Travelers Indem. Co. v. Mongiovi

Decision Date03 June 1975
Citation135 N.J.Super. 452,343 A.2d 750
PartiesTRAVELERS INDEMNITY COMPANY, Plaintiff-Appellant, v. Susan MONGIOVI et al., Defendants-Respondents.
CourtNew Jersey Superior Court — Appellate Division

Daniel J. Keenan, West Orange, for plaintiff-appellant.

Benjamin L. Bendit, Newark, for defendant-respondent Susan Mongiovi (Bendit, Weinstock & Sharbaugh, Newark, attorneys).

Leonard M. Goodman, West Orange, for defendants-respondents Loss Adjustment Corp., Inc. and Leatherby Ins. Co. (Goodman & Lustgarten, West Orange, attorneys).

Before Judges MATTHEWS, FRITZ and BOTTER.

The opinion of the court was delivered by

BOTTER, J.A.D.

This is an appeal from the refusal of the trial judge to stay arbitration demanded by Susan Mongiovi of her insurer, Travelers Indemnity Company (Travelers), under an uninsured motorists endorsement (see N.J.S.A. 17:28--1.1) to her automobile insurance policy.

For the purposes of this action the following facts are not disputed. Mongiovi was sitting in her parked car on June 5 1972 when it was struck by an automobile owned by Ruperta Castro and operated by Regustian C. Mendez. The Castro auto was insured by Leatherby Insurance Co. (Leatherby).

Mongiovi sued Castro for damages and her attorneys sent a copy of the summons and complaint to Leatherby. Thereafter Leatherby notified Castro that it was 'expressly disclaiming all coverage under your policy 524326, because of your lack of cooperation.' A copy of said disclaimer letter was sent to Mongiovi's attorneys, who, in turn, sent the letter to Travelers and informed Travelers that: 'Since there has been a disclaimer, we are making claim under the Uninsured Motorist provisions of the Travelers Policy.'

Travelers apparently resisted Mongiovi's claim, and Mongiovi's attorneys demanded arbitration by the American Arbitration Association. In response, Travelers filed the complaint in this action and, on October 5, 1973, obtained an order to show cause why the arbitration hearing should not be stayed. The complaint asserts that the Castro vehicle was not an 'uninsured' vehicle at the time of the accident; that Leatherby cannot disclaim if it was not prejudiced by the lack of cooperation; That the coverage afforded to Mongiovi under her insurance policy must be judicially determined as a condition precedent to arbitration (see Visselli v. American Fedelity Co., 155 Conn. 622, 237 A.2d 561 (Sup.Ct.Err.1967)), and that arbitration, pursuant to the endorsement, applies only to a dispute as to (a) the liability of the owner or operator of the Castro vehicle and/or (b) the amount of damages, if any. The complaint sought a stay of the arbitration, a determination of the 'validity of the attempted disclaimer,' a determination of Mongiovi's right to arbitration, and such other relief as may be appropriate.

The trial judge ruled that Mongiovi was entitled to pursue her claim for damages against Travelers. Accordingly, he refused to stay the arbitration proceeding. Implicit in this determination is the holding that the Castro vehicle was an 'uninsured' vehicle within the meaning of the uninsured motorists endorsement issued by Travelers to Mongiovi. It is from the order denying the stay of arbitration that Travelers has appealed, although the issue of Leatherby's right to disclaim has not been resolved in the lower court. 1

The trial judge found that the right of Mongiovi to assert her claim for damages against Travelers in arbitration required a determination of whether 'the notice of disclaimer rendered the Castro car uninsured.' The trial judge applied the literal language of the policy endorsement and concluded that the uninsured motorists coverage could be invoked by Mongiovi since the endorsement defined an uninsured highway vehicle to include a vehicle insured by a company which 'denies coverage' under its policy.

Since the Castro carrier denied coverage, 'arbitration is available' to Mongiovi, the trial judge held. Also rejected was the contention of Travelers that Leatherby's right to disclaim must be adjudicated before Mongiovi can proceed with her claim against Travelers.

In our view, the disclaimer by Leatherby makes the Castro vehicle an 'uninsured' vehicle within the meaning of the Travelers uninsured motorists endorsement. Therefore, Mongiovi can demand payment under that coverage without first concluding her claim against the driver of the Castro vehicle, and without Leatherby's right to disclaim having first been adjudicated. The insurance coverage afforded by the policy endorsement is defined therein as follows:

I. UNINSURED MOTORISTS COVERAGE

(Damages for Bodily Injury and Property Damage Caused by Uninsured Highway Vehicles)

The company will pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle because of bodily injury or property damage, caused by accident and arising out of the ownership, maintenance or use of such uninsured highway vehicle; provided, for the purposes of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and the company or, if they fail to agree, by arbitration.

No judgment against any person or organization alleged to be legally responsible for the bodily injury or property damage shall be conclusive, as between the insured and the company, of the issues of liability of such person or organization or of the amount of damages to which the insured is legally entitled unless such judgment is entered pursuant to an action prosecuted by the insured with the written consent of the company.

Exclusions

This insurance does not apply:

(a) to bodily injury or property damage with respect to which the insured, his legal representatives or any person entitled to payment under this insurance shall, without written consent of the company, make any settlement with any person or organization who may be legally liable therefor; * * *

An 'uninsured highway vehicle' is defined as follows:

(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; or * * *but the term 'uninsured highway vehicle' shall not include: (1) an insured highway vehicle, * * *. (Emphasis added.)

The literal language of the policy, as the trial court found makes the Castro vehicle an 'uninsured' vehicle for the purposes of the endorsement, since Castro's insurance company 'denies coverage' under its policy. It is asserted, however, that the definition is ambiguous, since, by other terms, it excludes 'an insured highway vehicle.' Travelers contends that if it is determined that Leatherby had no right to disclaim, the Castro vehicle would remain an 'insured' vehicle, and thus it would not be an 'uninsured' vehicle.

Admitting some ambiguity, the first answer is to say that such ambiguity should be interpreted in favor of the insured and against the insurance company which drafted the policy endorsement. Butler v. Bonner & Barnewall, Inc., 56 N.J. 567, 576, 267 A.2d 527 (1970); Allen v. Metropolitan Life Ins. Co., 44 N.J. 294, 305, 208 A.2d 638 (1965). However, it is not necessary to rely solely on this principle. The terms of this endorsement, when carefully analyzed, confirm that the result reached was probably intended by the draftsman, whatever laymen may have understood the endorsement to mean.

To start with, the literal terms are satisfied notwithstanding the apparent ambiguity. We know that Castro's insurance company 'denies coverage' under the 'insurance policy applicable at the time of the accident.' We do not know whether the disclaimer will be legally effective; therefore, we do not know whether the Castro vehicle is or is not an 'insured' vehicle with respect to this accident. For the purposes of this endorsement, then, it is clear that an uninsured vehicle includes a vehicle with an insurance policy at the time of the accident issued by a company which later 'denies coverage thereunder.' Such a vehicle cannot also be deemed an 'insured' vehicle, since by previous definition it has been labeled an 'uninsured' vehicle for the purposes of the policy.

There is other language which supports this conclusion. Clause I, 'Uninsured Motorists Coverage,' first quoted above, provides that no judgment obtained by the insured against 'any person or organization' liable to the insured for damages 'shall be conclusive, as between the insured and the company (Travelers)' as to liability or damages 'unless such judgment is entered pursuant to an action prosecuted by the insured With the written consent of the company.' (Emphasis supplied.) Coverage is also excluded for personal injuries or property damage claims if the insured 'without the written consent of the company' makes 'any settlement' with the persons 'legally liable therefor.' These provisions prohibiting suit or settlement without consent of the insurer are said to be aimed at protecting the insurer 'against multiple lawsuits in which its interests may be adversely affected without its being given adequate representation * * *.' Annotation, 'Uninsured Motorist Endorsement: validity and enforceability of provision for binding arbitration, and waiver thereof,' 24...

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