCJF is not before us and we expressly do not decide it. In Sanderssupra199 N.J. at 380, the Court dismissed plaintiff's complaint against the UCJF for PIP coverage because his special insurance policy provided for emergency PIP coverage. The Court did not address whether the UCJF would be available for a special automobile insurance policy holder who was uninsured because of the absence of UM coverage. -------- 
Therefore, plaintiff is not excluded from UM coverage under the IFA policy, because plaintiff's special automobile insurance policy does not provide "similar coverage" to that of the IFA policy, making IFA's UM Limitation of Liability Endorsement inapplicable. 
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.