Opinion ID: 2326701
Heading Depth: 1
Heading Rank: 3

Heading: The Dealerships' Claims Against Universal

Text: In their cross-petition for certification, the Dealerships challenge the dismissal of their claims against their insurer, Universal, for defense and indemnity they contend should have been available pursuant to the STEO coverage.
The Dealerships advance two arguments in support of their assertion that the dismissal of their claims against Universal should be overturned. First, they contend that the trial court and the Appellate Division failed to consider the arising out of language in the policy, overlooking therefore its relationship to the coverage for any federal, state or local ... truth-in-lending law or truth-in-leasing law, as a result of which both courts applied a stricter standard to the questions of defense and indemnity than was appropriate. Second, the Dealerships maintain that the Appellate Division erred by switch[ing] the burden of proof agreed to in the insurance contract by requiring them to prove that the Wilson action was in fact a TILA claim, rather than recognizing that they were entitled to coverage based upon showing that the Wilson action had a substantial nexus to TILA. Universal responds to those arguments by asserting that the judgment on appeal is completely in accord with the rules of construction that apply to insurance policies. It asserts that both of the arguments raised by the Dealerships suffer from the same flaws. That is, because the Wilson complaint was directed solely at the Dealerships' sales practices and made no allegations about lending or leasing practices, the Wilson claim is not one for which a defense or indemnity was owed. Regardless of how one reads the arising out of language or interprets the substantial nexus approach, the Wilson claims were not related to any truth-in-lending or truth-in-leasing law. Universal argues, therefore, that it was not obligated to defend or to provide coverage under the STEO policy, and urges us to affirm the Appellate Division's judgment.
We need not detail all of the well-settled principles relating to an insurer's duty to defend and how courts should evaluate claims relating to that duty. Essential to any evaluation of a claim that an insurer has a duty to defend is a comparison of the factual allegations in the complaint with the coverage language of the policy. Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 173, 607 A. 2d 1255 (1992) (holding that insurer's duty to defend is triggered by allegations in complaint); see Flomerfelt v. Cardiello, 202 N.J. 432, 444, 997 A. 2d 991 (2010) (explaining that insurer's duty to defend depends on comparing complaint and insurance policy); Danek v. Hommer, 28 N.J.Super. 68, 77, 100 A. 2d 198 (App.Div.1953) (holding that complaint should be laid alongside the policy and a determination made as to whether, if the allegations are sustained, the insurer will be required to pay the resulting judgment), aff'd o.b., 15 N.J. 573, 105 A. 2d 677 (1954). As we have recently reiterated, [i]n making that comparison, it is the nature of the claim asserted, rather than the specific details of the incident or the litigation's possible outcome, that governs the carrier's duty to defend. Flomerfelt, supra, 202 N.J. at 444, 997 A. 2d 991 (citing Ohio Cas. Ins. Co. v. Flanagin, 44 N.J. 504, 512, 210 A. 2d 221 (1965)). When the two correspond, the duty to defend arises, irrespective of the claim's actual merit. Voorhees, supra, 128 N.J. at 173, 607 A. 2d 1255 (citing Danek, supra, 28 N.J.Super. at 76-77, 100 A. 2d 198). Although claims that are ambiguously pleaded, but potentially covered are generally read in favor of the insured, Flomerfelt, supra, 202 N.J. at 444, 997 A. 2d 991 (citing Cent. Nat'l Ins. Co. v. Utica Nat'l Ins. Group, 232 N.J.Super. 467, 470, 557 A. 2d 693 (App.Div.1989)), in the final analysis, the burden of proving that there is a duty to defend rests on the insured, FileNet Corp. v. Chubb Corp., 324 N.J.Super. 476, 494, 735 A. 2d 1203 (Law Div.1997), aff'd, 324 N.J.Super. 419, 735 A. 2d 1170 (App.Div.1999). Therefore, our analysis must begin with the claims asserted in Wilson, because only by comparing those claims to the policy's provisions can the coverage question be resolved. In Wilson, the class consisted of all persons or entities who purchased or leased a motor vehicle from the Dealerships, but the complaint alleged that the Dealerships had made misrepresentations and committed fraud in their dealings with their customers. That general assertion was further defined to include three specific claims, which were: overcharging class members for license, title and registration fees and failing to disclose those overcharges; charging class members a deceptive and misleading `Documentary Fee'; and using a form that failed to comply with the applicable regulation regarding font size in its explanation of the customers' right to details about those fees. Those factual allegations were tied to two statutes, the CFA and the TCCWNA, and to three parts of the MVSP regulations, N.J.A.C. 13:45A-26B.2(a)(1)(iii), 13:45A-26B.2(a)(2)(i), [8] and 13:45A-26B.2(a)(iii). In support of their argument that the Wilson claims fell within the STEO coverage, the Dealerships contend that the CFA, the TCCWNA, and the MVSP regulations all advance objectives similar to the truth-in-lending and truth-in-leasing laws, with the result that the insurance policies should be understood to provide coverage for the Wilson claims. We disagree. Although there may be occasional overlap in the effect of the statutes and regulations, the essential purpose of truth-in-lending and truth-in-leasing laws is to ensure that certain specific information is provided in connection with the extension of credit. TILA, for example, specifies that terms including annual percentage rates, method of determining finance charges, amount subject to the finance charge, total number and amount of payments, and due dates for repayment of the debt all be disclosed. 15 U.S.C. §§ 1602(f), 1602(u) (TILA); see also 15 U.S.C. §§ 1667a, 1667(1) (Consumer Leasing Acts). Several New Jersey statutes are similar examples of laws that are directed to truth-in-lending or truth-in-leasing. See, e.g., Market Rate Consumer Loan Act, N.J.S.A. 17:3B-4 to -43; New Jersey Fair Credit Reporting Act, N.J.S.A. 56:11-28 to -52; Consumer Protection Leasing Act, N.J.S.A. 56:12-60 to -70; Retail Installment Sales Act of 1960, N.J.S.A. 17:16C-1 to -103. By comparison, the statutes and regulations that were in issue in Wilson had a far more general purpose, making them only of superficial similarity to the statutes implicated in the STEO coverage. Moreover, nothing in the Wilson complaint raised any claim directed at the Dealerships' credit, leasing, or financing practices. Certainly the generalized reference to a CFA claim would not create a duty to defend under the policy language referring to a claim by a customer arising out of ... an alleged violation of any federal, state or local ... (2) truth-in-lending or truth-in-leasing law. Nor, when compared to the actual claims asserted in Wilson, is there any assertion of a consumer fraud-based claim that related in any way to truth-in-lending or truth-in-leasing laws. Regardless of how one interprets the arising out of language in the policy, unless the statute or the regulations could be understood to be truth-in-lending or truth-in-leasing laws, there can be no coverage and thus no obligation to defend. The precedents cited by the Dealerships in support of their appeal are not to the contrary. See Psensky v. Am. Honda Finance, 378 N.J.Super. 221, 223, 875 A. 2d 290 (App.Div.2005) (recognizing that auto maker's financing affiliate's extension of credit implicated truth-in-lending law); Gross v. TJH Auto. Co., 380 N.J.Super. 176, 186, 881 A. 2d 760 (App.Div.2005) (commenting in dicta that N.J.A.C. 13:45A-26B.2(a)(2)(i) is analogous to the federal TILA, 15 U.S.C.A. § 1601 to 1693(r)). Notwithstanding the dicta in Gross about similarities between TILA and the regulation governing font size cited in the Wilson complaint, TILA relates to creditors that make material disclosures to consumers to promote the informed use of credit, 15 U.S.C.A. §§ 1601(a), 1602(f), 1602(u). Because nothing in the Wilson complaint related to claims about credit or the extension of credit, those claims did not give rise to a duty to defend with the meaning of the policy language. The Dealerships' argument that Universal should have provided a defense based on the Wilson allegation of a violation of TCCWNA similarly falls short. That Act does not, as the Dealerships assert, have the same purpose as TILA, which the Dealerships assert would qualify it as a truth-in-lending or truth-in-leasing law. The purpose of the TCCWNA, N.J.S.A. 56:12-15, is to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties in consumer contracts. By its terms, it encompasses a wider variety of transactions than do truth-in-lending and truth-in-leasing laws. Were we to interpret TCCWNA in the way that the Dealerships' urge us to, we would broaden the insurer's contractual obligation far beyond truth-in-lending or truth-in-leasing to any claim that arose under TCCWNA. Taking that approach would create significantly better coverage than that which the Dealerships bargained for and their insurer intended. See Walker Rogge, Inc. v. Chelsea Title & Guar. Co., 116 N.J. 517, 529, 562 A. 2d 208 (1989) (holding that courts should not write for the insured a better policy of insurance than the one purchased); Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43, 161 A. 2d 717 (1960). Regardless of how broadly we interpret arising out of or substantial nexus in our analysis of insurance contracts, the coverage question in this appeal turns on the meaning of the policy's reference to truth-in-lending or truth-in-leasing laws. Absent a claim in the Wilson action that falls within the meaning of that limitation, Universal was not obligated to defend or indemnify. Notwithstanding the Dealerships' assertions that the Wilson action raised such claims, the focus of that complaint was on fees charged to customers regardless of whether they bought or leased; the fees were not associated with the extension of credit which is the hallmark of a truth-in-lending or truth-in-leasing law. As the complaint filed in this matter recognized through its repeated references to vehicle sales, all of the claims raised in Wilson rested on an attack on the Dealerships' sales practices, and not on assertions relating to leasing, financing, or extending credit. The Wilson complaint, as the trial and appellate courts concluded, simply cannot be understood to raise a covered claim when compared to the policy's clear language.