State Farm Mut. Auto. Liability Ins. Co. v. Kiser
| Decision Date | 16 May 1979 |
| Citation | 168 N.J.Super. 230,402 A.2d 952 |
| Parties | STATE FARM MUTUAL AUTOMOBILE LIABILITY INSURANCE COMPANY, Plaintiff-Appellant, v. Earl R. KISER and Rosemary Kiser, Defendants-Respondents, and New Jersey Property Liability Insurance Guaranty Association, as successor tothe interest of Gateway Insurance Company, and Doris S. Greenberg, Defendants. |
| Court | New Jersey Superior Court — Appellate Division |
James J. Casby, Jr., Cherry Hill, for plaintiff-appellant (Casby, Garrigle & Chierici, Cherry Hill, attorneys; Richard C. Borton, Cherry Hill, on the brief).
John C. Babin, Williamstown, for defendants-respondents (Nicholas A. Lacovara, Williamstown, attorney).
Before Judges LORA, MICHELS and LARNER.
The opinion of the court was delivered by
LARNER, J. A. D.
This appeal presents the question whether an injured person can recover under the uninsured motorist endorsement of his automobile liability policy where he has a covered claim against the New Jersey Property Liability Insurance Guaranty Association (Association) as a consequence of the insolvency of the tortfeasor's insurance carrier.
Earl R. Kiser and his wife Rosemary Kiser sustained personal injuries as a result of an automobile accident with the vehicle of Doris S. Greenberg, a Pennsylvania resident, on September 10, 1972. The Kisers were covered by two automobile policies issued by plaintiff State Farm Mutual Liability Insurance Company (State Farm), which contained uninsured motorist (UM) coverage mandated by N.J.S.A. 39:6A-14 and N.J.S.A. 17:28-1.1. Greenberg's vehicle was insured at the time of the accident through a policy issued by Gateway Insurance Company (Gateway).
In August 1974, Gateway was declared insolvent by a court of competent jurisdiction of Pennsylvania, which triggered the involvement of the Association and its duty to undertake the obligations of Gateway, the insolvent insurer, with respect to payment of covered claims. N.J.S.A. 17:30A-8.
The Kisers filed a claim with the Association and were advised on March 25, 1975 that "the claim must be handled by the Pennsylvania Guarantee Association." A subsequent letter of May 16, 1975 from the Association explained that when there are two such associations involved, the claimant shall seek recovery first from the Association of the place of residence of the assured namely, Pennsylvania. Further inquiry of the Pennsylvania Association elicited the response that under the Pennsylvania statute the claimants must exhaust their remedies under the uninsured motorist coverage of State Farm. 1 40 Pa.Stat.Ann. § 1701.503.
Faced with the prima facie rejection of the claim by the Associations of both states, the Kisers made a demand for arbitration under their State Farm policies. This was followed by the filing of a declaratory judgment complaint by State Farm and an order staying the arbitration pending disposition of the litigation in the Law Division.
The matter was heard by the trial judge on cross-motions for summary judgment. After an appropriate hearing he granted judgment for the Kisers and dissolved the stay of arbitration. Upon filing of the notice of appeal by State Farm the trial judge again ordered a stay of arbitration pending disposition of the appeal. The rationale underlying the decision below is that the policy language clearly mandates coverage under the undisputed facts herein.
The key clause of the policy relates to the following definition of an "uninsured highway vehicle":
"uninsured highway vehicle" means:
(a) a highway vehicle with respect to the ownership, maintenance or use of which there is, in at least the amounts specified by the financial responsibility law of the state in which the insured highway vehicle is principally garaged, no bodily injury and property damage liability bond or insurance policy applicable at the time of the accident with respect to any person or organization legally responsible for the use of such vehicle, or with respect to which there is a bodily injury and property damage liability bond or insurance policy applicable at the time of the accident but the company writing the same denies coverage thereunder or is or becomes insolvent.
Under this policy the insured and his spouse are entitled to recover for bodily injury such damages as they would be legally entitled to recover from an owner or operator of an uninsured highway vehicle. An uninsured vehicle is defined as one without insurance of at least the amount required by the financial responsibility law of this State. It also may consist of an insured vehicle wherein the company has denied coverage or is or Becomes insolvent. Since Gateway was declared insolvent by the Pennsylvania court, the uninsured motorist coverage came into play and the Kisers, as assureds, qualified for payment thereunder.
State Farm urges that the substitution of the Association for insolvent Gateway under the provisions of N.J.S.A. 17:30A-1 Et seq., which makes available a fund for the payment of claims against insolvent insurers, renders its UM coverage inapplicable. It particularly points to N.J.S.A. 17:30A-8(a) (2), which provides:
a. The association shall
(2) Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent.
Although this argument may have some surface appeal, further analysis leads to the conclusion that it is without merit in the context of the contractual undertaking of State Farm by clear and explicit language in its own policies. Although the existence of the Association creates another potential source of recovery of claims against the assureds of Gateway, such an available remedy does not affect the contractual right of the Kisers to recover from their own carrier when the policy condition has been met, namely, either a denial of coverage or the insolvency of the carrier. Either of these factors triggers the right to invoke UM coverage via the very definitional term of " uninsured highway vehicle."
It must be noted that the State Farm policy is not couched in terms of collectibility, and that it is immaterial whether or not the assured may be able to recover damages from any other source or fund. Since the policy mandates coverage when the tortfeasor owns or operates an uninsured highway vehicle, the touchstone of liability must be...
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