Allstate Ins. Co. v. Royal Globe Ins. Co.
| Decision Date | 22 August 1984 |
| Citation | 195 N.J.Super. 598,481 A.2d 298 |
| Parties | ALLSTATE INSURANCE COMPANY, Plaintiff-Respondent, v. ROYAL GLOBE INSURANCE CO., Defendant-Appellant, and Karen Malmendier, Liberty Mutual Insurance Company, Joseph Gerbino, Passaic-Clifton Driv-Ur-Self System, Inc., Peter Marker and Spruce Scaffold & Ladder Co., Inc., Defendants-Respondents. |
| Court | New Jersey Superior Court — Appellate Division |
Stephen B. Fenster, Hackensack, for defendant-appellant (Fenster, Fenster & Farrell, attorneys; Stephen B. Fenster, Hackensack, on brief).
Philip L. Geibel, Paramus, for defendants-respondents, Passaic-Clifton Driv-Ur-Self System, Inc., Marker, and Spruce Scaffold & Ladder Co., Inc. (Geibel & Geibel, Paramus, attorneys; Philip L. Geibel, Paramus, on brief).
William A. Carpenter, Jr., Newark, for plaintiff-respondent (Carpenter, Bennett & Morrissey, attorneys; John E. Keale, Newark, of counsel; William A. Carpenter, on brief).
John F. O'Donnell, Montclair, for defendant-respondent Liberty Mut. Ins. Co. (Joan B. Sherman, Freehold, attorney; John F. O'Donnell, on the brief).
Before Judges BOTTER, PRESSLER and O'BRIEN.
The opinion of the court was delivered by
BOTTER, P.J.A.D.
Defendant Royal Indemnity Company (Royal), 1 appeals from a judgment entered in this declaratory judgment action which provided that the Royal policy affords primary coverage for Joseph Gerbino up to $100,000 for injuries claimed by Karen Malmendier, a passenger in a car driven by Gerbino which was rented by Peter Marker and Spruce Scaffold & Ladder Co., Inc. (Spruce) from Passaic-Clifton Driv-Ur-Self (Passaic). The judgment also provided that the policies issued by Allstate Insurance Company (Allstate), covering a car owned by Gerbino, and by Liberty Mutual Insurance Co. (Liberty Mutual), covering a car owned by Marker, afforded excess coverage pro rata for any portion of the claim not satisfied by Royal. The judgment also provided that Royal must indemnify Gerbino for counsel fees and costs in the sum of $4,303.99 incurred in his defense of the action brought by Malmendier. After the trial judge delivered his oral decision in the case, the Malmendier claim was settled for $50,000. That sum was paid by Royal. On this appeal Royal contends that its coverage was not primary, that its coverage was limited to $15,000 for one claimant and $30,000 in the aggregate, that Royal's obligation should be pro rated with the obligations of Allstate and Liberty, and that no counsel fee should have been awarded to Gerbino, but if one was payable it should have been shared by the other carriers. We reject these contentions and affirm.
On September 8, 1980, Joseph Gerbino, age 20, was driving a car which collided with a tree, injuring his passenger Malmendier. The car had been rented on September 5, 1980 by Passaic to Peter Marker, and nominally to Spruce. The vehicle was rented for Marker's personal use. Gerbino was Marker's step-son and a member of his household. Marker had given permission to Gerbino to use the car. Malmendier brought an action for her injuries against Gerbino, Marker, Spruce and Passaic. Allstate then brought this action to determine the obligations of the three insurance carriers involved. Allstate furnished the defense for Gerbino in the personal injury action and sought an adjudication that Royal was obligated to indemnify Gerbino for the cost of the defense which Royal refused to furnish.
The policy issued by Royal termed Passaic an insured and also provided:
Anyone else is an insured while using with your permission a covered auto you own, hire or borrow.... 2
Endorsement # 3 provided that a person or organization renting an automobile from Passaic is not an insured unless Passaic is obligated by written contract to provide liability insurance for such person or organization. In such event, the endorsement provided ... the insurance afforded under this policy shall apply to such person or organization, provided such person's or organization's actual operation or (if he is not operating) his other actual use of the automobile at the time of the accident was within the scope of the permission granted by the named insured licensee, subject to the limits of liability stated in endorsement # 4 of the policy.
It is further agreed that in the event that coverage is imposed, by operation of law, to the benefit of the customer, any person other than the customer or any authorized operator, the limits of such coverage shall be the minimum requirements of the financial responsibility law or other applicable statue [sic ] of the state or other jurisdiction in which the accident occurred.
The endorsement also provided:
It is still further agreed that if the limits of liability stated, in the written contract, exceed the limits in item 2 of the declarations, the limits in the written contract shall apply, subject, however to a maximum of:
Bodily Injury Liability Each Person $100,000
Each Accident $300,000
Property Damage Liability Each Accident $25,000.
Endorsement # 4 provided insurance limits applicable to Passaic as an insured of $100,000/$300,000 for bodily injury per person or accident, respectively, as well as property damage of $25,000 per accident. This endorsement also provided, to the extent relevant to this case:
The following limits of liability apply to insurance afforded 1) to any person or organization renting an automobile from the named insured licensee, or 2) any person or organization legally responsible for the use thereof:
Private
Passengers
----------
Bodily Injury liability
each person $100,000
each accident $300,000
Property Damage liability
each accident $ 25,000
Marker elected to purchase "Personal Accident Insurance" (PAI) as part of the rental agreement and he was charged a premium for each day's use of the car for such insurance. The back of the rental agreement contained provisions relating to the insurance provided pursuant to the agreement. Those provisions stated in part:
9. LIABILITY COVERAGE
Lessor provides liability coverage for customer and any operator authorized by lessor in accordance with the standard provisions of a BASIC AUTOMOBILE LIABILITY INSURANCE POLICY, as required in the jurisdiction in which the vehicle was operated against liability for bodily injury including death (limits $100,000 each person, $300,000 each accident) and property damage (limits $25,000), arising from use of vehicle as permitted by this agreement. Coverage hereunder shall automatically conform to the basic requirements of any "no fault" law which may be applicable, but do not include "uninsured motorists" or supplementary "no fault" or other optional coverage.... Lessor warrants that to the extent permitted by law, the liability coverage described in this paragraph 9 is primary as respects any other insurance applicable to customer or any authorized operator. (Emphasis added.) 3
The rental contract provided that the vehicle shall not be operated by any person except the customer and "authorized operators" with permission of the customer. "Authorized Operators" were defined to include "persons 21 or over who are members of Customer's immediate family and permanently reside in Customer's household," as well as "a regular employee of Customer."
Appellant contends that the insurance provided by the contract did not cover Gerbino because Gerbino was under 21 years of age and was therefore not a person authorized by Passaic to operate the car. If Gerbino is deemed covered by operation of law, such as N.J.S.A. 45:21-1 et seq., Royal contends that the coverage should be limited to appropriate statutory limits. N.J.S.A. 45:21-3 requires certain insurance coverage for vehicles owned by persons in the business of renting or leasing motor vehicles, with limits of $10,000/$20,000 and $5,000. The limits contained in N.J.S.A. 39:6A-3 of the more recently enacted no-fault law are $15,000/$30,000 and $5,000. Royal contends that the $15,000/$30,000 limits apply.
The no-fault law, N.J.S.A. 39:6A-1 et seq., requires every owner or registered owner of an automobile registered or principally garaged in New Jersey to carry automobile liability insurance coverage. N.J.S.A. 39:6A-3. The coverage is for the benefit of any person who suffers bodily injury, death or property damage arising out of the operation or use of the automobile. In the case at hand Passaic and Royal agreed to furnish such coverage with liability limits of $100,000/$300,000, but attempted to reduce or withdraw such coverage in the event the rented automobile was driven by an unauthorized person.
Even if the limiting language could accomplish Royal's purpose, the endorsements are written in such a fashion as to convey the impression that the policy limits are $100,000/$300,000. Moreover, the insurance policy and the rental agreement, at least as to the provisions for liability coverage, are contracts of adhesion and will not be enforced to the extent that they conflict with the public policy of this state. Allen v. Metropolitan Life Ins. Co., 44 N.J. 294, 305, 208 A.2d 638 (1965); see Vasquez v. Glassboro Service Ass'n, Inc., 83 N.J. 86, 98-103, 415 A.2d 1156 (1980). Matits v. Nationwide Mut. Ins. Co., 33 N.J. 488, 496-497, 166 A.2d 345 (1960), held that "if a person is given permission to use a motor vehicle in the first instance, 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...
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