An Insurer May Relieve Itself Of Liability by Imposing Conditions Prior To Assuming An Obligation
People who are injured in an auto accident always believe the insurance available from the tortfeasor and an underinsured motorist insurer is insufficient and try valiantly to obtain even more from other insurers. Failing to read and understand a clear and unambiguous exclusion results in losing a motion for summary judgment and a wasteful appeal.
In Ana S. Deras v. Yasamin T. Hamwi, Marisol D. Santos, Government Employees Insurance Company, Defendants, and Allstate New Jersey Property & Casualty Insurance Company, Docket No. A-4167-18T3, Superior Court Of New Jersey Appellate Division (February 11, 2020) Ana S. Deras appealed from an order granting summary judgment to defendant Allstate New Jersey Property & Casualty Insurance Company (Allstate) and denying her request for underinsured motorist (UIM) coverage under Allstate’s policy.
Plaintiff suffered an injury while she was a passenger in a car (host vehicle) involved in an accident with another car (tortfeasor’s vehicle). The host vehicle, insured by Government Employees Insurance Company (GEICO), was owned and driven by plaintiff’s friend. The tortfeasor’s vehicle failed to stop at a stop sign and struck the host vehicle. The tortfeasor’s vehicle was insured by Plymouth Rock Assurance (Plymouth).
Plaintiff sought UIM coverage from Allstate. Allstate denied plaintiff’s UIM claim based on an exclusion in the Policy, prohibiting coverage for resident relatives who are not occupants of a car insured under the Policy, and who are insured under another policy.
Plaintiff’s counsel wrote to Allstate, confirming coverage by GEICO and advising Plymouth made a settlement offer. Counsel also advised of plaintiff’s intent to proceed with her UIM claim against Allstate regardless of the exclusionary language in the Allstate policy.
Plaintiff settled with GEICO and Plymouth. After settling with these insurance companies, plaintiff dismissed all claims except her UIM claim against Allstate.
Allstate filed a motion for summary judgment, seeking dismissal of plaintiff’s complaint because she was not covered under the Policy. The trial judge agreed with Allstate’s denial of UIM coverage, granted Allstate’s motion, and denied plaintiff’s cross-motion.
The interpretation of an insurance contract is a question of law which the appellate courts decide independent of the trial court’s conclusions. Under the Allstate Policy an “insured person” is defined as the policyholder “and any resident relative or civil union partner under New Jersey law.” The Policy defines an “underinsured auto” as a vehicle “to which a liability bond or policy applies at the time of accident but its limit for liability is less than the limit of liability for this coverage.”
There are seven exclusions for which Allstate will not pay any damages an insured person is legally entitled to recover. One of the exclusions states Allstate “will not provide [UIM] coverage to any resident relatives who are not occupants of the insured auto described on the Policy Declarations, including a replacement auto and an additional auto, and who are insured under another auto policy.”
Here, the issue is whether plaintiff is eligible for UIM benefits under the Policy as a resident relative subsequent to her receipt of benefits as an insured under the GEICO policy. In determining whether a claimant shall receive UIM benefits, courts employ a two-step approach. First, the court must determine whether a UIM claimant qualifies for UIM benefits and Second a determination as to whether plaintiff is entitled to the benefits of more than one policy in light of the relevant policies terms.
Plaintiff contends she is entitled to UIM coverage under an Endorsement that provides the coverage limits apply to an insured person who is the named insured or resident spouse of the named insured and any resident relative who is not the named insured or spouse of a named insured on another insurance policy, and who is in, on, getting into or out of an insured auto or non-owned auto.
Plaintiff argued the Endorsement applied and she was entitled to UIM coverage under the Policy.
UIM insurance is essentially a creature of contract law and should be interpreted accordingly.
The appellate court concluded that where the terms of an insurance contract are clear, they are to be accorded their plain and ordinary meaning. The parties to an insurance contract may contract for any lawful coverage, and the insurer may limit its liability and impose restrictions and conditions upon its obligation under the contract not inconsistent with public policy or statute. It is fundamental that in the absence of a statutory prohibition to the contrary, an insurance company has a right to impose whatever conditions it desires prior to assuming its obligations.
Courts enforce the terms of an insurance contract as written, so long as the language is clear. The court concluded that the Endorsement does not apply since there is no UIM coverage. The plain language of the Exclusion states UIM coverage is not available. The court concluded, therefore, that Allstate had the right to relieve itself of liability, as in this situation, by imposing conditions prior to assuming an obligation. There was no UIM coverage as a result of plaintiff’s being deemed an insured under GEICO’s policy.
Because plaintiff was occupying the host vehicle, she was an “insured” under GEICO’s policy, triggering Allstate’s exclusion and depriving her of entitlement to UIM benefits from Allstate.
Failure to RTFP (Read the Full Policy) strikes again. The exclusion used by Allstate is clear and unambiguous. That the plaintiff was an insured of the Allstate policy means nothing if the policy provides no coverage for the injuries she claimed as a result of the actions of the underinsured motorist.
© 2020 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize 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 52 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.