Watson v. Agway Ins. Co.

• Decision Date: 20 June 1996
• Citation: 291 N.J.Super. 417,677 A.2d 788
• Parties: Peter S. WATSON, Individually and as General Administrator and Administrator ad prosequendum of the Estate of Kathleen S. Watson, Plaintiff-Respondent/Cross-Appellant, v. AGWAY INSURANCE COMPANY and First Trenton Indemnity Company, Defendants/Appellant/Respondent/Cross-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 417

291 N.J.Super. 417

677 A.2d 788

Peter S. WATSON, Individually and as General Administrator and Administrator ad prosequendum of the Estate of Kathleen S. Watson Plaintiff-Respondent/Cross-Appellant, v. AGWAY INSURANCE COMPANY and First Trenton Indemnity Company Defendants/Appellant/Respondent/Cross-Appellant.

Superior Court of New Jersey Appellate Division.

Argued March 19, 1996.

Decided June 20, 1996.

Sharon K. Galpern, Voorhees, argued the cause for appellant Agway Insurance Company (Stanley P. Stahl, attorney).

William J. Cook, Westmont, argued the cause for respondent/cross-appellant Peter S. Watson (Brown & Connery, attorneys).

Lawrence D. Lally, Cherry Hill, argued the cause for respondent First Trenton Indemnity Company (Montano, Summers, Mullen, Manuel, Owens & Gregorio, attorneys).

Before Judges KEEFE, WEFING and A.A. RODRIGUEZ. ¹

The opinion of the court was delivered by

KEEFE, J.A.D.

In this declaratory judgment action, defendant Agway Insurance Co. (Agway), appeals from the entry of summary judgment in favor of plaintiff Peter S. Watson holding that there was underinsured motorist (UIM) coverage available under Agway's business automobile and excess policies for the benefit of plaintiff's decedent Kathleen Watson. We affirm.

On July 5, 1994, plaintiff Peter Watson's wife, Kathleen, was fatally injured in an automobile accident. The accident was caused when a vehicle driven by Francis Montgomery failed to stop for a stop sign and flashing red light and collided with Kathleen's vehicle. Colonial Penn Insurance Company was the liability insurer of the Montgomery automobile. It tendered its single limit liability coverage of $100,000 in settlement of the case against its insured.

At the time of the accident, Kathleen was driving a leased vehicle which was a temporary substitute for her personal automobile that was being repaired. Her personal automobile was insured by defendant First Trenton Indemnity Co. (First Trenton). Defendant Agway was the insurer under a business automobile policy and an excess insurance policy in which "Peter Watson, David Watson T/A Watson Farms" were the named insureds. Plaintiff notified First Trenton and Agway of his intention to make UIM claims against them, and his intentions to settle with Colonial Penn. Neither Agway nor First Trenton objected to plaintiff's acceptance of the settlement. Agway denied UIM coverage for damages resulting from Kathleen's death under its auto and excess policies.

Plaintiff instituted this declaratory judgment action against Agway and First Trenton, seeking a determination that both First Trenton and Agway provided $500,000 in primary UIM coverage, and that Agway provided an additional $1,000,000 in excess UIM coverage. Plaintiff moved for summary judgment seeking the relief sought in his complaint as well as counsel fees. First Trenton cross-moved, essentially taking the same position as plaintiff in respect of the Agway policies, but also seeking a declaration that First Trenton's policy was excess to Agway's. Agway cross-moved seeking a determination that neither of its policies provided UIM coverage for Kathleen's accident.

Agway argued that there was no coverage because the named insured in the Agway policies is a partnership, and, as such, the wife of an individual partner cannot receive third party UIM benefits under the terms of either policy. The Law Division judge, Lee B. Laskin, rejected that argument. He ruled that the Agway policies provided UIM coverage for Kathleen; that the Agway and First Trenton policies were co-primary and afforded $200,000 in UIM coverage under each policy; and that Agway's excess policy provided an additional $1,000,000 of coverage. Plaintiff's application for attorney fees was denied.

Agway appeals from that decision and plaintiff cross-appeals from the denial of counsel fees. First Trenton joins in plaintiff's contention that the Agway policies afford UIM coverage in these circumstances. Neither insurer challenges the trial court's determination of co-primary coverage in the event we hold that there is coverage under the Agway policies. Agway concedes on appeal that if we find UIM coverage under the auto policy, there is also coverage under the excess policy, inasmuch as the arguments made under the auto policy are the same as those advanced under the excess policy. Therefore, we shall focus our analysis on the terms of the auto policy.

The declarations page of the Agway policy describes the coverage as "COMMERCIAL AUTO COVERAGE PART/ BUSINESS AUTO DECLARATIONS." The "Named Insured" is identified as "Peter Watson, David Watson T/A Watson Farms." Underneath the designation of the named insured, the policy has the following words contained on one line: "Form of Business: [ ] Individual [x] Partnership [ ] Corporation [ ] Other ________." As indicated, the box next to the word "Partnership" was marked with an "x." The policy provided for liability coverage of $500,000 with uninsured (UM) and UIM coverage in the same amount.

The UIM endorsement affords coverage to an "insured" who is entitled to recover compensatory damages from the owner or driver of an "underinsured motor vehicle." It is conceded for the purpose of this litigation that the Montgomery vehicle was underinsured. An "insured" is defined in the endorsement as:

1. You.

2. If you are an individual, any "family member."

3. Anyone else "occupying" a covered "auto" or a temporary substitute for a covered "auto." The covered "auto" must be out of service because of its breakdown, repair, servicing, loss or destruction.

4. Anyone for damages he or she is entitled to recover because of "bodily injury" sustained by another "insured."

A "family member" is defined in the endorsement as "a person related to you by blood, marriage, or adoption who is a resident of your household, including a ward or foster child." The word "you" is not defined in the endorsement, but it is defined elsewhere in the policy this way:

Throughout this policy the words "you" and "your" refer to the Named Insured shown in the Declarations.

Plaintiff reasons that "you" in paragraph one of the UIM endorsement refers to Peter in the context of the facts of this case because he is a named insured on the declarations page of the policy. Further, Peter is an "individual." Therefore, inasmuch as Kathleen is Peter's "family member," she is an insured under the terms of paragraph two of the endorsement.

Agway, however, contends in its brief that while

Peter Watson and David Watson standing alone may be individuals[,] ... when taken together as designated on the policy, they are a partnership unit. Peter Watson and David Watson are not insured as "individuals" but instead, are insured as a "partnership" under the explicit terms of the Agway policies.

At oral argument, great emphasis was placed on the fact that an "x" was typed in the box next to "partnership" as the form of business being engaged in by the named insureds. However, Agway has failed to point to anything in the policy which makes that designation a significant factor in determining coverage. As we read the policy, coverage is determined by how the "named insured" is described in the policy, not what business form the named insured has elected to utilize. We reiterate, the "named insured" in the Agway policy is designated as "Peter Watson, David Watson T/A Watson Farms." The named insured is not, for example, "Watson Farms, a partnership."

Despite Agway's contention that Peter and David Watson are not insured as "individuals," its conduct and statements reveal otherwise. Several endorsements to the auto policy, effective as of June 20, 1994, the original issue date of the policy, refer to the "named insured" as "Peter Watson, David Watson." Agway's counsel's letter of November 15, 1994, recognized that "Peter Watson is a named insured under both Agway policies." Agway, through a representative at depositions, agreed with its counsel's statement in that letter. He also acknowledged that the word "you" as used in the policy in general, and specifically as used in the UIM endorsement, referred to Peter Watson as a named insured. Further, the representative acknowledged that Peter Watson would be covered under the UIM endorsement as the "you" referred to in paragraph one of the endorsement; that he was the same "you" referred to again in paragraph two, and that Kathleen was a "family member." Finally, he admitted that Peter Watson would be entitled to UIM coverage even if he were operating a non-covered automobile under the policy.

Notwithstanding these admissions, Agway maintains that there is no coverage for Peter Watson as an "individual." Agway's argument comes to this: Peter Watson, the natural person, loses his identity as an individual because he is a partner in Watson Farms. Reduced to its essence, the argument is untenable because it is contrary to the reasonable expectations of an average person who reads the policy and is conversant with the English language. Doto v. Russo, 140 N.J. 544, 556, 659 A.2d 1371 (1995). Nowhere in the policy does it state that where a natural person is listed as a named insured, the natural person qualifies as "you" for UIM coverage for himself or herself, but is not an "individual" in order to qualify a family member for the same coverage. Indeed, the word "individual" is not defined in the endorsement or elsewhere. Therefore, it must be given its common sense meaning in the context in which it is used: "a single human being as contrasted with a social group or institution." Webster's Third New International Dictionary, 1152 (1966).

The best that can be said for the policy language in light of Agway's argument is that it is ambiguous, which is of no solace to Agway. If the controlling language of an insurance policy supports two interpretations, one favorable to the insurer and the other favorable to the insured, courts are obliged to adopt the...