List Your Owned Auto on Policy or Be Self-Insured

Auto Must Be Identified on Policy to Provide Coverage

Classic automobiles often require a specialty insurer to insure the risks of loss to the classic automobile or caused by the operator of a classic auto. For that reason the basic auto insurer is not equipped to insure such a limited type of risk. When a family owned a classic and powerful Ford Shelby Cobra automobile they insured it separately from other autos owned by the family.

In Melissa P. Silverman v. Robert H. Digiorgio and Robert V. Digiorgio v. New Jersey Manufacturers Insurance Company and America Modern Home Insurance Company, Docket NO. A-4542-16T2, Superior Court Of New Jersey Appellate Division (April 2, 2018) Plaintiff Melissa P. Silverman was a passenger in a specialty car, a 1967 Ford Shelby Cobra, driven by defendant Robert H. DiGiorgio. She was badly injured when the driver lost control of the car and it struck a utility pole. The car burst into flames and both plaintiff and the driver were extracted from the vehicle.

FACTS

The Shelby was owned by the driver’s father, defendant Robert V. DiGiorgio. The father allowed the son, who lived with his parents, to have access to the car whenever he wanted to drive it so long as the father was not using it. As a specialty car, the Shelby had historic vehicle “QQ” license plates. The car was driven only a few hundred miles each year.

The Shelby was insured on a $500,000 policy with American Modern Home Insurance Company (“American”), with an annual 3,000 mile usage restriction. In addition to the American policy, the son’s mother Jean had a $500,000 auto policy with New Jersey Manufacturers Insurance Company (“NJM”) listing four other vehicles of the household as “covered autos,” but did not list the Shelby.

Paintiff sued the father and son for personal injuries. Those defendants, in turn, brought third-party complaints against American and NJM seeking a declaration of coverage for the accident.

Plaintiff settled with defendants for $1 million, memorializing that sum in a consent judgment. American paid an unspecified amount to plaintiff, and was dismissed from the case.

NJM moved for summary judgment, arguing that the terms of its policy did not cover the son’s accident. Assignment Judge Yolanda Ciccone granted the motion, construing the NJM policy to exclude the son’s operation of the Shelby.

THE POLICY

The NJM policy affords liability and indemnity protection to policyholders for their “covered autos,” defined in pertinent part to encompass the vehicles listed in the policy’s Declarations page. The Shelby was not listed as such a covered auto on the Declarations page.

An “insured” under the NJM policy is defined, in pertinent part, to include “You or any family member for the ownership, maintenance or use of any auto or trailer[,]” as well as “[a]ny person using your covered auto.” Thus, even though the Shelby was not listed by the DiGiorgios as a “covered auto,” the policy additionally supplies coverage for the use of a non-covered auto by “you” or by “any family member,” subject to the policy’s Exclusions.

Nonetheless, the “Exclusions” section of the policy is important because it can negate any viable claim for coverage in this case and provides at Exclusion B.2(a) that disallows coverage for “[a]ny vehicle, other than your covered auto, which is . . . owned by you . . . .” Indisputably, the Shelby is owned by the father.

THE APPEAL

The interpretation of an insurance contract is an issue of law. As a starting point in the analysis of an insurance coverage issue, courts look to the plain and ordinary meaning of the words contained in the carrier’s policy.

The purpose of a policy’s exclusionary clause is to allow an insurer to protect itself from covering all automobiles available to the insured’s use, even if the policy was bought for one automobile.

The appellate court concluded that the “DiGiorgios would readily understand that NJM did not intend to cover their son with respect to an automobile which a reasonable person would know ought to be listed in the policy for a further premium allocated to it.” The Shelby was conspicuously omitted from the Declarations page listing the other four vehicles of the household.

The DiGiorgios obtained the American policy to cover the Shelby because that specialty car was not on the NJM policy. Indeed, NJM derived no premium for that extra risk and probably would not have insured the Shelby if asked.

Exclusion B.2(a) negates the claim of coverage.

The trial court’s decision denying coverage was affirmed.

ZALMA OPINION

I once owned a classic car – it was a mistake – it was almost impossible to insure. I found that the insurer who had no trouble insuring my basic transportation cars refused to insure the classic. I assume the DiGiorgios had the same problem and that is why they did not list the Shelby on their NJM policy and purchased a limited cover from American. American paid the claim and NJM properly refused.


© 2018 – 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 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

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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.

 

 

 

 

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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.
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2 Responses to List Your Owned Auto on Policy or Be Self-Insured

  1. Thomas Murin says:

    I believe it would have been a pretty good idea to have an umbrella policy. NJM is a direct writer. American Modern is not. I wonder if an E & O claim will be pursued if there’s an agent involved.

    • Barry Zalma says:

      You are quite correct. Where there is a loss there is usually a lawsuit unless going through this appeal blew the statute of limitations.

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