McFarland v. Motor Club of America Ins. Co.

• Decision Date: 29 June 1972
• Citation: McFarland v. Motor Club of America Ins. Co., 295 A.2d 375, 120 N.J.Super. 554 (N.J. Super. 1972)
• Parties: Vander McFARLAND, Plaintiff, v. MOTOR CLUB OF AMERICA INSURANCE COMPANY, Defendant.
• Court: New Jersey Superior Court

Page 554

120 N.J.Super. 554

295 A.2d 375

Vander McFARLAND, Plaintiff, v. MOTOR CLUB OF AMERICA INSURANCE COMPANY, Defendant.

Superior Court of New Jersey Chancery Division.

June 29, 1972.

Charles W. Gabage, Vineland (Shapiro, Brotman, Eisenstat & Capizola, Vineland), for plaintiff.

Jerome S. Lieb, East Orange (Lieb, Teich & Berlin, East Orange), for defendant.

FRANCIS, J.S.C.

Plaintiff Vander McFarland, was a passenger in a vehicle owned and operated by Andrew McFarland when that vehicle was involved in a collision with a vehicle owned and operated by Rosa M. Roberts. As a result of the alleged negligent operation of the Roberts vehicle, plaintiff sustained special damages in the approximate amount of $2,530. Rosa M. Roberts was uninsured.

Andrew McFarland was insured by Allstate Insurance Co. under an insurance agreement which provided uninsured motorists protection to plaintiff. Allstate paid to plaintiff the $10,000 policy limit, which amount plaintiff alleges was insufficient to fully compensate him for his expenses, personal injuries, pain and suffering.

Plaintiff also carries uninsured motorists protection in his own insurance policy with defendant Motor Club of America. Plaintiff has asserted a claim against Motor Club for whatever amount up to $10,000 by which his total damages exceed the $10,000 policy limit paid to him by Allstate. Assuming plaintiff's damages to exceed the $10,000 already paid him, defendant denies liability therefor. Each party has moved for summary judgment pursuant to R. 4:46--1.

The uninsured motorists protection in the Motor Club policy was offered to plaintiff by legislative mandate. N.J.S.A. 17:28--1.1 reads as follows:

No automobile liability policy or renewal of such policy, of insurance insuring against loss resulting from liability imposed by law for bodily injury or death, sustained by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in this State * * * unless coverage is offered in connection therewith, in limits for bodily injury or death set forth in (N.J.S.A. 39:6--69) ^* * * * for payment of all or part of the sums which the insured or his legal representative shall be legally entitled to recover as damages from the operator or owner of an uninsured automobile, or hit and run automobile * * * because of bodily injury * * * sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured or hit and run automobile * * *

Pursuant to N.J.S.A. 17:28--1.2, plaintiff elected to accept, and therefore received, coverage to the extent of $10,000 for injury or death to one person in one accident with an uninsured motorist.

Plaintiff's insurance policy with Motor Club also contains the following clause, which seemingly restricts the uninsured motorists coverage:

Other insurance: With respect to bodily injury to an insured while occupying an automobile not owned by the named insured, the insurance under Part IV (UM) shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such automobile as primary insurance, and this insurance shall then apply only in the amount by which the limit of liability for this coverage exceeds the applicable limit of liability of such other insurance. * * *

Except as provided in the foregoing paragraph, if the insured has other similar insurance available to him and applicable to the accident, the damages shall be deemed not to exceed the higher of the applicable limits of this insurance and such other insurance, and the company shall not be liable for a greater proportion of any loss to which this coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance.

Defendant states the second paragraph does not control the case at bar and accordingly confines his argument to the efficacy of the restrictions imposed by the first paragraph. In reference to that paragraph, defendant contends that

* * * the UM insurance which applies to the vehicle claimant is occupying is viewed as primary insurance, so that the claimant's own uninsured motorist endorsement (if any) applies Only in the event that its coverage is more extensive than the primary coverage and then only for the amount of such 'excess.'

Under this construction, Motor Club need only adopt the $10,000 and $20,000 minimums of N.J.S.A. 17:28--1.1 as its maximum coverage offered, in order to escape liability to its insured guest whenever the host-driver has similar coverage. In no instance will the Motor Club coverage be 'more extensive' than the 'primary coverage.' Plaintiff argues that such a restriction is void as against public policy.

I deem the case at bar to be analogous to those cases which have arisen out of the attempts of various insurance companis to restrict the omnibus coverage required by virtue of N.J.S.A. 39:6--46(a). See Kish v. Motor Club of America Ins. Co., 108 N.J.Super. 405, 261 A.2d 662 (App.Div.1970), cert. den. 55 N.J. 595, 264 A.2d 68 (1970); Willis v. Security Ins. Group, 104 N.J.Super. 410, 250 A.2d 158 (Ch.Div.1968), aff'd 53 N.J. 260, 250 A.2d 129 (1969); Newark Ins. Co. v. Concord Ins. Co., 115 N.J.Super. 147, 278 A.2d 508 (App.Div.1971); and Unsatisfied Claim & Judgment Fd. Bd. v. Clifton, 117 N.J.Super. 5, 283 A.2d 350 (App.Div.1971).

N.J.S.A. 39:6--46 is that section of the Motor Vehicle Security Responsibility Law which requires all liability insurance policies to provide 'omnibus coverage.' In pertinent part, it reads:

The policy shall: * * * insure the insured named therein and any other person using or responsible for the use of any such motor vehicle with the express or implied consent of the insured.

An insurer's failure to provide this 'omnibus coverage' leaves his customer 'uninsured' for the purposes of the Unsatisfied Claim and Judgment Fund Law. N.J.S.A. 39:6--62.

The New Jersey courts have consistently invalidated insurance clauses purporting to restrict the 'omnibus coverage.' In Willis, supra, the court invalidated a coverage exclusion against individuals driving the insured's automobile with his permission when such individuals had valid and collectible insurance in $10,000/20,000 minimums under their own insurance policies. In Kish, supra, the Appellate Division struck down an exclusionary clause relating to the insured, his spouse or minor children. In Newark, supra, the proviso that the driver be 'duly licensed' was stricken. And in Selected Risks Insurance Co. v. Zullo, 48 N.J. 362, 225 A.2d 570 (1966), a 'scope of permission' clause was stricken.

In each of the above cases the restrictive clause was found to be inconsistent with 'omnibus coverage' and was deleted. In each case, however, the court presented the same statutory authority for doing so; for example, in Zullo When a motorist presents a policy of insurance to the Director of Motor Vehicles in order to obtain the advantages of registering an insured motor vehicle, he is offering 'proof of financial responsibility' as these words are used in N.J.S.A. 39:6--46 and 48. A policy so offered must have the broad form omnibus coverage set forth in N.J.S.A. 39:6--46(a). A policy which purports to have a more restrictive omnibus coverage is automatically amended to conform to the statutory standard. N.J.S.A. 39:6--48(b). (at 373, 225 A.2d at 576.)

It is apparent that the Supreme Court relied upon the last-cited statute which specifically states that insurance policies 'shall be deemed amended to conform with and to contain all the provisions required by this act.' N.J.S.A. 17:28--1.1, the statute involved in the case at bar, contains no parallel authority for striking an insurance policy clause. But the clause in question does deny he insured coverage which the statute says shall be offered. The question which arises is: Can this court, under the rubric of 'public policy,' and without specific statutory authorization, strike an insurance clause it finds repugnant to a statute?

As pointed out in Hannan v. Employers Commercial Union Ins. Co., 117 N.J.Super. 485, 489, 285 A.2d 83 (Law Div.1971), and Exum v. Marrow, 112 N.J.Super. 570, 574, 272 A.2d 298 (Law Div.1970), the clear intendment of the 1969 amendment to N.J.S.A. 39:6--62 (prohibiting holders of uninsured motorists coverage from proceeding against the Fund) and N.J.S.A. 17:28--1 et seq. (making the offer of such coverage mandatory), is to relieve some of the financial burdens of the Fund. This purpose is, of course, accomplished even by limiting an insured to proceeding against one insurer, as defendant urges. But the more general purpose of the Motor Vehicle Security Responsibility Law, N.J.S.A. 39:6--23 to 60, the Unsatisfied Claim and Judgment Fund Law, N.J.S.A. 39:6--61 to 91, and the Motor Vehicle Liability Security Fund Law, N.J.S.A. 39:6--92 to 104, is to provide 'victims of automobile accidents with financially responsible people to look to for damages.' See Zullo, supra, 48 N.J. at 371, 225 A.2d at 575. Both policies can be effectuated by allowing plaintiff to collect from the two insurance companies. Referring to the mandatory offer of uninsured motorists coverage, defendant in its brief concedes that:

(M)anifestly, the purpose of the entire program was to insure for an innocent victim of an uninsured motorist that there would be provision for reimbursement to At least the sum of $10,000./20,000. compensation as required in the Financial Responsibility Statute. (emphasis supplied)

I feel the Motor Club of America policy contains language inconsistent with N.J.S.A. 17:28--1.1. Defendant asks us to declare a forfeiture, contrary to the mandate of the act, to accommodate the insurer. Defendant seeks to confine its insured to a recovery below his asserted loss, which loss is well within the multiple policy limits. The act did not place...