Home State Ins. Co. v. Continental Ins. Co.

• Decision Date: 06 July 1998
• Citation: 713 A.2d 557,313 N.J.Super. 584
• Parties: HOME STATE INSURANCE COMPANY, Plaintiff-Appellant, v. CONTINENTAL INSURANCE COMPANY, Defendant-Respondent, and Jaime Skierski, an Infant by Her Guardian Ad Litem, Beverly Skierski, Irving Raphael, Inc., Leila Steinnagel, John Doe and Jane Doe, Names Being Fictitious, Real Names Unknown, Defendants.
• Court: New Jersey Superior Court — Appellate Division

Page 584

313 N.J.Super. 584

713 A.2d 557

HOME STATE INSURANCE COMPANY, Plaintiff-Appellant, v.CONTINENTAL INSURANCE COMPANY, Defendant-Respondent and Jaime Skierski, an Infant by Her Guardian Ad Litem, Beverly Skierski, Irving Raphael, Inc., Leila SteinnagelJohn Doe and Jane Doe, Names Being Fictitious, Real Names Unknown, Defendants.

Superior Court of New Jersey Appellate Division.

Argued May 13, 1998.

Decided July 6, 1998.

David A. Mazie, Livingston, for plaintiff-appellant(Nagel Rice & Dreifuss, attorneys; Mr. Mazie, on the brief).

Jamie D. Happas, New Brunswick, for defendant-respondent(Hoagland, Longo, Moran, Dunst & Doukas, attorneys; Mr. Happas, on the brief).

Before Judges BAIME, BROCHIN and WEFING.

The opinion of the court was delivered by

BAIME, P.J.A.D.

Jaime Skierski sustained injuries when she was assaulted by other students while a passenger on a school bus owned and operated by Irving Raphael, Inc.(Raphael).Through her guardian, she brought suit against Raphael, claiming that the driver was negligent in failing to stop the bus and quell the altercation.Raphael notified Home State Insurance Company(Home State), its automobile insurer, and Continental Insurance Company(Continental), its general liability insurer, of the underlying suit.Home State filed an answer on behalf of Raphael, but subsequently requested that Continental take over the defense, asserting that the incident was covered under Raphael's general liability insurance.Continental refused Home State's demand.Home State instituted a declaratory judgment action against Continental to compel the carrier to defend Raphael.While the declaratory judgment action was pending, Skierski's suit against Raphael was settled.The Law Division granted Continental's motion for summary judgment, finding that Skierski's claim arose out of Raphael's use and operation of the bus and thus fell within the purview of Home State's insuring agreement.The court also concluded that Continental's policy did not afford coverage.Home State appeals.We affirm.

We begin our analysis by examining the insuring agreement contained in the Home State policy.The policy issued by Home State covered all claims against Raphael caused by an "accident" and "resulting from ownership, maintenance or use" of the covered automobile.This policy language differs slightly from that mandated by N.J.S.A. 39:6B-1.The statute requires liability coverage for all claims resulting from an accident "arising out of the ownership, maintenance or use" of a motor vehicle.It is axiomatic that an insurer may not afford less coverage than that mandated by the Legislature.State Farm Mut. Auto. Ins. Co. v. Zurich Am. Ins. Co., 62 N.J. 155, 170, 299 A.2d 704(1973);Pasterchick v. Insurance Co. of North Am., 150 N.J.Super. 90, 93-94, 374 A.2d 1243(App.Div.1977).Where a policy provision conflicts with the coverage required by a statute, it is inapplicable and is deemed amended to conform to the statutory standard.Motor Club of Am. Ins. Co. v. Phillips, 66 N.J. 277, 286, 330 A.2d 360(1974);Fellippello v. Allstate Ins. Co., 172 N.J.Super. 249, 261, 411 A.2d 1137(App.Div.1979), certif. denied, 85 N.J. 481, 427 A.2d 574(1980).While it is arguable that the Home State policy language, more particularly the phrase "resulting from," requires a strict causal relationship between the "ownership, maintenance or use" of the automobile and the claim made against the insured, we are obliged to apply the statutory language.

We note at this point that, while Home State's policy includes coverage for accidents that arise out of the "ownership, maintenance or use" of the school bus, Continental's policy contains the same language excluding such coverage.In the proceedings below, both Home State and Continental took the position that their policies were mutually exclusive.In their appellate briefs, neither Home State nor Continental argues or suggests that their policies provide overlapping coverage.SeeSalem Group v. Oliver, 248 N.J.Super. 265, 274-75, 590 A.2d 1194(App.Div.1991), aff'd, 128 N.J. 1, 607 A.2d 138(1992); 7A Appleman, Insurance Law and Practice, § 4500, at 177-90(1979).We thus assume for the purpose of this appeal, and without deciding the issue, that only one of the two policies affords coverage.SeeState of New Jersey, Office of Employee Relations v. Communications Workers of Am., AFL-CIO, 154 N.J. 98, 107-09, 711 A.2d 300(1998).

We must determine whether Skierski's bodily injury claim related to an accident "arising out of the ownership, maintenance or use" of Raphael's school bus.We are aided by several well-settled principles.While insurance policies are contractual in nature, they are not ordinary agreements but "contracts of adhesion between parties who are not equally situated."Meier v. New Jersey Life Ins. Co., 101 N.J. 597, 611, 503 A.2d 862(1986);see alsoSparks v. St. Paul Ins. Co., 100 N.J. 325, 335, 495 A.2d 406(1985);Di Orio v. New Jersey Mfrs. Ins. Co., 79 N.J. 257, 269, 398 A.2d 1274(1979);Allen v. Metropolitan Life Ins. Co., 44 N.J. 294, 305-06, 208 A.2d 638(1965).To that extent, insurance contracts are "unipartite in character."Mazzilli v. Accident & Cas. Ins. Co. of Winterthur, 35 N.J. 1, 7, 170 A.2d 800(1961).These circumstances long ago fathered the principle that doubts as to the existence of coverage must generally be resolved in favor of the insured.Id. at 8, 170 A.2d 800.Our courts"have adopted the principle giving effect to the 'objectively reasonable expectations' of the insured for the purpose of rendering a 'fair interpretation' of the boundaries of insurance coverage."Meier v. New Jersey Life Ins. Co., 101 N.J. at 612, 503 A.2d 862(quotingDi Orio v. New Jersey Mfrs. Ins. Co., 79 N.J. at 269, 398 A.2d 1274).Of course, this principle "is, and indeed always has been, one of construction, simply an aid to the proper interpretation of terms devised by the professional underwriter."Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 246, 405 A.2d 788(1979).Only genuine interpretational difficulties engage the doctrine of ambiguity.American White Cross Lab., Inc. v. Continental Ins. Co., 202 N.J.Super. 372, 381, 495 A.2d 152(App.Div.1985).But if the language of a policy will support two meanings, one favorable to the insured and the other favorable to the insurer, that which will sustain coverage will be applied.Mazzilli v. Accident & Cas. Ins. Co. of Winterthur, 35 N.J. at 7, 170 A.2d 800.

These principles have particular efficacy in the area of automobile liability insurance which is mandated by statute.Such policies are to be construed broadly in favor of the insured and injured persons to effectuate the strong legislative policy of assuring financial protection for innocent victims of automobile accidents.SeePennsylvania Nat'l Mut. Cas. Ins. Co. v. Estate of Miller, 185 N.J.Super. 183, 187, 447 A.2d 1344(App.Div.1982).

It is against this backdrop that we consider whether Skierski's claim for bodily injury stemmed from an accident "arising out of the ownership, maintenance or use" of the school bus.We do not write on a blank slate.In Westchester Fire Insurance Co. v. Continental Insurance Cos., 126 N.J.Super. 29, 312 A.2d 664(App.Div.1973), aff'd o.b., 65 N.J. 152, 319 A.2d 732(1974), a passenger in an automobile insured by Westchester threw a wooden stick out of the rear window, striking a pedestrian who then brought suit against the driver and owner of the vehicle.Westchester's policy covered accidents "arising out of the ownership, maintenance or use" of the covered automobile.Id. at 35, 312 A.2d 664.Westchester instituted a declaratory judgment action against Continental, claiming that the risk fell within Continental's homeowner's policy.Continental's policy contained an exclusionary clause making its coverage inapplicable to "the ... use of automobiles...."Id. at 33, 312 A.2d 664(ellipses in original).

We rejected Westchester's argument "that the words 'arising out of the ... use' requir[ed] or justif[ied] the interpretation that before coverage exists it must appear that the injury is a direct and proximate result, in a strict legal sense, of the use of the automobile."Id. at 37, 312 A.2d 664(ellipses in original).We said that the policy language "does not require that the injury be directly or proximately caused by the automobile itself or by its motion or operation."Ibid.Instead, we held "that the phrase 'arising out of' must be interpreted in a broad and comprehensive sense to mean 'originating from' or 'growing out of' the use of the automobile."Id. at 38, 312 A.2d 664.It was said that "there need be shown only a substantial nexus between the injury and the use of the vehicle in order for the obligation to provide coverage to arise."Ibid.We concluded that "[t]he inquiry should be whether the negligent act which caused the injury, although not foreseen or expected, was in the contemplation of the parties to the insurance contract a natural and reasonable incident or consequence of the use of the automobile, and thus a risk against which they might reasonably expect those insured under the policy would be protected."Ibid.So posited, we held that the claim fell within the coverage afforded by the automobile liability policy issued by Westchester.In contrast, while recognizing that "exclusions ... must be strongly construed against the insurer,"we said that the "clear import and intent" of the exclusionary language contained in the Continental policy barred coverage.Id. at 41, 312 A.2d 664;see alsoAllstate Ins. Co. v. Moraca, 244 N.J.Super. 5, 13 n. 1, 581 A.2d 510(App.Div.1990);Scarfi v. Aetna Cas. & Sur. Co., 233 N.J.Super. 509, 515, 559 A.2d 459(App.Div.1989).

These principles were more recently applied by our Supreme Court in Smaul v. Irvington General Hospital, 108 N.J. 474, 530 A.2d 1251(1987), andLindstrom v. Hanover Insurance Co., 138 N.J. 242, 649...