Ciecka v. Transamerica Ins. Group

• Decision Date: 05 December 1979
• Citation: Ciecka v. Transamerica Ins. Group, 81 N.J. 421, 409 A.2d 272 (N.J. 1979)
• Parties: Stanley CIECKA, Plaintiff-Respondent, v. TRANSAMERICA INSURANCE GROUP, Defendant-Appellant, and Home Indemnity Insurance Company, Defendant-Respondent.
• Court: New Jersey Supreme Court

Page 421

81 N.J. 421

409 A.2d 272

Stanley CIECKA, Plaintiff-Respondent, v. TRANSAMERICA INSURANCE GROUP, Defendant-Appellant and Home Indemnity Insurance Company, Defendant-Respondent.

Supreme Court of New Jersey.

Argued Nov. 14, 1978.

Decided Dec. 5, 1979.

James A. Mullen, Jr., Cherry Hill, for defendant-appellant, Transamerica Ins. Group (Montano, Summers, Mullen & Manuel, Cherry Hill, attorneys, James A. Mullen, Jr., of counsel).

Peter P. Green, Haddonfield, for defendant-respondent, Home Indem. Ins. Co. (Green & Lundgren, Haddonfield, attorneys).

Charles I. Tighe, III, Cherry Hill, for plaintiff-respondent (Friedman & Tighe, Cherry Hill, attorneys).

PER CURIAM.

In this declaratory judgment action plaintiff seeks a determination as to the applicability and effect of the uninsured motorist (UM) endorsements in automobile insurance policies issued by defendant insurance companies.

On August 7, 1972 plaintiff, Stanley Ciecka, was a passenger in an automobile owned and operated by one William Landolt when it collided with an automobile owned and operated by one Augustin Cardona. As a result of the collision plaintiff sustained personal injuries. Cardona was uninsured. Defendant-appellant, Transamerica Insurance Company, insured the Landolt vehicle for liability with a limit of $50,000 damages on account of bodily injury to one person. The same policy contained an uninsured motorist endorsement in standard form, ¹ binding the insurer to

pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle because of bodily injury or property damage, caused by accident and arising out of the ownership, maintenance or use of such uninsured highway vehicle; provided, for the purposes of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and the company or, if they fail to agree, by arbitration.

In addition, plaintiff had a policy of insurance on his own automobile with defendant Home Indemnity Insurance Company (Home), which contained an uninsured motorist endorsement in the same form as Transamerica's. ²

Ciecka instituted suit against both drivers. Transamerica interposed a defense for Landolt, and the Unsatisfied Claim and Judgment Fund answered for Cardona. Ciecka then negotiated a settlement with Transamerica for the available $50,000 policy limit on the bodily injury liability coverage. The parties filed a Stipulation of Dismissal and Transamerica paid the $50,000.

Plaintiff then made a demand under the UM endorsements of both policies, alleging damages on account of personal injuries in excess of $70,000 and seeking the maximum of $10,000 under each UM endorsement. ³ The carriers resisted arbitration, taking the position that their UM coverages were beyond plaintiff's reach inasmuch as he had already been paid the full limit of Transamerica's liability coverage. Defendants relied on certain "exclusions" and "limits of liability" affecting UM coverage in their respective policies. Plaintiff then commenced the instant action for declaratory relief, in which the parties agreed that for purposes of this suit both drivers were negligent and plaintiff's injuries carried with them a value in excess of $50,000.

The trial court found in plaintiff's favor, determining that the UM coverage of both the host driver and the injured plaintiff were available, with Home's policy (plaintiff's) excess or secondary to the Transamerica policy (host driver's). On Transamerica's appeal the Appellate Division, in an unreported opinion, affirmed. We granted Transamerica's petition for certification, 77 N.J. 490, 391 A.2d 504 (1978), and now affirm.

The Appellate Division examined those provisions of the UM coverage of Transamerica's policy upon which the carrier relies, found them "at best ambiguous," and consequently construed them in favor of plaintiff, citing Bryan Construction Co., Inc. v. Employers' Surplus Lines Insurance Co., 60 N.J. 375, 377, 290 A.2d 138 (1972). While Transamerica proffers a number of policy provisions in support of its position, its argument narrows down to the contention that by virtue of Section III (c)(1) of the UM endorsement it is entitled to offset against the UM coverage the $50,000 it paid to plaintiff under its bodily injury liability coverage. Section III (c)(1) reads as follows:

III. LIMITS OF LIABILITY

Regardless of the number of Insureds under this insurance, the company's liability is limited as follows:

(c) Any amount payable under the terms of this insurance because of bodily injury or property damage sustained in an accident by a person who is an insured shall be reduced by

(1) all sums paid on account of such bodily injury or property damage by or on behalf of

(i) the owner or operator of the uninsured highway vehicle and

(ii) any other person or organization jointly or severally liable together with such owner or operator for such bodily injury or property damage,

including all sums paid under the bodily injury or property damage liability coverage of the policy * * * .

Transamerica urges that because of the offset permitted by the literal language of this section, its $10,000 UM coverage is effectively cancelled out by the $50,000 payment to plaintiff under the bodily injury liability coverage this because the policy states explicitly that any offset shall include "all sums paid under the bodily injury * * * coverage of the policy." In support of its position that the policy reflects an intent to create an intra-policy liability-UM offset, Transamerica points to Section III (d) of the UM endorsement, which creates the converse, or a UM-liability offset:

(d) Any payment made under this insurance to or for any insured shall be applied in reduction of the amount of damages which he may be entitled to recover from any person insured under the bodily injury property damage liability coverage of the policy.

In rejecting these contentions the Appellate Division ascribed critical significance to the carrier's use of the conjunctive "and" between subsections "i" and "ii" of Section III (c)(1) quoted above. It concluded that

a fair reading of Section III (c) suggests that the reduction applied only where payments have been made by or on behalf of (1) the owner or operator of the uninsured vehicle And (2) others jointly or severally liable. Thus it would appear that the language relied on for exoneration by Transamerica would require payment by the uninsured tortfeasor as well as the insured vehicle before it becomes operative.

Having disposed of Transamerica's argument on the basis of a perceived ambiguity in the cited language, the court below went on to observe in passing that even "if the clauses were given the construction sought by Transamerica, they would be invalid", citing Motor Club of America Insurance Co. v. Phillips, 66 N.J. 277, 330 A.2d 360 (1974).

We need not reach the question of whether the clauses suffer from a fatal ambiguity, for we conclude that they are plainly invalid when read as intended by the carrier. While under that reading Section III (c)(1) would clearly effect a reduction in Transamerica's UM exposure, it would just as clearly disserve the purpose of a UM endorsement as expressed in L.1968, C. 385 § 2 (codified at N.J.S.A. 17:28-1.1) and as interpreted by our decision law. The statute recognizes no relationship whatsoever between liability coverage and uninsured motorists protection, other than the obvious requirement that a carrier issuing a policy with the former coverage must offer (as of the time the policies herein were issued, see N. 3, Supra ) the latter. The coverages are separate and distinct. Separate premiums are charged. Under the liability coverage of Transamerica's policy the company undertook generally to protect the named insured as owner of specified private passenger vehicles, permissive...