Engrassia v. Uzcategui, A-74 September Term 2017

• Decision Date: 29 March 2019
• Docket Number: 080709,A-74 September Term 2017
• Citation: 205 A.3d 206 (Mem),237 N.J. 373
• Parties: Patricia ENGRASSIA, Administratrix Ad Prosequendum of the Estate of Jason Marles, Deceased, Plaintiff-Appellant, v. Erick UZCATEGUI, Defendant, and Hunterdon Motors, Inc., d/b/a Hunterdon BMW, Defendant-Respondent, and Federated Mutual Insurance Company, Defendant-Respondent, and John Saddy, Saddy Family, LLC, LASV, Inc., and Bamboo Bar LLC, Defendants/Third-Party Plaintiffs, v. Indre Dosinaite, Sarita M. Hines, Frank A. Talarico, and James S. Torsiello, III, Third-Party Defendants, and New Jersey Manufacturers Insurance Company, Intervenor-Respondent.
• Court: New Jersey Supreme Court

237 N.J. 373

205 A.3d 206 (Mem)

Patricia ENGRASSIA, Administratrix Ad Prosequendum of the Estate of Jason Marles, Deceased, Plaintiff-Appellant,

v.Erick UZCATEGUI, Defendant,andHunterdon Motors, Inc., d/b/a Hunterdon BMW, Defendant-Respondent,

and

Federated Mutual Insurance Company, Defendant-Respondent,

and

John Saddy, Saddy Family, LLC, LASV, Inc., and Bamboo Bar LLC, Defendants/Third-Party Plaintiffs,

v.Indre Dosinaite, Sarita M. Hines, Frank A. Talarico, and James S. Torsiello, III, Third-Party Defendants,andNew Jersey Manufacturers Insurance Company, Intervenor-Respondent.

A-74 September Term 2017

080709

Supreme Court of New Jersey.

March 29, 2019

CORRECTED ORDER

The Court granted certification in this appeal on July 11, 2018, and held oral argument on January 15, 2019. By letter dated March 21, 2019, plaintiff-appellant notified the Court that the parties had "fully and finally resolved all issues," and requested that the appeal be dismissed as to all parties. The Court having considered this matter further, and based on the representations of plaintiff-appellant regarding the resolution of the dispute pending before the Court;

IT is ORDERED that the within appeal is dismissed.

CHIEF JUSTICE RABNER and JUSTICES PATTERSON, FERNANDEZ-VINA, SOLOMON, and TIMPONE join in this order. JUSTICE LaVECCHIA filed a dissent, in which JUSTICE ALBIN joins.

JUSTICE LaVECCHIA dissents from this Order dismissing the appeal.

The issue before this Court raises an issue of general public importance -- the legality and scope of an insurance policy's alleged step-down provision that eliminated liability coverage for an automobile driven by a permissive user. The Court granted certification on this issue. The issue has been briefed and argued. The Court should not stop the parties from agreeing to settle their private coverage dispute and keep it confidential. The private concerns of the parties, however, should not prevent the Court from discharging its public duty to decide the issue.

In my view, this appeal raises issues of substantial public importance and those legal issues should be resolved now. See Nini v. Mercer Cty. Cmty. Coll., 202 N.J. 98, 105 n.4, 995 A.2d 1094 (2010) ("We have often declined ... to dismiss a matter on grounds of mootness, if the issue in the appeal is an important matter of public interest." (quoting Reilly v. AAA Mid-Atl. Ins. Co. of N.J., 194 N.J. 474, 484, 946 A.2d 564 (2008) ) ). To decide this case, in light of its public importance, would be in line with our past decisions to hear the merits of moot cases that would have a "significant effect" on segments of our population or "continue to divide our courts." Id. at 106 n.4, 107, 995 A.2d 1094 (deciding to interpret the New Jersey Law Against Discrimination's provision that allowed employers to "refus[e] to accept for employment ... any person over 70 years of age" even though the parties settled the case during the pendency of proceedings (quoting N.J.S.A. 10:5-12(a) ); see also Reilly, 194 N.J. at 484-85, 946 A.2d 564 (deciding to interpret N.J.A.C. 11:3-34.3 despite the Court's inability to provide affirmative relief and assurances from the Department of Banking and Insurance that the challenged regulation was being amended "to provide clarity"). Deciding this case is my preferred course of action, and I therefore voted against dismissal of the appeal and remand of the matter.

Further, registering a nay vote on the application is not enough. In light of the public importance of the issue, I find it necessary to address the legal error that should be corrected. I believe that the Appellate Division and trial court erred in categorizing the insurance contract's provisions affecting the minimum mandatory coverage for the dealership's cars as an enforceable step-down clause and not an impermissible escape clause. In my view, it is important to shine a light on flawed legal reasoning that imported the use of a step-down analysis into an analysis of the adequacy of an insurance contract's provisions governing compliance with required minimum mandatory automobile insurance coverage by auto owners. Accordingly, I write in the hope that by highlighting that analytic error, the error will not be perpetuated.

I.

Briefly stated, plaintiff Patricia Engrassia filed this action seeking compensation on behalf of the estate of James Marles. Marles was killed by Erick Uzcategui when Uzcategui struck him while driving a loaner vehicle from Hunterdon BMW (Hunterdon). When Uzcategui took possession of the loaner vehicle, he executed a rental agreement stating that his automobile liability insurance would be primary and the dealership's automobile liability insurance would be secondary.

At the time of the accident, Geico Indemnity Company (Geico) insured Uzcategui with a Family Automobile Insurance Policy having liability limits of $ 100,000 per person and $ 300,000 per accident. Geico accepted coverage for this accident and paid the liability limit of its policy, $ 100,000.

Plaintiff sought to hold Federated Mutual Insurance Company (Federated), Hunterdon's insurer, liable under Hunterdon's garage policy, which had coverage limits of $ 500,000. In New Jersey, automobile dealerships are required by the Motor Vehicle Commission to submit to several requirements in order to be licensed as a motor vehicle dealer, including N.J.A.C. 13:21-15.2(l ) (requiring demonstration of liability insurance in the amounts of $ 100,000 per person/$ 250,000 per incident covering all vehicles owned or operated by a license applicant). It is not disputed that Hunterdon relied on the garage policy in its license submission.

The garage policy includes a provision that excludes Hunterdon customers from coverage unless the customer does not have statutorily required minimum insurance coverage. In those instances, customers are insured under the garage policy, but only up to the "compulsory law limits." This provision is set forth under the insurance contract's section addressing "Who is an Insured." The garage policy defines "insured" as:

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

....

(d) Your customers. However, if a customer of yours:

(I) Has no other available insurance (whether primary, excess or contingent), they are an "insured" but only up to the compulsory or financial responsibility law limits where the covered "auto" is principally garaged.

(II) Has other available insurance (whether primary, excess or contingent) less than the compulsory or financial responsibility law limits where the covered "auto" is principally garaged, they are an "insured" only for the amount by which the compulsory or financial responsibility law limits exceed the limit of their other insurance.

On the key issue that prompts this writing, cross-motions for summary judgment were filed with the trial court. Federated claimed that Uzcategui did not constitute an "insured" under the garage policy. That said, because the clause would have provided Uzcategui coverage if he did not have proper insurance under the New Jersey requirements on his vehicle, Federated claimed that the clause is not an "illegal escape clause," and is therefore enforceable. Plaintiff filed a cross-motion for summary judgment against Federated, arguing that Uzcategui was a permissive user of Hunterdon's vehicle covered under the garage policy and therefore the owner of the vehicle (Federated's insured) was obligated to maintain liability coverage for him. Plaintiff asserted that the language that excluded Uzcategui from coverage constituted an unenforceable "escape clause" and that it should therefore be voided and coverage under the garage policy provided.

The trial court concluded that the clause was not an "illegal escape clause" because it did not deny coverage; rather, it merely limited coverage to the compulsory minimum in New Jersey, which the court identified as the amounts in the omnibus statute, N.J.S.A. 39:6B-1(a) (requiring $ 15,000/$ 30,000 in minimum compulsory automobile liability insurance for private automobiles). Further, the court described the clause as a step-down clause, which is generally permitted under law and thus valid. The court held that Uzcategui was an "insured" under the garage policy subject to the statutory liability limit of $ 15,000, and ordered Federated to pay plaintiff that amount. Both plaintiff and Federated appealed from the trial court's judgment.

An appellate panel affirmed the trial court as to its findings that the "insured" provision was an enforceable step-down provision, but reversed the trial court's remedy that required Federated to pay Uzcategui the $ 15,000 statutory liability minimum. Relying primarily on our decision in Aubrey v. Harleysville Insurance Cos., 140 N.J. 397, 658 A.2d 1246 (1995), the panel determined that the definition of insured in the garage policy was an enforceable "step-down" provision that allowed Federated to avoid covering Hunterdon for the minimum compulsory liability limit for Uzcategui.

II.

In enacting our state's automobile insurance scheme, the Legislature determined that

[e]very owner or registered owner of a motor vehicle registered or principally garaged in this State shall maintain motor vehicle liability insurance coverage ... insuring against loss resulting from liability imposed by law for bodily injury, death and property damage sustained by any person ... at least in: (1) an amount or limit of $ 15,000.00, exclusive of interest and costs, on account of injury to, or death of, one person, in any one accident[.]

[ N.J.S.A. 39:6B-1(a).]

This Court has noted that the statute evidences a priority of providing certainty in coverage.

Proformance Ins. Co. v. Jones, 185 N.J. 406, 412, 887 A.2d 146 (2005) (citing Matits v. Nationwide Mut. Ins. Co., 33 N.J. 488, 496, 166 A.2d 345 (1960) ).

Based on the plain language of the statute -- requiring every automobile to be insured by its owner, not its driver -- and the acknowledgement...