Another Failure of Stipulated Judgment to Get Insurance Money

Contract Between Driver & Owner Controls

When state law only requires insurance up to minimum statutory limits an insurer whose insured allowed another to permissively drive an owned vehicle was asked to provide full limits rather than those required by contract and law.

In Patricia Engrassia, Administratrix Ad Prosequendum, of the Estate of Jason Marles, Deceased v. Erick Uzcategui, Hunterdon Motors, Inc., d/b/a Hunterdon BMW and Federated Mutual Insurance Company, and John Saddy, Saddy Family, LLC, etc., et al. DOCKET NO. A-2755-15T1, Superior Court Of New Jersey Appellate Division (January 11, 2018) the Plaintiff appealed from orders entered by the Law Division which granted in part and denied in part a motion by Federated Mutual Insurance Company (Federated) for summary judgment; granted a motion for summary judgment by Hunterdon Motors, Inc. d/b/a Hunterdon BMW (Hunterdon BMW); and denied plaintiff’s motion for summary judgment.


On November 24, 2010, Erick Uzcategui brought his personal vehicle to Hunterdon BMW for service. Hunterdon BMW provided Uzcategui a BMW X3 as a loaner car, and required that he return the vehicle within twenty-four hours. Hunterdon BMW required Uzcategui to execute a “BMW Rental Agreement for a Temporary Substitute Vehicle” (the BMW Rental Agreement), which provided in pertinent part that he was responsible for all damage or loss to others arising from his use of the vehicle.

Hunterdon BMW was insured by Federated under a commercial garage policy (the garage policy), which had coverage limits of $500,000. Hunterdon BMW also had a commercial umbrella liability policy with Federated (the umbrella policy), with coverage limits of $10,000,000. The umbrella policy covered certain damages that are in excess of the amount of the available primary insurance.

Uzcategui had auto liability insurance coverage through GEICO Indemnity Company (GEICO). His policy provided coverage of $100,000 per person and $300,000 per accident.

On the evening of November 24, 2010, Uzcategui drove the loaner car while intoxicated and collided with another vehicle, causing the death of its driver, Jason Marles. Uzcategui was thereafter convicted of vehicular manslaughter and sentenced to a term of imprisonment.

In December 2011, plaintiff, as representative of Marles’ estate, filed a complaint seeking damages arising from Marles’ death, including claims of conscious pain and suffering and wrongful death. Plaintiff named Uzcategui, Hunterdon BMW, and Federated as defendants.


Plaintiff sought a declaration that Federated was required to provide coverage of $500,000 under the garage policy, and $10,000,000 under the umbrella policy for the claims asserted against Uzcategui. Federated denied liability.

GEICO provided Uzcategui a defense in the action and deposited its full policy limits with the court. NJM intervened and also sought a declaration that Uzcategui was entitled to coverage under the garage policy that Federated issued to Hunterdon BMW. After discovery was completed, plaintiff, Federated, and Hunterdon BMW filed motions for summary judgment.

The Law Division judge determined that the provision of Federated’s garage policy pertaining to Hunterdon BMW’s customers was not an illegal “escape clause.” The judge found, however, that the policy would be reformed and Federated ordered to provide Uzcategui coverage in the amount of $15,000, the minimum level of liability coverage required by New Jersey law, concurrent with the coverage provided under the GEICO policy.

The judge also determined that Federated had no obligation to provide Uzcategui coverage under the umbrella policy. Eventually plaintiff and Uzcategui settled plaintiff’s claims for $9,500,000, plus interest of $934,722, for a total of $10,434,722. The settlement was subject to an agreement not to collect the judgment against Uzcategui.

Trial against the bar, the jury entered a verdict finding that plaintiff had not proven by a preponderance of the evidence that LASV had served Uzcategui alcoholic beverages while he was visibly intoxicated and that Uzcategui was one-hundred percent responsible for the accident and awarded plaintiff damages of $10,082,735.


Plaintiff argues that the provision of the policy pertaining to coverage of Hunterdon BMW’s customers is an illegal “escape clause.” Plaintiff contends the clause unlawfully excludes permissive users of the dealership’s vehicles if those persons have their own auto insurance in amounts that exceed the minimum coverages required by law.

Plaintiff argues that the applicable provision of Federated’s garage policy constitutes an illegal “escape clause” because it fails to provide the coverage required by statute.

Because the Federated garage policy excludes coverage for permissive users of the dealership’s autos who have their own auto liability insurance that exceeds the minimum coverage required by statute the plaintiff claimed the clause is invalid. The appellate court disagreed. The relevant provision of the policy is not an illegal “escape clause,” but rather a valid “step-down” clause. The liability section of the dealership’s policy stated in part that the dealership’s customers are insured, but coverage was limited to the minimum required by law.

The dealership’s policy, which limited coverage for the dealership’s customers “to the statutory minimum, $15,000” and because the statutory minimum was not greater than the liability limits under the dealership’s policy, the driver was not covered by the liability section of that policy.

Under the policy, Federated is not obligated to provide coverage when the customer has insurance with coverage that exceeds the minimum required by law. Thus the relevant provision of the Federated policy is a valid “step-down” clause or limitation on coverage.

Because Uzcategui had auto liability insurance that exceeds the minimum required by law, Federated was not obligated to provide him with coverage under the garage policy.

The BMW Rental Agreement does not state the customer will be given insurance coverage. Moreover, the agreement states that “any” coverage provided will be no higher than the minimum required by law. In light of the clear and unambiguous provisions of the BMW Rental Agreement, Uzcategui could not have any expectation he would be covered by the garage policy, or if covered, that such coverage would be up to the full $500,000 limits of the policy.

The Federated umbrella policy clearly and unequivocally states that it does not provide coverage to customers to whom Hunterdon BMW has entrusted its automobiles. Therefore, the motion judge correctly found that Uzcategui was not entitled to coverage under that policy.

An insurer has a duty to advise its insured of a possible disclaimer of coverage. Plaintiff was not, however, an insured under the Federated policies, and Federated had no duty to inform plaintiff of all the possible reasons it might have to deny coverage to Uzcategui. Moreover, the record shows that Federated made clear before and after the litigation commenced that it was not obligated to provide coverage to Uzcategui. Thus, plaintiff’s claim that Federated is estopped from denying coverage under the umbrella policy is meritless.

In its cross-appeal, Federated argues that although the trial court correctly determined that the provision of its garage policy is not an illegal “escape clause,” the court erred by holding that it was required to provide coverage in the statutory minimum liability coverage of $15,000 to Uzcategui under that policy, concurrent with Uzcategui’s coverage under the GEICO policy. Federated contends the “step-down” clause in the garage policy is valid and should be enforced according to its terms.

It is undisputed that Uzcategui had liability coverage that exceeded that statutory minimum, and for that reason, he was not covered under the Federated garage policy. There was no need to reform the Federated policy to ensure that Uzcategui was insured in the minimum amounts by law since he had bought his own coverage that far exceeded the statutory limit.  The trial court erred by reforming the policy to require Federated to provide liability coverage to Uzcategui under the garage policy in the amount of $15,000.


There is only one reason for this lawsuit: Uzcategui’s only asset was his GEICO policy. If he had any assets above and beyond the limit the plaintiff should have executed upon those assets. In this case the Plaintiff gave up the right to collect on a more than ten million dollar judgment for off chance of collecting from an insurer. A bad bet because the policy was clear and unambiguous.

© 2017 – Barry Zalma

This article, and all of the blog posts on this site, digests and summarizes cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at can be reached at

Mr. Zalma’s reports can be found on Tumbler at  on Facebook at and you can follow him on Twitter at

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.




About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
This entry was posted in Zalma on Insurance. Bookmark the permalink.