Title: Joao Zacarias v. Allstate Insurance Company, et als.

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). VERNIERO, J., writing for a majority of the Court. This appeal involves a declaratory judgment action in which the plaintiff-policyholder (Zacarias) seeks indemnification from defendant-insurer (Allstate) in connection with a suit brought against him by his wife for injuries she sustained in a boating accident. Plaintiff, Joao Zacarias, owned a boat insured by Allstate Insurance Company. The declarations page of plaintiff's boatowner's policy outlined the coverages and limits of liability and indicated that those coverages and limits were subject to several endorsements, the first of which was the boatowner's policy. The boatowner's policy in this case included an intra-family exclusion, which excluded from coverage bodily injury to an insured person or property damage to property owned by an insured person. The policy definition of insured person included the insured him or herself, as well as any relative living in the insured's household. On September 3, 1995, Zacarias was operating his boat with his wife on board. During that trip, Zacarias allegedly operated the boat in a negligent manner, as a result of which his wife suffered injuries. Zacarias submitted a claim to Allstate in his wife's behalf, but Allstate disclaimed coverage based on the intra-family exclusion in the policy. Thereafter, Zacarias's wife sued him for the injuries she sustained. Allstate provided a defense for Zacarias under a reservation of rights. Zacarias then filed this declaratory judgment action against Allstate seeking to void the intra-family exclusion, or, in the alternative, to compel Allstate to indemnify him because of its alleged failure to inform him of the exclusion. The matters were consolidated and both parties moved for summary judgment. The trial court granted summary judgment in favor of Allstate and dismissed Zacarias's action. A majority of the Appellate Division affirmed the trial court's disposition, holding that the policy was free of ambiguity and was to be given its plain and ordinary meaning. The dissenting member concluded that the policy should be read to conform to the reasonable expectations of the insured, who purchased insurance with the intention of covering all legally cognizable liability claims arising from the use of his boat. The appeal is before the Supreme Court as of right, based on the dissent below. HELD: The terms of the Allstate boatowner's policy, which contained an intra-family coverage exclusion, were unambiguous and should be enforced. 1. In the absence of any ambiguity, courts should not write for the insured a better policy of insurance than the one purchased. However, when there is ambiguity in an insurance contract, courts interpret the contract to comport with the reasonable expectations of the insured, even if a close reading of the written text reveals a contrary meaning. (pp. 4-10) 2. New Jersey courts, as well as courts in other jurisdictions, have found intra-family exclusions, similar to the one contained in Zacarias's policy, to be unambiguous. (pp. 10-14) 3. In enforcing an insurance policy, courts will depart from the literal text and interpret it in accordance with the insured's understanding if the text appears overly technical or contains hidden pitfalls, cannot be understood without employing subtle or legalistic distinctions, or requires strenuous study to comprehend. However, the plain terms of the contract will be enforced if the entangled and professional interpretation of an insurance underwriter is not pitted against that of an average purchaser of insurance. (p. 14) 4. The Allstate policy language in this case is direct and ordinary, and the intra-family exclusion contained therein does not require an entangled and professional interpretation to be understood. Thus, the terms of the policy, being unambiguous, should be enforced. (pp. 14-15) 5. An insurance contract is not per se ambiguous because its declarations sheet, definition section, and exclusion provisions are separately presented. (pp. 15-17) 6. The one page most likely to be read and understood by the insured is the declarations sheet. Thus, insurers are well advised to explore ways to incorporate as much information as may be reasonably included in the declarations sheet. (pp. 17-18) 7. Courts should construe insurance policies against the insurer, consistent with the reasonable expectations of the insureds, when those policies are overly complicated, unclear, or written as a trap for the unguarded consumer. (p. 18) 8. Although the insurance industry is urged to write more discernible policies to avoid future disputes, the policy at issue here, while not perfect, is sufficiently clear when reviewed under the rules of construction traditionally employed in this setting. (pp. 18-19) Judgment of the Appellate Division is AFFIRMED. JUSTICE LONG filed a separate dissenting opinion in which JUSTICE ZAZZALI joined. Justice Long concluded that the boatowner's policy purchased by Zacarias was not unambiguous and would require a great effort on the insured's part to discern the coverage provided. Thus, Justice Long would have applied the reasonable expectations doctrine and would have ruled in favor of the plaintiff to afford coverage in this case. CHIEF JUSTICE PORITZ and JUSTICES STEIN and LaVECCHIA join in JUSTICE VERNIERO's opinion. JUSTICE LONG has filed a separate dissenting opinion in which JUSTICE ZAZZALI joins. JUSTICE COLEMAN did not participate. JOAO ZACARIAS, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY and GEORGE D. SINCOX, Defendants and Third-Party Plaintiffs-Respondents, v. MARIA ZACARIAS, Third-Party Defendant. Argued February 14, 2001 -- Decided July 3, 2001 On appeal from the Superior Court, Appellate Division, whose opinion is reported at 330 N.J. Super. 231 (2000). Gary Alan Blaustein argued the cause for appellant. John G. Tinker, Jr., argued the cause for respondents (Leary, Bride, Tinker & Moran, attorneys). The opinion of the Court was delivered by VERNIERO, J. In this declaratory judgment action, plaintiff seeks indemnification from defendant insurer in connection with a suit brought against him by his wife for injuries sustained in a boating accident. Specifically, plaintiff asks that we set aside the intra-family exclusion in his boatowner's insurance policy. The trial court ruled in favor of the insurer. A divided panel of the Appellate Division likewise denied plaintiff his requested relief, concluding that the exclusion was plainly written and thus valid. We agree and affirm. See also Gerhardt, supra, 48 N.J. at 298 (observing that policy was ambiguous in part because exclusion was not on declarations sheet). We share the sentiments expressed by the Appellate Division in Lehrhoff in respect of the importance of the declarations sheet. We do not, however, interpret Lehrhoff to require an insurer to include an intra-family exclusion on the policy's declarations sheet in all cases. After an extensive analysis of the declarations sheet, as compared to the limits of coverage contained elsewhere in the policy, the Lehrhoff court found that the general definition section would unfairly defeat the insured's reasonable expectations of coverage. Id. at 350. In this case, in contrast, we find no ambiguity, inconsistency, or contradiction between the declarations sheet and the body of plaintiff's policy. As noted, the declarations sheet alerts the insured that the coverages and limits of liability are subject to the provisions of the policy, one of which is the intra- family exclusion. Also as noted, the exclusion itself is written in direct and ordinary terms. Similarly, in Werner Industries, Inc. v. First State Insurance Co., 112 N.J. 30 (1988), this Court harmonized the declarations page with the balance of the policy and found no ambiguity. We approvingly noted the rationale expressed in other jurisdictions that courts should not focus 'on one sentence of th[e] policy's Conditions section . . . to the exclusion of the balance of the contract. Such an interpretation is distorted and legally inappropriate.' Id. at 37 (quoting Wurth v. Ideal Mut. Ins. Co., 518 N.E.2d 607, 612 (Ohio 1987)). See also Emerson, supra, 102 Wash. 2d at 484-85 (rejecting argument that policy was ambiguous because it required insured to cross-reference exclusion with other provisions). In sum, an insurance contract is not per se ambiguous because its declarations sheet, definition section, and exclusion provisions are separately presented. A rule of construction forcing insurers to avoid all cross-referencing in policies would require them to reprint the entire definition section on each page of the policy, or to define each term every time it is used. That proliferation of fine print would itself demand strenuous study and run the risk of making insurance policies more difficult for the average insured to understand. JOAO ZACARIAS Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY and GEORGE D. SINCOX, Defendants and Third-Party Plaintiffs-Respondents, v. MARIA ZACARIAS, Third-Party Defendant. LONG, J., dissenting. I do not subscribe to the judgment of my colleagues in this rather straightforward case. Their conclusion that the boat liability policy purchased by Zacarias is not ambiguous is footed on a Herculean effort by an insured. The scope of that effort was set forth precisely by Judge Pressler who dissented below: To begin with, the declarations page of this policy identifies only plaintiff-husband, Joao Zacarias. Nor is he even referred to as the named insured, a designation which, to a careful reader of the declarations page, might suggest some limitation or qualification to come. Certainly the declarations page in no way itself suggests that anyone else is an insured. This is, as we have pointed out, both a casualty and a liability policy. The terms of the liability coverage appears on page ten, which one could locate there either by consulting the table of contents on page one of the policy or by simply flipping through the policy. The section begins with the heading Losses We Cover. Those losses are defined as all sums arising from an accidental loss which an insured person becomes legally obligated to pay as damages because of bodily injury or property damage resulting from the ownership, maintenance, or use of covered water craft, boat equipment or boat trailers. There is, of course, nothing in this definition to suggest that there is any insured person other than the person identified on the declarations page. Thus the sole person who is named on the declarations page could safely assume that if he became legally obligated to pay damages to a family member because of his negligence, he would be covered therefor. Then comes the second portion of the liability coverage entitled Losses We Do not Cover. In addition to the usual exclusions for intentional or criminal conduct of an insured person, illegal or business use of the boat, workers' compensation claims, and the like, is paragraph 2, which provides in full that: We do not cover bodily injury to an insured person or property damage to property owned by an insured person. There is still nothing to suggest to the reader of the liability coverage that there is any insured person subject to this exclusion other than the insured named in the declarations page. [Zacarias v. Allstate Ins. Co., 330 N.J. Super. 231, 238-240 (App. Div. 2000)(Pressler, P.J.A.D., dissenting.] The burden of deciphering this policy renders it ambiguous, thus justifying resort to the reasonable expectations doctrine that, in the face of ambiguity, requires us to honor the objectively reasonable expectations of insurance applicants even where a 'painstaking study of the policy provisions would have negated those expectations.' Sparks v. St. Paul Ins. Co., 100 N.J. 325, 338-39 (1985)(quoting R. Keeton, Insurance Law 351 (1971); R. Keeton, Insurance Law Rights at Variance with Policy Provisions, 83 Harv. L. Rev. 961, 967 (1970)). Applied here, the reasonable expectations doctrine requires a ruling in favor of Zacarias who, like any purchaser of a boat liability policy, reasonably expected to be covered for all legally cognizable liability claims against him arising out of the use of the boat-- including legally recognized interspousal claims. See Merenoff v. Merenoff, 76 N.J. 535, 557 (1978) (holding that doctrine of interspousal tort immunity is abrogated as bar to civil suit between married persons for damages for personal injuries). See also Foldi v. Jeffries, 93 N.J. 533, 549 (1983) (concluding that doctrine of parental immunity will no longer insulate parent from liability for willful or wanton failure to supervise children). Indeed, in purchasing $500,000 worth of boat liability insurance, what reasonable person would not expect coverage for injuries sustained by his family members, the people most likely to be on the boat? That belief, in addition to being objectively reasonable standing alone, has particular resonance in light of the equally reasonable conclusion by an insurance applicant that, generally, boat liability insurance is an analogue to auto insurance, except for the means of conveyance. To be sure, we have distinguished auto from other forms of insurance from a public policy perspective because auto insurance is compulsory. Horesh v. State Farm Fire & Cas. Co., 265 N.J. Super. 32, 37 (App. Div. 1993). Nevertheless, and despite that legal distinction, there is nothing about a boat liability policy to alert an insurance applicant that he is not purchasing coverage similar to that purchased for an automobile. Although I am delighted that the majority has acknowledged the viability of Lehrhoff v. Aetna Cas. and Sur. Co., 271 N.J. Super. 340 (App. Div. 1994), one need only return to the language of Lehrhoff to divine the fallacy of the conclusion that the declarations page in this case passes muster. There has been little judicial consideration of the import of the declaration page of an insurance policy in terms of the construction of the policy as a whole and in terms of its capacity to define the insured's reasonable expectations of coverage. We, however, regard the declaration page as having signal importance in these respects. A personal automobile insurance policy is a bulky document, arcane and abstruse in the extreme to the uninitiated, unversed and, therefore, typical policyholder. We are persuaded, therefore, that a conscientious policyholder, upon receiving the policy, would likely examine the declaration page to assure himself that the coverages and their amounts, the identity of the insured vehicle, and the other basic information appearing thereon are accurate and in accord with his understandings of what he is purchasing. We deem it unlikely that once having done so, the average automobile policyholder would then undertake to attempt to analyze the entire policy in order to penetrate its layers of cross-referenced, qualified, and requalified meanings. Nor do we deem it likely that the average policyholder could successfully chart his own way through the shoals and reefs of exclusions, exceptions to exclusions, conditions and limitations, and all the rest of the qualifying fine print, whether or not in so-called plain language. We are, therefore, convinced that it is the declaration page, the one page of the policy tailored to the particular insured and not merely boilerplate, which must be deemed to define coverage and the insured's expectation of coverage. And we are also convinced that reasonable expectations of coverage raised by the declaration page cannot be contradicted by the policy's boilerplate unless the declaration page itself clearly so warns the insured. [Lehrhoff, supra, 271 N.J. Super. at 346-47.] In light of Lehrhoff, at the very least, the declarations page in Zacarias's boat liability policy should have alerted him that the policy contained an intra-family exclusion, eliminating from liability coverage the persons most likely to be on the boat. In other words, he should have been put on notice that his family members, whose interests were a good part of the reason he purchased the policy, could not invoke its protection. For those reasons and for the reasons expressed in Judge Pressler's opinion, I respectfully dissent. Justice Zazzali joins in this opinion. NO. A-1 JOAO ZACARIAS, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY and GEORGE D. SINCOX, Defendants and Third-Party Plaintiffs-Respondents, v. MARIA ZACARIAS, Third-Party Defendant. DECIDED July 3, 2001 Chief Justice Poritz