NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A- 0400

- 23 BRITNEY MOTIL, Plaintiff-Respondent,

v. WAUSAU UNDERWRITERS INSURANCE COMPANY, 1 Defendant-Appellant.

_________________________

Argued March 5, 2024

– Decided April 5, 2024 Before Judges Rose, Smith and Perez Friscia. On appeal from an interlocutory order of the Superi or Court of New Jersey, Law Division, Gloucester County, Docket No. L- 0734

- 21. William P. Krauss argued the cause for appellant (Connell Foley LLP, attorneys; William P. Krauss an d Evan David Haggerty, of counsel and on the briefs). Michael T. Novick argued the cause for respondent (Brown, Novick & McKinley, attorneys; Michael T. Novick, of counsel and on the brief). The opinion of the court was delivered by

1 Improperly pleaded as Liberty Mutual Insurance Comp any. APPROVED FOR PUBLICATION

April 5, 2024 APPELLATE DIVISIONA- 0400

- 23 2 PEREZ FRISCIA, J.S.C. (temporarily assigned) In this automobile insurance coverage dispute, defe ndant Wausau Underwriters Insurance Company appeals from the Aug ust 25, 2023 Law Division order denying reconsideration of the June 23, 2023 order , which granted summary judgment to plaintiff Britney Motil , entitling her to $100,000 in underinsured motorist (UIM) insurance coverage. This appeal presents the novel issue of whether plaintiff was entitled to UI M coverage as a "covered driver" injured in an automobile accident while dri ving a "covered auto" with an identified alternate garaging address under her parents' automobile policy

. Defendant disclaimed coverage, under the policy's u ninsured motorist (UM)/UIM endorsement step-down provision, because p laintiff was neither a named insured nor a defined family member. We conc lude there was ambiguity between the declaration and the policy's step-down provision of $15,000 in UIM coverage because the declaration pla inly provided : $100,000 UM/UIM coverage for each person; plaintiff was a co vered driver; the UM/UIM premium charged was the same for each vehicl e; and plaintiff's vehicle was a covered vehicle with an alternate gar aging address. Thus, the policyholder's reasonable expectation of $100,000 U IM coverage should be afforded. We affirm.A- 0400

- 23 3 I. On December 26, 2018, plaintiff sustained serious b odily injuries from an automobile accident while driving a 2014 Jeep Ch erokee owned by her father, Charles Motil. Plaintiff filed a personal injury action that settled for the tortfeasor's $15,000 policy limit. Thereafter, plaintiff filed this declaratory judgment action seeking $100,000 in UIM coverage fr om defendant, alleging she was a covered driver at the time of the acciden t under her parents Charles and Louise Motil's policy. Charles 2 had obtained insurance with defendant in February 2017. The four-page insurance declaration, effective November 1, 2018, reflected the "[n]amed [i]nsured[s]" on the policy were Charles a nd Louise. The mailing address listed was in Bridgeton. The "Vehicles Cov ered by [the] Auto Policy" provision listed four vehicles, including the 2014 Jeep Cherokee. The declaration named plaintiff as a covered driver und er "Driver Information," and memorialized that the Jeep had an "[a]lternate [g]araging [a]ddress" in Blackwood. Under "Coverage Information," the declaration state d: "Your total annual policy premium for all covered vehicles is s hown below. A premium is

2 Because the parties bear the same surname, intendin g no disrespect, we use their first names in this opinion.A- 0400

- 23 4 shown for each type of coverage you have purchased for each vehicle. Where no premium is shown, you have not purchased indicat ed coverage for that vehicle." In the same section, it stated each of the four veh icles, including the Jeep, had a $100,000 bodily injury coverage limit a nd a $100,000 "[e]ach [p]erson" UM coverage limit, which included UIM cov erage. Each vehicle had the listed charge of $103 UM/UIM "PREMIUM PER V EHICLE." The declaration also directed that the endorsement entitled "[UM] Coverage

– New Jersey AS2106 06 16 Amendment of Policy Definitions " was "applicable to [the] policy." The policy's "DEFINITIONS" section defined "you" an d "your" as "'the named insured' shown in the [d]eclarations." "Fami ly member" was defined as "a person related to you by blood, marriage or adop tion who is a resident of your household. This includes ward or foster child ." "Your covered auto" was defined as "[a]ny vehicle shown in the [d]eclaratio ns." The policy's UIM endorsement provided the caveat "T HIS
ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY." The endorsement was titled "Part C

– [UM] Coverage" and stated in pertinent part:

INSURING AGREEMENT
A. We will pay compensatory damages which cover an "insured" is legally entitled to recover from th eA- 0400

- 23 5 owner or operator of an "uninsured motor vehicle" o r "underinsured motor vehicle" because of: 1. "Bodily injury" sustained by an "insured" and caused by an accident; and
2. "Property damage" caused by an accident exempt under Paragraph 2[] of the definition of "uninsured motor vehicle". [sic]

. . . . B. "Insured" as used in this endorsement means:
1. You or any "family member". [sic]
2. Any other person "occupying":

a. "Your covered auto" with your express or implied permission; or b. Any other auto operated by you. [(Emphasis added).] The endorsement contained a "LIMIT OF LIABILITY" st ep-down provision, which stated: The limit of liability shown in the [d]eclarations

for this coverage is our maximum limit of liability for all damages resulting from any one accident. However, for the [UM] [c]overage and [UIM] [c]overage, if the "insured" is not a named "insure d" or "family member" under this policy and is not insured under any other automobile insurance policy , our maximum limit of liability for all damages resulting from one accident shall not exceed $15,00 0 per person and $30,000 per accident for "bodilyA- 0400

- 23 6 injury" and $5,000 per accident for "property damages". [sic] [(Emphasis added).] On April 14, 2021, plaintiff requested UIM coverage from defendant. One week later, defendant's adjuster disclaimed cov erage via letter, reasoning that upon investigation, "no UIM exposure exist[ed] for th[e] claim" as "the available policy limits for th[e] claim [we]re equa l to the $15/$30k tortfeasor limits." On June 16, the adjuster clarified that " [a]s a non-resident family member, [plaintiff] [wa]s subject to the '[l]imit o f [l]iability'" step-down "provision in the [UM c]overage endorsement of her parent's policy." The adjuster further stated, "[plaintiff] was neither a 'named insured' nor a 'family member' within the meaning of her parent's policy a t the time of the accident" and therefore "d[id] not qualify for [UIM] benefits ." On June 24, 2021, plaintiff filed a three-count com plaint against defendant claiming UIM benefits, unfair claim settl ement practices in violation of N.J.S.A. 17B:30-13.1, and a breach of the covena nt of good faith and fair dealing. After filing an answer, defendant moved t o dismiss counts two and three without prejudice or alternatively to sever a nd stay those claims. On March 20, 2023, the motion judge granted severance. Thereafter, the parties cross-moved for summary jud gment. On June 23, 2023, the judge granted plaintiff's motion, orderin g defendant to "provideA- 0400

- 23 7 $100,000 [] in UIM coverage to . . . plaintiff," and denied de fendant's motion. In his written statement of reasons, the judge cite d Lehrhoff v. Aetna Casualty and Surety Company, 271 N.J. Super. 340 (App. Div. 1994), reasoning the facts were "remarkably similar." Although the judg e found "the step[-]down provision in the policy [wa]s clear and unambiguous ," he concluded that "under the[] circumstances[,] the reasonable expect ations of the applicants for insurance must prevail." The judge further found, "the reasonable expectations of coverage raised by the declaration . . . cannot be contradicted by the policy's boilerplate" language and "the declaration . . . di d not clearly warn the insured." Defendant moved for reconsideration, which was deni ed. In his written statement of reasons accompanying the order, the ju dge found the "reasonable expectation doctrine" applied and concluded defenda nt could not "profit off of plaintiff and her family by selling them insurance and telling them it covers all of them but then . . . tell plaintiff she should bu y her own insurance if she really wants the coverage." On appeal, defendant argues the judge erroneously d isregard ed the unambiguous limitation of liability $15,000 step-do wn provision, which precluded plaintiff from receiving UIM coverage abo ve the settlement for the tortfeasor's policy of $15,000

.A- 0400

- 23 8 II. We review a trial court's summary judgment decision de novo. DeSimone v. Springpoint Senior Living, Inc., 256 N. J. 172, 180 (2024). "To decide whether a genuine issue of material fact exi sts, the trial court must 'draw[] all legitimate inferences from the facts in favor of the non-moving party.'" Friedman v. Martinez, 242 N.J. 449, 472 ( 2020) (alteration in original) (quoting Globe Motor Co. v. Igdalev, 225 N.J. 469, 480 (2016)). It is well-settled that we review a court's interpr etation of an insurance contract de novo. Katchen v. Gov't Emps. Ins. Co., 457 N.J. Super. 600, 604 (App. Div. 2019). Thus, we afford no special defer ence to a "trial court's interpretation of the law and the legal consequence s that flow from established facts." Sealed Air Corp. v. Royal Indem. Co., 404 N.J. Super. 363, 374 (App. Div. 2008) (quoting Pressler, Current N.J. Court Ru les, cmt. 3.1 on R. 2:10

- 2 (2007)). An insurance policy "will be enforced as written wh en its terms are clear in order that the expectations of the parties will be fulfilled." Norman Int'l, Inc. v. Admiral Ins. Co., 251 N.J. 538, 552 (2022) (quoting Mem'l Props., LLC v. Zurich Am. Ins. Co., 210 N.J. 512, 525 (2012)). "In considering the meaning of an insurance policy, we interpret the la nguage 'according to its plain and ordinary meaning.'" Flomerfelt v. Cardie llo, 202 N.J. 432, 441A- 0400

- 23 9 (2010) (quoting Voorhees v. Preferred Mut. Ins. Co. , 128 N.J. 165, 175 (1992)). "If the plain language of the policy is u nambiguous, we will 'not "engage in a strained construction to support the i mposition of liability" or write a better policy for the insured than the one purchased.'" Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pitts burgh, 224 N.J. 189, 200 (2016) (quoting Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195 N.J. 231, 238 (2008)). It is clear "an insurance contract is not per se ambiguous because its declarations sheet, definition section, and exclusi on provisions are separately presented." Zacarias v. Allstate Ins. Co., 168 N.J. 590, 603 ( 2001). Indeed, "[a] rule that would require exclusions to appear o n the declaration page would result in even more fine print and 'run the risk of making insurance policies more difficult for the average insured to understan d.'" Katchen, 457 N.J. Super. at 609 (quoting Morrison v. Am. Int'l Ins. C o. of Am., 381 N.J. Super. 532, 540- 41 (App. Div. 2005)). A policy provision is deemed a mbiguous when it is objectively open to more than one interp retation. Where the terms are ambiguous , "they are construed against the insurer and in favo r of the insured, in order to give effect to the insured's r easonable expectations." Cadre v. Proassurance Cas. Co., 468 N.J. Super. 246 , 258 (App. Div. 2021) (quoting Flomerfelt, 202 N.J. at 441).A- 0400

- 23 10 Our Supreme Court has established that we pay "spec ial scrutiny to insurance contracts because of the stark imbalance between insurance companies and insureds in their respective understa nding of the terms and conditions of insurance policies." Zacarias, 168 N.J. at 594. "[I]nsurance policies are contracts of adhesion 'between parties who are not equally situated.'" Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 270 (2008) (quoting Meier v. N.J. Life Ins. Co., 101 N.J. 597, 611 (1986)). "I nsurance policy exclusions must be construed narrowly." Merck & Co ., Inc. v. Ace Am. Ins. Co., 475 N.J. Super. 420, 434 (App. Div. 2023) (citing Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997)). "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." Zacarias, 168 N.J. at 595. "The objectively reasonable expectations of

applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations." Ibid. (quoting Sparks v. Saint Paul Ins. Co., 100 N.J. 325, 338

- 39 (1985)). In deciding Lehrhoff, 271 N.J. Super. at 347, this court held the "reasonable expectations of coverage raised by the declaration page cannot be contradicted by the policy's boilerplate unless the declaration page itselfA- 0400

- 23 11 clearly so warns the insured." Severino v. Malachi , 409 N.J. Super. 82, 98 (App. Div. 2009) (quoting Lehrhoff, 271 N.J. Super. at 347). "[I]nsureds are [not] relieved of their ordinary duty to review, an d to be bound by the terms of, the policy itself"; however, the reasonable expecta tion of the policyholder governs where "a close, searching review would not have resolved the ambiguity." Pizzullo, 196 N.J. at 273. "Of course , for a policyholder's expectations to govern over the plain language of a n insurance contract, his or her expectations must be objectively reasonable." Cassilli v. Soussou, 408 N.J. Super. 147, 154 (App. Div. 2009). We have distinguished two classes of covered indivi duals in an insurance contract:

[T]he term "named insured" is self-defining. The t erm refers only to the names so appearing in the declaration. On the other hand, an insured is [anyone] who is entitled to coverage. This coverage may result by virtue of a person's status as an operator or occup ier of a covered auto. [Botti v. CNA Ins. Co., 361 N.J. Super. 217, 226 (App. Div. 2003) (citations omitted).] "[T]hose listed as 'named insureds' are not necessa rily the only individuals covered under the policy," and "[o]ther individuals not listed as 'named insureds' may be entitled to liability cover age under certainA- 0400

- 23 12 circumstances enumerated by the policy." Cassilli, 408 N.J. Super. at 155. "Thus, being an 'insured' under a policy 'is a comb ination of status and circumstance,'" and, undoubtedly, being a covered d river would render one "a potential 'insured'" entitled to coverage under the policy. Ibid. (quoting Webb v. AAA Mid-Atl. Ins. Grp., 348 F. Supp. 2d 324, 331 (D.N.J. 2004)).
III. UIM coverage is defined under N.J.S.A. 17:28-1.1(e) (1) as: "insurance for damages because of bodily injury . . . resulting from an accident arising out of the ownership, maintenance, operation or use of an underinsured motor vehicle." Defendant argues plaintiff is not entitled to the $ 100,000 in UIM coverage because she was neither a "named insured" nor a "family member" as defined under the policy; thus, the step-down provi sion of $15,000 applied. Defendant posits the declaration and UIM step-down endorsement "clearly and unambiguously demonstrate[d] that [plaintiff's] rec overy of UIM benefits was expressly limited." We disagree. The UIM policy endorsement's "limit of liability" s tep-down for insureds who are neither a named insured nor a family member is clear, but that alone is not dispositive of the UIM coverage issue. Unquest ionably, a "step-down in coverage has been approved in the setting of eligib ility for first-party UIM coverage." Huggins v. Aquilar, 246 N.J. 75, 89 (2021). However, a policy'sA- 0400

- 23 13 permissive step-down does not dictate coverage when the policy language is otherwise ambiguous or conflicts with the declarati on. See Lehrhoff, 271 N.J. Super. at 346-47 (finding the declaration is of "signal importance" because "a conscientious policyholder, upon receiving the poli cy, would likely examine [it] to assure that the coverages and their amounts . . . are accurate and in accordance with his [or her] understandings"). Our Supreme Court has elucidated that insurance policies shall be constru ed "against the insurer, consistent with the reasonable expectations of insu reds, when those policies are overly complicated, unclear, or written as a tr ap for the unguarded
consumer." Zacarias, 168 N.J. at 604. Here, the declaration listed plaintiff as a covered driver. Further, the declaration illustrated the Motils paid the same $1 03 premium per vehicle for the four identified vehicles and $100,000 in UIM co verage for "[e]ach [p]erson." An objective review of the declaration indicates that because the UIM coverage premiums were the same for each vehicl e, the provided UIM coverage would be the same for a named insured, fam ily member, or covered driver, particularly since the declaration included an alternate garaging address for the Jeep. Specifically, the declaration established that in a ddition to the Bridgeton address listed for the vehicles, the Jeep had an id entified alternate garagingA- 0400

- 23 14 address in Blackwood. "Alternate" is defined as " occurring or succeeding by
turns." Alternate, Merriam-Webster, https://www.merriamwebster.com/dictionary/alternate (last visited Mar. 26, 2024). Neither the declaration nor the policy provided a distinction o f UIM coverage for a "covered auto" with an identified alternate garagin g address. While defendant maintains plaintiff was only entitled to step-down UIM benefits, the declaration does not alert her

— a covered driver operating a vehicle garaged at

a separately identified alternate address

— that she did not qualify as a "family member" who was a "resident of [Charles and Louise's] househol d." The drafters could have unambiguously included lang uage in either the declaration or the policy alerting that a covered d river using a "covered auto" with an identified alternate garaging address was s ubject to the step-down in coverage. Specifically, the policy could have clar ified that the only qualifying "household" was the residence of the named insured and an identified alternate address was excluded. We further observe the definitions section of the p olicy does not define covered driver or alternate garaging address. Ther efore, the lack of clarity and distinction in the declaration and policy created a mbiguity and fairly leads to the presumption that a covered driver is entitled t o UIM coverage, regardless of the UIM step-down provision. Stated another way , a review of theA- 0400

- 23 15 declaration in conjunction with the endorsement doe s not inform the policyholder that a covered driver charged the same uninsured premium for a vehicle with an accepted alternate garaging address is not entitled to the $100,000 in UIM coverage and is subject to the $15, 000 step- down provision. Pursuant to the language of the declaration, the po licyholder had the reasonable expectation that plaintiff, as a covered driver, was entitled to the same UIM policy coverage. Because the ambiguity and contradiction between the declaration and the policy obfuscates the appli cation of the step-down, the "reasonable expectations doctrine" controls. As we established in Lehrhoff , "[t]he interpretation of insurance contracts to acc ord with the reasonable expectations of the insured, regardless of the exis tence of any ambiguity in the policy, constitutes judicial recognition of the uni que nature of contracts of insurance." 271 N.J. Super. at 348 (quoting Sparks , 100 N.J. at 338). Based on our de novo review of the declaration and policy , we discern no basis to disturb the judge's well-reasoned decision. Affirmed.