Title: The Proformance Insurance Co. v. Stacey Jones, et. al

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). 2. It is undisputed that Panichi gave Ward permission to use the pickup truck. Thus, Ward s disregard of Panichi s instruction not to let anyone else drive has no impact on the coverage issue. Coverage should be afforded unless the subsequent use constituted theft. The initial and subsequent permittees use of the vehicle did not constitute theft. (p. 9) 3. Proformance argues that its business pursuits exclusion is clear and must be enforced. We assume for the purposes of this appeal that the policy provisions are clear. (p. 9) 4. Pursuant to the omnibus liability coverage statute, every registered vehicle owner in New Jersey must have liability insurance. Our comprehensive insurance scheme evinces a strong legislative policy of assuring at least some financial protection for innocent accident victims. An insurer must afford liability coverage in at least the amount mandated by the legislature. A policy provision that conflicts with statutorily mandated coverage will not be enforced. (pp. 10-11) 5. The legislative policy embodied in our statutes of compensating injured third parties by requiring all New Jersey motorists to carry compulsory insurance overrides the business exclusion in the policy. Because the protection of innocent third parties is a primary concern of our personal injury no-fault system and because the business use exclusion in the policy contravenes that concern, the exclusion will not be enforced in respect of innocent third parties. (pp. 11-19) 6. We turn to the question of whether the stated policy limit of $100,000 applies or whether the minimum required statutory limits should be read into the policy. The business pursuits exclusion is contrary to public policy to the extent it denies an injured party the minimum coverage required by law. The Proformance policy must provide the statutorily required minimum limits of coverage for the accident. (19-20) The judgment of the Appellate Division as MODIFIED is AFFIRMED. CHIEF JUSTICE PORITZ and J USTICES LONG, LaVECCHIA, ZAZZALI, ALBIN, and RIVERA-S OTO join in JUSTICE WALLACE s opinion SUPREME COURT OF NEW JERSEY A- 102 September Term 2004 THE PROFORMANCE INSURANCE CO., Plaintiff-Appellant, v. STACEY JONES and SHAWN WHELAN, Defendants-Respondents, and ADAM ROSARIO, CHARMAINE PANICHI, AUTO ADVANTAGE, HENRY WARD and HANK'S MOVING COMPANY, Defendants. Argued September 12, 2005 Decided December 22, 2005 On certification to the Superior Court, Appellate Division. Aldo J. Russo argued the cause for appellant (Russo & Della Badia, attorneys). Chad A. Rutkowski argued the cause for respondent Stacey Jones (White and Williams, attorneys; Mr. Rutkowski, Noreen P. Kemether and Stephen Trzcinski, on the brief). Jeffrey S. Craig argued the cause for respondent Shaw Whelan (Kelley, Wardell & Craig, attorneys). Justice WALLACE delivered the opinion of the Court. This case implicates the initial permission rule and the business pursuits exclusion of an insured s automobile insurance policy. The question is whether a permissive user is entitled to liability coverage if he or she uses a vehicle in violation of a business pursuits exclusion in the insurance policy and in disregard of the insured s direction not to let anyone else drive the vehicle. We hold that the grant of initial permission requires the insurer to provide coverage for third-party claims because the public policy underlying our mandatory insurance statute trumps the business exclusion clause. We also hold that the insurance policy should be construed to provide coverage up to the minimum limits required by statute. [Id. at 496-97.] In adopting that rule, we expressed that it best effectuates the legislative policy of providing certain and maximum coverage, and is consistent with the language of the standard omnibus clause in automobile liability insurance policies. Id. at 496. Thus, we concluded that the permittee s deviation from the purpose for which she borrowed the vehicle did not annul the protection afforded her and the injured plaintiffs by the omnibus clause of [the] policy. Id. at 497. Four years later, in Small v. Schuncke, 42 N.J. 407 (1964), we extended the initial permission rule to provide coverage for a subsequent permittee using the vehicle beyond the original permission. In that case, Herbert Weidel authorized his nephew, Michael Wagner, to use Weidel s car to drive his wife to visit him in the hospital and to perform errands for her. Id. at 410. One night after returning from the hospital, Wagner picked up a friend, Martin Schuncke, and drove to New York for the weekend. Ibid. At some point, Schuncke started driving and later was involved in a fatal crash. Ibid. Various actions were filed against Weidel and Schuncke. Id. at 410-11. Weidel was insured by Pennsylvania Threshermen and Farmers Mutual Casualty Insurance Company. Id. at 410. Pennsylvania Threshermen refused to cover Schuncke because he was operating Weidel s car without his permission. Id. at 413. We held that Pennsylvania Threshermen must provide coverage for Schuncke because [t]he initial permission rule as expressed in Matits contemplates a situation in which the subsequent use of a car may be inconsistent with and even frustrate the intention and plans of the person granting permission. Id. at 414-15. We explained that [u]nder the initial permission rule only two questions must be answered to determine coverage. Was there permission to use the car initially? Did the subsequent use, while possession was retained, constitute theft or the like? Id. at 413. Since our decisions in Matits and Small, [c]ourts have held that a nearly unlimited range of conduct on the part of a driver or passenger, short of outright theft [of the vehicle,] is within the scope of an insured s or owner s permission. Jaquez v. Nat l Cont l Ins. Co., 178 N.J. 88, 93 (2003) (citation omitted). Underlying the initial permission rule is the intent to assure that all persons wrongfully injured have financially responsible persons to look to for damages because a liability insurance contract is for the benefit of the public as well as for the benefit of the named or additional insured. Verriest v. INA Underwriters Ins. Co., 142 N.J. 401, 414 (1995) (citation omitted). We need not concern ourselves with the outer-reach of the initial permission rule. It is obvious that the answers to the two relevant questions require a conclusion that the initial permission rule was satisfied in this case. The first question is: Did the insured or owner give initial permission to use the vehicle? It is undisputed that Panichi gave Ward permission to use the pickup truck. Moreover, [o]nce established that the first user . . . ha[d] permission from the named insured, lack of permission, whether express or implied, of such named insured for use by a later permittee is irrelevant. Rutgers Cas. Ins. Co. v. Collins, 158 N.J. 542, 549 (1999) (citations omitted). Thus, Ward s disregard of Panichi s instruction not to let anyone else drive the vehicle has no impact on the coverage issues. Coverage should be afforded in favor of Whelan and Jones unless the subsequent use constituted theft or the like. The obvious answer, which Proformance does not challenge, is that the initial permittee and the subsequent permittee s use of the vehicle did not constitute theft or the like. [Id. at 149-50.] Ultimately, we found the public policy that requires an insurer to pay to innocent third parties injured in automobile accidents minimum PIP benefits available under our compulsory insurance requirements does not apply to a resident spouse. Id. at 152. Our review of the treatment of this issue by courts in other jurisdictions illustrates that the great majority favor coverage over exclusions that conflict with an omnibus liability insurance requirement. Recently, the Oklahoma Supreme Court invalidated an automobile insurance policy provision that excluded liability coverage while an insured vehicle was being repaired . . . or engaged in any way in a car business. Tapp v. Perciful, ___ P.3d ___, ___ (Okla. 2005) (slip op. at 4). The insured s vehicle was being repaired when it lurched forward and struck the plaintiff. Id. at 1. Considering the mandatory liability insurance statute and its purpose of protecting injured third parties, the court held that the public policy of the compulsory insurance law plainly overrides contrary private agreements to restrict coverage whenever the contractual strictures do not square with the purposes of the insurance law. Id. at 12. In Salamon v. Progressive Classic Insurance Co., 841 A.2d 858 (Md. 2004), Maryland s highest court addressed whether the so-called pizza exclusion, which denied coverage if the insured driver was delivering property for compensation at the time of the accident, was enforceable. Id. at 860. The court invalidated the exclusion, finding it incompatible with a state statute that required minimum insurance coverage for automobiles. Id. at 864-68. In Marcus v. Hanover Insurance Co., 740 So. 2d 603 (La. 1999), the Louisiana Supreme Court considered whether a business use exclusion violated public policy. In that case, the insured was driving his vehicle in the scope of his employment when he allegedly caused an automobile accident. Id. at 604-05. In the subsequent action against the insured, his insurance company, Hanover, denied coverage based on the business use exclusion in the policy. Ibid. After finding that the exclusion was unambiguous, the court held that the business exclusion was contrary to the state s omnibus statute. Id. at 608. The court reasoned that because the purpose of the omnibus statute was to provide compensation for persons injured by the operation of an insured vehicle, it would be [a]n anomalous result . . . if the rights of third parties, for whose protection the law was adopted, could be defeated by the private agreement of two parties. Ibid.; see also Universal Underwriters Ins. Co. v. Am. Motorists Ins. Co., 541 F. Supp. 755, 761 (N.D. Miss. 1982) (holding automobile use exclusion contrary to financial responsibility laws and, therefore, invalid). Exchange Cas. & Sur. Co. v. Scott, 364 P.2d 833, 839 (Cal. 1961) (holding exclusion contravenes public policy and, therefore, is unenforceable); Smith v. Se. Fid. Ins. Co., 365 S.E.2d 105, 107 (Ga. 1988) (holding business use exclusion contrary to statute requiring minimum coverage and, therefore, invalid); DeWitt v. Young, 625 P.2d 478, 482 (Kan. 1981) (holding automobile business exclusion contrary to compulsory insurance laws and, therefore, unenforceable); Nationwide Mut. Ins. Co. v. Aetna Life & Cas. Co., 194 S.E.2d 834, 838 (N.C. 1973) (holding automobile use exclusion is against public policy as expressed in financial responsibility laws and, therefore, invalid); Matter of Liberty Mut. Ins. Co. v. Hogan, 623 N.E.2d 536, 539 (N.Y. 1993) (holding policy provision excluding coverage for vehicle used to carry persons or property for a fee invalid); Pa. Nat l Mut. Cas. Inc. Co. v. Parker, 320 S.E.2d 458, 461 (S.C. Ct. App. 1984) (holding business use exclusion contrary to statute requiring minimum coverage and, therefore, invalid). But see Progressive Univ. Ins. Co. of Illinois v. Liberty Mut. Fire Ins., 828 N.E.2d 1175, 1186 (Ill. 2005) (holding food delivery exclusion enforceable despite mandatory insurance law); United Servs Auto. Ass n v. Reilly, 858 P.2d 457, 465-66 (Or. 1993)(holding exclusion for business use of non-owned vehicle not contrary to financial responsibility laws); Murray v. Remuck, 273 A.2d 491, 494 (R.I. 1971) (holding automobile business exclusion not contrary to public policy or minimum statutory requirements). We are convinced that the legislative policy embodied in our statutes of compensating injured third parties by requiring all New Jersey motorists to carry compulsory insurance overrides the business exclusion in the Proformance policy. We are in accord with the view expressed by the Louisiana Supreme Court in Marcus, supra, 740 So 2d at 608, that is equally applicable to our insurance law: The statutory scheme is intended to . . . attach financial protection to the vehicle regardless of the purpose for which the vehicle is being operated. Similarly, the goal of all liability policies, which is to benefit injured persons and to give protection and coverage to all insureds, cannot be realized if the instant exclusion is allowed to be enforced. Further, if we were to sanction the exclusion at issue, motorists would be allowed to drive in and out of coverage, depending on the purpose of a particular exclusion, which would wreak havoc on the legislature s goal in enacting an orderly and comprehensive scheme designed for the protection of injured victims of careless drivers. [Ibid.] In brief, because the protection of innocent third parties is a primary concern of our personal injury no-fault system and because the business use exclusion in the Proformance policy contravenes that concern, the exclusion will not be enforced in respect of innocent third parties. SUPREME COURT OF NEW JERSEY NO. A-102 SEPTEMBER TERM 2004 ON CERTIFICATION TO Appellate Division, Superior Court THE PROFORMANCE INSURANCE CO., Plaintiff-Appellant, v. STACEY JONES and SHAWN WHELAN, Defendants-Respondents, and ADAM ROSARIO, CHARMAINE PANICHI, AUTO ADVANTAGE, HENRY WARD, and HANK S MOVING COMPANY, Defendants. DECIDED December 22, 2005 Chief Justice Poritz PRESIDING OPINION BY Justice Wallace CONCURRING/DISSENTING OPINIONS BY DISSENTING OPINION BY