Royal Ins. Co. v. Rutgers Cas. Ins. Co.

• Decision Date: 22 March 1994
• Citation: 638 A.2d 924,271 N.J.Super. 409
• Parties: ROYAL INSURANCE COMPANY, Plaintiff-Respondent and Cross-Appellant, v. RUTGERS CASUALTY INSURANCE COMPANY, Defendant-Appellant and Cross-Respondent, and Sherri L. Davidson, Defendant.
• Court: New Jersey Superior Court — Appellate Division

Page 409

271 N.J.Super. 409

638 A.2d 924

ROYAL INSURANCE COMPANY, Plaintiff-Respondent and Cross-Appellant, v. RUTGERS CASUALTY INSURANCE COMPANY, Defendant-Appellant and Cross-Respondent, and Sherri L. Davidson, Defendant.

Superior Court of New Jersey,

Appellate Division.

Argued Feb. 15, 1994.

Decided March 22, 1994.

Susan L. Moreinis, Collingswood, argued the cause, for appellant and cross-respondent Rutgers Cas. Ins. Co.

James A. Mullen, Jr., Cherry Hill, argued the cause, for respondent and cross-appellant Royal Ins. Co. (Montano, Summers, Mullen, Manuel, Owens & Gregorgio, attorneys; Mr. Mullen, of counsel and on the brief).

Before Judges MICHELS, SKILLMAN and WEFING.

The opinion of the court was delivered by

MICHELS, P.J.A.D.

Defendant Rutgers Casualty Insurance Company (Rutgers) appeals and plaintiff Royal Insurance Company (Royal) cross-appeals from a summary judgment of the Law Division that (1) declared that Rutgers and Royal shall equally pay an underinsured motorist arbitration award and post-judgment interest to defendant Sherri L. Davidson (Ms. Davidson) and (2) ordered Rutgers to reimburse Royal for fifty percent of all costs incurred by Royal in the arbitration proceedings, including the arbitrators' fees and Royal's attorneys' fees. The pivotal issue raised by this appeal is whether the Rutgers insurance policy or the Royal insurance policy provided Ms. Davidson with her primary underinsured motorist coverage or whether both policies provided concurrent coverage and, if so, what amount each policy must contribute toward payment of the award.

The facts giving rise to this appeal are undisputed. Ms. Davidson was injured as a result of an automobile accident involving Ms. Sandra Mimms. Ms. Davidson was operating an automobile owned by her employer, Arrow Pontiac, a Division of Auerbach Chevrolet Corporation. The Arrow Pontiac automobile was insured under a garage policy issued by Royal to Auerbach Chevrolet Corporation which contained underinsured motorist coverage with limits of $500,000 per accident. Ms. Davidson, as part of her compensation package, was permitted to drive the automobile for both personal and business use, but was required to contribute $25 per month towards the cost of the insurance covering that vehicle.

Ms. Mimms was operating an automobile which was insured by a policy with a personal injury liability limit of $25,000. Ms. Davidson made a claim against Ms. Mimms to recover damages for the personal injuries she sustained as a result of the accident. Ms. Mimms' insurance company paid Ms. Davidson the entire $25,000 policy limit in satisfaction of her claim against Ms. Mimms.

At the time of the accident, Ms. Davidson's husband, Carl L. Davidson, owned a GMC truck which he had purchased jointly with Ms. Davidson. He also owned a Chevette passenger automobile.

Both the GMC truck and the Chevette were covered by a Rutgers personal automobile policy which named "Carl L. & Sherri L. Davidson" as insureds and contained underinsured motorist coverage with limits of $300,000 per accident.

After Ms. Davidson settled with Ms. Mimms, she filed an arbitration claim against Rutgers and Royal, seeking to recover the amount of her uncompensated loss under the underinsured motorist provisions of the respective policies. Both Rutgers and Royal refused to pay Ms. Davidson, each contending that its policy provided only excess underinsured motorist coverage, not primary coverage. Prior to the scheduled arbitration hearing, Rutgers informed Ms. Davidson and Royal that it did not intend to participate in the arbitration. Ms. Davidson thereupon instituted an action in the Law Division seeking a court order to compel Rutgers to participate in the arbitration proceedings or, alternatively, to appoint an arbitrator to represent Rutgers at those proceedings. The Law Division did not order Rutgers to appear, but ordered that the arbitrator for Royal also act as the arbitrator for Rutgers.

The arbitration proceeded without the participation of a representative for Rutgers. At the conclusion of the proceedings, the panel of arbitrators awarded Ms. Davidson damages in the total sum of $82,500 for the personal injuries she sustained in the accident. Since Ms. Davidson had received $25,000 from Ms. Mimms' insurance company, her net underinsured motorist award was $57,500. By agreement, the panel of arbitrators did not resolve the issue of the liability of Rutgers and Royal for payment of the award because this issue was to be resolved by the Law Division. Following the arbitration, Royal demanded that Rutgers reimburse it for one-half of the arbitration fees and costs, but Rutgers refused.

Royal thereupon instituted this action in the Law Division against Rutgers and Ms. Davidson, seeking a declaratory judgment that (1) Rutgers pay Ms. Davidson the balance due on the underinsured motorist award of $57,500 on the ground that the On cross-motions for summary judgment, the trial court found that "because of certain factors of Ms. Davidson's employment", the Royal policy "was personal insurance coverage and basically in the nature of first party coverage." The trial court also found that the underinsured motorist coverage of the Rutgers policy issued to Ms. Davidson and her husband was also "personal and basically first party coverage," and ordered that Royal and Rutgers each pay fifty percent of the net arbitration award and that Rutgers reimburse Royal for one-half of the cost of the arbitration proceedings, including the arbitrators' fees and Royal's attorneys' fees. This appeal and cross-appeal followed.

Rutgers policy provided the primary coverage; (2) Rutgers reimburse it for one-half of the fees and costs incurred in prosecuting the arbitration; and (3) Rutgers reimburse it for the attorneys' fees and costs incurred in prosecuting the declaratory judgment action. Rutgers denied that it was under any liability to Royal or to Ms. Davidson because it claimed that the Royal policy provided the primary underinsured motorist coverage and its policy only provided excess coverage. By way of counterclaim, Rutgers sought a declaratory judgment that (1) its underinsured motorist coverage was excess to the primary coverage provided by the Royal policy; (2) it was not under any liability to Ms. Davidson because the net arbitration award of $57,500 was less than the limits of Royal's underinsured motorist coverage; and (3) Royal reimburse it for all attorneys' fees and costs incurred in defending this action. Alternatively, Rutgers contended that if it were under any liability to Ms. Davidson, then it was only liable for its pro rata share of the net arbitration award, based on the proportion that its limit of liability bore to the total limits of all applicable underinsured motorist coverage.

Rutgers seeks a reversal of the judgment, contending that the Royal policy issued to Auerbach Chevrolet Corporation covering the automobile operated by Ms. Davidson was the primary underinsured motorist coverage and that the Rutgers policy issued to Ms. Davidson and her husband covering their automobiles provided Generally, whether or not a policy of insurance provides primary or excess coverage or whether a policy provides concurrent coverage with other available insurance and the extent to which such policy contributes to a loss is governed by the "Other Insurance" provisions of the policies involved. The "Other Insurance" provision of the underinsured motorist coverage contained in Part C of the Rutgers' personal automobile insurance policy provides:

only excess underinsured motorist coverage. Rutgers further contends that since the limits of Royal's primary coverage were sufficient to satisfy the arbitration award, it is not under any liability to Ms. Davidson or under any liability to Royal to pay a part of the cost of arbitration proceedings, including the arbitrators' and attorneys' fees incurred by Royal. We agree and reverse.

If there is other applicable similar insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits.

However, any insurance we provide with respect to a vehicle you do not own, or a vehicle owned by you or any family member which is not insured for this coverage under this policy, shall be excess over any other collectible insurance.

The definitional section of the Rutgers policy, in pertinent part, provides:

In return for payment of the premium and subject to all the terms of this policy, we agree with you as follows:

DEFINITIONS

A. Throughout this policy, "you" and "your" refer to:

1. The "named insured" shown in the Declarations; and

2. The spouse if a resident of the same household.

The "Other Insurance" provision of the Royal policy, provides:

For any covered auto you own this policy provides primary insurance. For any covered auto you don't own, the insurance provided by this policy is excess over any other collectible insurance.

The definitional section of the Royal policy, in pertinent part, provides In return for the payment of the premium and subject to all the terms of this policy, we agree with you as follows:

PART 1--WORDS AND PHRASES WITH SPECIAL MEANING--READ THEM CAREFULLY.

The following words and phrases have special meaning throughout this policy and appear in boldface type when used:

A. "You" and "your" mean the person or organization shown as the named insured in ITEM ONE of the declarations.

Our function in construing these policies of insurance, as with any other contract, is to search broadly for the probable common intent of the parties in an effort to find a reasonable meaning in keeping with the express general purposes of the policies....