Title: Progressive Casualty Insurance Company v. Robert Matthew Hurley, et al.
Citation: N/A
Docket Number: a-96-99
State: new-jersey
Issuer: new-jersey Supreme Court
Date: January 29, 2001

STEIN, J., writing for a unanimous Court. The issue before the Court is whether Robert Hurley (Hurley), the sole owner of Devil Eleven, Inc. (Devil Eleven), the named insured, is entitled to uninsured motorist (UM) benefits on the basis that the uninsured/underinsured endorsement of the business automobile policy expressly provides coverage for any family member of the insured. On December 12, 1993, Hurley was involved in a car accident in Sacramento, California with an uninsured motorist. At the time of the accident, Hurley lived in Sacramento, where he played professional basketball with the Sacramento Kings. Hurley was driving a Toyota 4 Runner that had been loaned to him by Folsom Lake Toyota. He received UM benefits under Folsom Lake's insurance policy. In 1993, Devil Eleven was formed primarily for tax purposes. Hurley and his mother were the sole officers of the corporation. In 1993, Jason Jacobs, Hurley's financial advisor, was responsible for Hurley's personal business affairs. Jacobs asked Jim Cullinan, the president of Coverage Consultants, Inc., an insurance broker, to find the best coverage available for Hurley's 1993 Ford Explorer. The insurance application submitted by Coverage Consultants was a Commercial Trucker Insurance Plan, which stated that Devil Eleven was the applicant, the specified vehicle was the Ford Explorer, and the covered operators were Hurley and his mother, Christine. Based on that application, Progressive Casualty Insurance Company, Inc. (Progressive) issued a Business Auto Insurance Policy insuring Devil Eleven. The language of the policy provided that UM coverage would be for specified vehicles only. In order to cover Hurley in the Toyota 4 Runner, Cullinan learned from Progressive that hired car and drive other car coverages should be added to the policy. After informing Jacobs of Progressive's advice, Jacobs told Cullinan to add drive other car coverage, which only enhanced liability coverage and had no effect on UM coverage. Cullinan testified in deposition that never had any conversations with Jacobs or any of the Hurleys about UM coverage prior to the car accident. Hurley testified that he believed that Jacobs took out a policy that provided blanket coverage to protect him and the employees of Devil Eleven. Progressive instituted a declaratory action, seeking a judgment that, under Devil Eleven's business auto insurance policy, Hurley was not entitled to UM coverage for the injuries he sustained in the car accident. Hurley and Devil Eleven counterclaimed, seeking coverage for those injuries. Hurley and Devil Eleven also filed a third- party complaint against Coverage Consultants, contending that the broker was negligent for failing to insure that the policy had UM coverage. Coverage Consultants filed a fourth-party complaint against Jacobs. The third and fourth party complaints have been resolved. The Law Division granted summary judgment in favor of Progressive on the basis that Hurley was not entitled to UM coverage under a commercial auto insurance policy issued in New Jersey by Progressive for injuries sustained while driving a loaned vehicle involved in an automobile accident with an uninsured motorist in California. The Appellate Division affirmed the trial court's decision, concluding that Progressive was not required to provide UM coverage for a borrowed car that was not registered or principally garaged in the State, and that the Declarations Page of the policy plainly indicated that UM coverage was not provided. The court specifically noted that item four of the Declarations Page made clear that only liability was covered under the drive other car category, and that no premium was charged and no coverage provided for UM, UIM, or any other purpose in respect of the drive other car endorsement. HELD: The language in Progressive Insurance Company's business automobile policy specifying that [y]ou and any family member are insured under a UM endorsement creates an ambiguity that must be interpreted in favor of the insured. 1. New Jersey courts have not yet addressed the specific issue of whether family oriented language in an auto insurance policy issued to a corporation renders the policy language ambiguous. Among jurisdictions that have confronted this issue, a majority hold that business insurance policies extending coverage to family members are not ambiguous and, therefore, do not provide coverage for relatives or employees. Other cases have held that the family member language in the business policy does not create an ambiguity and that only the named insured is entitled to coverage. The minority view considers the policy language ambiguous and, thus, coverage should be afforded to relatives and employees of the corporation. (Pp. 10-16) 2. Insurance policies are contracts of adhesion subject to special rules of interpretation. When the policy is unclear, ambiguities ordinarily are resolved in favor of the insured. Moreover, an automobile insurance policy should be construed to comport with the insured's reasonable expectations of coverage and ordinarily a policy's Declarations Page should be deemed to define coverage and the insured's expectations. (Pp. 16-21) 3. Devil Eleven is the kind of small, closely held, family corporation that other courts have identified with family members for purposes of interpreting UM/UIM clauses in insurance policies. Progressive reasonably could have inferred that Devil Eleven was a closely held corporation owned solely by members of the Hurley family, and that its mailing address was the same as that of the members of Hurley's family. In addition, the UM endorsement reads as though it were designed to be used by a natural person. Devil Eleven had only two corporate officers, Hurley and his mother, and they were both listed drivers under the policy. Therefore, it is reasonable to assume that the main purpose of the policy was to insure members of the family involved in the business. Lastly, Progressive could have omitted the family member language in section D.1. of the UM endorsement to avoid any ambiguity. (Pp. 21-24) 4. The meaning of the phrase [y]ou or any family member in the UM endorsement of Progressive's business automobile policy is readily susceptible of several interpretations. Because some of those interpretations are favorable to the insured and others to the insurer, the interpretations favoring coverage should be applied. Moreover, Progressive's policy is interpreted to accord with the objectively reasonable expectations of the insured. An average policyholder reasonably could have concluded that the designated drivers were personally entitled to UM benefits. (Pp. 24-26) 4. As this case demonstrates, UM endorsements containing family member language should not be appended to business automobile insurance policies because policyholders are left to speculate about their meaning and purpose. (Pp. 26-27) Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law Division for further proceedings consistent with this opinion. CHIEF JUSTICE PORITZ and JUSTICES COLEMAN, LONG, VERNIERO, LAVECCHIA and ZAZZALI join in JUSTICE STEIN'S opinion. SUPREME COURT OF NEW JERSEY A- 96 September Term 1999 PROGRESSIVE CASUALTY INSURANCE COMPANY, an insurance carrier, Plaintiff-Respondent, v. ROBERT MATHEW HURLEY and DEVIL ELEVEN, INC., a New Jersey Corporation, Defendants and Third Party Plaintiffs- Appellants, v. COVERAGE CONSULTANTS, INC., a New York Corporation, Third Party Defendant- Respondent, and JASON JACOBS, Fourth Party-Defendant. Argued November 27, 2000 -- Decided January 29, 2001 On certification to the Superior Court, Appellate Division, whose opinion is reported at 327 N.J. Super. 179 (2000). John P. Nulty, Jr., argued the cause for appellants (Boffa, Shaljian, Cammarata &amp; O'Connor, attorneys). Marc L . Dembling argued the cause for respondent Progressive Casualty Insurance Company (Berlin, Kaplan, Dembling &amp; Burke, attorneys). Anthony J. Accardi argued the cause for respondent Coverage Consultants, Inc. (Litvak, Accardi &amp; Trifiolis, attorneys). The opinion of the Court was delivered by STEIN, J. This appeal concerns the scope of coverage provided by an uninsured/underinsured motorist endorsement of a business automobile insurance policy issued to a corporation. The specific issue is whether petitioner Robert Hurley (Hurley), the sole owner of Devil Eleven, Inc. (Devil Eleven), the named insured, is entitled to uninsured motorist (UM) benefits on the basis that the uninsured/underinsured endorsement of the policy expressly provides coverage for any family member of the insured. The UM endorsement is found several pages later with the heading, "THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY." The endorsement defines family member as a person related to you by blood, marriage or adoption who is a resident of your household, including a ward or foster child. Part D of the UM endorsement states as follows: WHO IS INSURED. 1. You or any family member. 2. Anyone else occupying a covered auto or a temporary substitute for a covered auto. Jerome Iwler, litigation manager for the motor carrier division at Progressive explained in his deposition that that endorsement is an Insurance Service Organization endorsement, mandated by the New Jersey Automobile Insurance Plan. He further stated that because the named insured was Devil Eleven, no one would be entitled to coverage under part D, subsection 1 of the UM endorsement. In 1994, the business automobile insurance policy's UM endorsement issued by Progressive to Devil Eleven was amended. Specifically, the language in Part D of the UM endorsement was changed in 1994 to WHO IS INSURED. 1. You. 2. If you are an individual, any family member. (Emphasis added). After Hurley went to California to play for the Sacramento Kings, his agent, Michael Higgins, obtained a car for his use through a Toyota dealership. Christine informed Jacobs that Hurley would be using that car. Jacobs testified that when Hurley began using the 4 Runner in California, in or about October 1993, he called Cullinan, Jr. and told him that there was another vehicle that [Hurley] would be driving and, therefore, to get coverage on that particular vehicle and to extend whatever coverage we had under the policies . . . . Cullinan, Jr. testified that he told Jacobs that if the car is not owned by Mr. Hurley it could not be added onto our policy. Cullinan, Jr. also informed Jacobs that he should make sure that the car was insured properly by Folsom Toyota. Jacobs testified that he did not remember what Coverage Consultants told him in response to his request. Cullinan Jr. contacted Progressive and spoke to Ms. Jan Edbaugh, explaining the situation and asking for advice. Ms. Edbaugh recommended that Cullinan, Jr. add hired car coverage and drive other car coverage. After Cullinan, Jr. told Jacobs what Progressive had suggested, Jacobs requested that Cullinan, Jr. add the drive other car coverage. Cullinan, Jr. asserted that he told Jacobs that the coverage would be only for liability and that Jacobs authorized him to proceed. On October 21, 1993 Cullinan, Jr. sent a letter to Progressive that read as follows: Please add hired-car coverage for liability on an 'if-any' basis, and drive other car coverage for $500,000 limit naming Robert M. Hurley and Christine A. Hurley. Iwler testified that a change was made to the policy whereby Robert Hurley and Christine Hurley were added as insureds under drive other car coverage. That the drive other car endorsement only enhanced the liability coverage and had no effect on UM coverage is undisputed. Prior to the accident, Cullinan, Jr. never had any conversations with Jacobs or any of the Hurleys regarding UM coverage. Hurley testified at his deposition that, prior to the accident, he never saw the policy nor spoke with anyone from Coverage Consultants. Hurley also testified that Jacobs told him that he had taken an insurance policy, as a blanket coverage for [him]self and the employees of Devil Eleven. Hurley understood that the policy was "to protect [him] in case if someone tried to sue [him] as a result of some kind of motor vehicle problem . . ." and that his financial advisor took out the policy "as blanket coverage for [him]self to protect [him]self and the employees of Devil Eleven. That's really all I knew about the policy." Progressive, supra, 327 N.J. Super. at 182. With regard to Progressive's processing of the claims resulting from Hurley's accident, Iwler testified that the accident was reported on December 14, 1993. On January 21, 1994, Tom Bose, an adjuster from Progressive, sent a letter to Hurley notifying him that there were some first party coverages for the claim arising from his accident and indicating that there was liability coverage. Christine Hurley testified that after she received the January 21 letter, Jacobs must have contacted Progressive and inquired about UM coverage. Thereafter, Progressive instituted this action seeking a declaratory judgment that under Devil Eleven's commercial auto insurance policy Hurley was not entitled to UM coverage for the injuries he sustained in the automobile accident. Id. at 180-81. Hurley and Devil Eleven counterclaimed seeking UM coverage for those injuries, ibid., and also filed a third-party complaint against their broker, Coverage Consultants, contending that if the policy did not provide UM coverage it was attributable to the broker's negligence. Id. at 181 n.1. Coverage Consultants filed a fourth-party complaint against Jacobs. The third and fourth party complaints have been resolved. Ibid. The Law Division granted summary judgment in favor of Progressive on the basis that Hurley was not entitled to UM coverage under a commercial auto insurance policy issued in New Jersey by Progressive, for injuries sustained while driving a loaned motor vehicle involved in an automobile accident with an uninsured motorist in California. The Appellate Division affirmed the trial court's grant of summary judgment, concluding that Progressive was not required to provide UM coverage pursuant to N.J.S.A. 17:28-1.1 for a borrowed car neither registered nor principally garaged in New Jersey, and that the declarations page of the policy plainly indicated that UM coverage was not provided. Id. at 181. The court specifically noted that item four of the "Declarations Page" made clear that only liability was covered under the "drive other car" category, and that no premium was charged and no coverage provided for UM, UIM or any other purpose with respect to the "drive other car" endorsement. Ibid. We granted certification. 163 N.J. 398 (2000). NO. A-96 PROGRESSIVE CASUALTY INSURANCE COMPANY, an insurance carrier, Plaintiff-Respondent, v. ROBERT MATHEW HURLEY and DEVIL ELEVEN, INC., a New Jersey Corporation, Defendants and Third Party Plaintiffs- Appellants. DECIDED January 29, 2001 Chief Justice Poritz