Atlantic Mut. Ins. Co. v. PALISADES

• Decision Date: 22 July 2003
• Citation: 364 N.J. Super. 599,837 A.2d 1096
• Parties: ATLANTIC MUTUAL INSURANCE COMPANY, as assignee of Raymond Majewski, Plaintiff-Appellant/Cross-Respondent, v. PALISADES SAFETY AND INSURANCE ASSOCIATION, Defendant-Respondent/Cross-Appellant, and Motor Club of America Insurance a/k/a Preserver Insurance Company, Defendant.
• Court: New Jersey Superior Court

837 A.2d 1096

364 N.J. Super. 599

ATLANTIC MUTUAL INSURANCE COMPANY, as assignee of Raymond Majewski, Plaintiff-Appellant/Cross-Respondent, v. PALISADES SAFETY AND INSURANCE ASSOCIATION, Defendant-Respondent/Cross-Appellant, and Motor Club of America Insurance a/k/a Preserver Insurance Company, Defendant.

Superior Court of New Jersey, Appellate Division.

Argued May 12, 2003.

Decided July 22, 2003.

Kenneth R. Rothschild, Somerville, argued the cause for appellant (Golden, Rothschild, Spagnola, Lundell, Levitt & Boylan, attorneys; Mr. Rothschild, of counsel; Audrey L. Shields, on the brief).

Brian D. Barr, Cherry Hill, argued the cause for respondent (Cooper, Perskie, April, Niedelman, Wagenheim & Levenson, attorneys; Mr. Barr, of counsel; Walter J. LaCon, on the brief).

Before Judges HAVEY, A.A. RODRÍGUEZ and WELLS.

The opinion of the court was delivered by RODRIGUEZ, A. A., J.A.D.

This is the second time that this matter comes before us. In Atlantic Mut. Ins. Co. v. Palisades Safety and Ins. Ass'n, No. A-219-99T5 (App.Div. Jan. 8, 2001), we decided, among other things, that Palisades Safety and Insurance Association (Palisades), must provide liability coverage to Raymond Majewski for injuries sustained by Cedar A. Johnson in an automobile accident. We remanded the matter to determine whether Atlantic Mutual Insurance Company (Atlantic), must also provide coverage to Majewski. If so, the Law Division judge was to decide whether Palisades' and Atlantic's coverages are primary, or excess. The judge found that Atlantic must provide coverage. The judge also determined that Palisades' and Atlantic's coverage is to be pro-rated according to the respective policy limits. We affirm.

The facts are undisputed. On August 29, 1995, Johnson was operating his wife's vehicle when he struck an automobile operated by Samuel Finn. Finn was injured. Johnson was accompanied by a co-worker, Daniel LaVienna. Both men were employed by Cambridge Frozen Bakery Products (Cambridge). They were returning from the home of their superior, Plant Manager Raymond Majewski, who had sent them to his home to retrieve his prescription medicine. Neither man "punched out" but remained "on the clock." Thus, they were "working" for Cambridge during the trip.

In a deposition, Majewski testified that he sent Johnson and LaVienna on this errand because he was the only manager on the shift and could not leave the plant. According to Majewski, he and Cambridge's president often used their employees for similar tasks. Johnson corroborated that he had made similar errands for his superiors.

Finn sued the Johnsons, Cambridge, and Majewski for negligence. Cambridge sent the complaint to Atlantic, its liability insurance carrier. Atlantic defended the action on Cambridge's behalf. Majewski notified Atlantic of the suit against him. Atlantic denied coverage for Majewski. Majewski also submitted the complaint to two other carriers: Preserver Insurance Company (Preserver), his homeowner's insurance carrier, and Palisades, his personal automobile insurance carrier. Preserver and Palisades denied coverage.

Finn settled with the Johnsons and Cambridge for $790,000. The Johnsons' insurer paid $100,000 and Atlantic, $690,000. Cambridge and Majewski entered into a consent judgment. Majewski agreed to a $690,000 judgment against him in order to satisfy Cambridge's indemnity claim. In return for an agreement not to execute on the consent judgment, Majewski assigned to Atlantic and Cambridge all of his rights against Preserver and Palisades. As Majewski's assignee, Atlantic filed the present lawsuit against Preserver and Palisades. Preserver and Palisades moved successfully for summary judgment. We affirmed as to Preserver, but reversed as to Palisades, concluding that the Palisades policy provided coverage. We remanded for further proceedings.

On remand, the judge found that both policies provided coverage and ordered Palisades to reimburse Atlantic for one-half of the Finn settlement. Upon reconsideration, the judge ordered that Palisades and Atlantic provide coverage on a pro rata basis according to their limits of coverage. He ordered Palisades to reimburse Atlantic $138,000, or twenty percent of the settlement.¹

Atlantic appeals contending that: (1) its policy does not provide coverage to Majewski; (2) Palisade's "other insurance" clause does not apply because there is no "other insurance;" and (3) the judge erred by finding that Atlantic's policy provides liability coverage to Majewski. Palisades cross-appeals contending that Atlantic's policy provides primary coverage.

The determination of whether an individual is an insured under an insurance policy is a matter of law to be decided by the court. National Union Fire Ins. v. Transportation Ins. Co., 336 N.J.Super. 437, 443, 765 A.2d 240 (App.Div.2001). The court should interpret the policy "according to its plain and ordinary meaning." Progressive Cas. Ins. v. Hurley, 166 N.J. 260, 272-73, 765 A.2d 195 (2001). However, the "policy should be construed to comport with the insured's reasonable expectations of coverage." Id. at 274, 765 A.2d 195 (citing Gibson v. Callaghan, 158 N.J. 662, 669-71, 730 A.2d 1278 (1999)). Therefore, the court should only enforce those restrictions or terms in the policy that are consistent with the insured's "objectively reasonable expectations." Ibid.

With those principles in mind, we concur with the judge that the Atlantic policy provides coverage to Majewski. The Atlantic policy provides:

1. WHO IS AN INSURED

The following are "insureds:"

a. You for any covered "auto;"

b. Anyone else while using with your permission a covered "auto" you own, hire, or borrow except:

(1) The owner or anyone else from whom you hire or borrow a covered "auto." This exception does not apply if the covered "auto" is a "trailer" connected to a covered "auto" you own;

(2) Your employee if the covered "auto" is owned by that employee or a member of his or her household;....

"You" is Cambridge, the named insured. The proofs support two critical findings by the judge. First, that Majewski was using, with Cambridge's permission, Johnson's auto. Second, that Johnson's auto was borrowed by Cambridge. It is self-evident that neither exception (1) or (2) to section b applies here. Therefore, Majewski has liability coverage for the Finn accident under the unique circumstances of this case.

We have already held that as a matter of law Majewski was in effect "using Johnson's vehicle ... and, thus, through Johnson, was operating Johnson's vehicle." Atlantic Mut. Ins. v. Palisades Safety and Ins. Ass'n, No. A-219-99T5 (App.Div. Jan. 8, 2001). Therefore, we turn to the second finding, i.e., that Cambridge was borrowing Johnson's auto. The meaning of the term "borrow" within the context of an insurance policy has been considered by courts in New Jersey on two occasions. In F & M Schaefer Brewing Co. v. Forbes Food Div., 151 N.J.Super. 353, 376 A.2d 1282 (Law Div.1977), the judge found that a person becomes a borrower when he or she "assume[s] a certain amount of control, dominion or power over the object being borrowed." Id. at 362, 376 A.2d 1282. We adopted this analysis in National Union Fire Ins. v. Transportation Ins. Co., supra, 336 N.J.Super. at 447, 765 A.2d 240. Along with the Law Division's definition of the term "borrower," we adopted the Fifth Circuit's definition for the term as analyzed in Sturgeon v. Strachan Shipping Co., 731 F.2d 255 (5th Cir.), cert. denied sub nom, Strachan Shipping Co. v. Bankers & Shippers Ins. Co. of N.Y., 469 U.S. 883, 105 S.Ct. 251, 83 L.Ed.2d 188 (1984), and the Texas Supreme Court's definition as stated in Liberty Mut. Ins. v. American Employers Ins., 556 S.W.2d 242 (Tex.1977). Ibid.

The Sturgeon court adopted the "use and possession" test as applied in Liberty Mut. Ins. to determine whether a party is a "borrower." Sturgeon, supra, 731 F.2d at 259. Under the test, a person is a "borrower" if he or she obtained possession of the vehicle. Ibid. Possession is established by having dominion or control. Ibid. Thus, the "user" of the vehicle must also have the simultaneous authority to move the vehicle in order to be considered a "borrower." Ibid.

We recognize that the analysis adopted in National Union Fire Ins. addressed the term "borrower" as used in the "loading and unloading" context, but nevertheless find the adopted analysis to apply here. The record reflects that Cambridge and its president used Johnson and...