Pinto v. New Jersey Manufacturers Insurance

*418 Justice ZAZZALI,

concurring in part, and dissenting in part.

The essential question in this appeal is: what does it mean when a corporation, but no human employee, is listed on an insurance policy that provides coverage for personal injuries? The specific term at issue is a step-down in coverage provision for UM/UIM insurance for persons who are not “named insureds” in a policy that lists two corporate entities as the “named insureds.”

Although I concur with the imposition of a prospective duty, I disagree with the majority opinion because a corporate purchaser of auto insurance could reasonably expect that the policy covers its employees, .rather than the corporation itself, due to the difficulty, in many situations, of naming all of its individual employees. More likely, a corporate purchaser would use the name of the corporation as shorthand for the corporation and all of its employees acting within the scope of their employment. This is particularly so because the corporate entity — a legal fiction that has no physical human qualities — can never sustain the bodily injuries contemplated by a $1 million policy. In this appeal, the record does not support a finding that the employer did not intend its employees to reap the full benefit of the million-dollar policy. Who, one can fairly ask, did the employer intend to insure if not the driver of its vehicles?

I therefore respectfully dissent and would conclude that a corporate purchaser of auto insurance would reasonably expect the policy to cover fully the corporation’s employees.

I

I concur with the majority’s prospective imposition of a duty on insurers and their agents and brokers to advise employers of the need to provide specific language in the policy that reflects the employer’s intent to include employees as named insureds. That sensible solution alleviates my concerns for the future. Although I cannot claim that the requirement is a concession by the majority, the imposition of a prospective obligation does suggest that something may be awry with the policy.

*419 However, unlike the majority, I would apply the new duty in this matter and conclude that New Jersey Manufacturers Insurance Company (NJM) violated it. Denying Pinto relief disserves principles of fairness. In our debate over esoteric nuances of insurance law, we should not forget that there is a victim here— Pinto, a street cleaner who sustained severe and permanent personal injuries and has not received adequate compensation. Our prior decisional law in this area has confused parties and the public, and we therefore should give Pinto the benefit of the newly imposed duty. By pursuing this litigation to the highest level, Pinto has occasioned the Court’s imposition of the new duty. It is unfair that all benefit by this appeal save Pinto.

II

Apart from those considerations, I would provide relief to Pinto on the basis of the two-step analysis developed in our insurance case law. See, e.g., Nav-Its, Inc. v. Selective Ins. Co. of Am., 183 N.J. 110, 118 , 869 A.2d 929 (2005). After determining that the policy is ambiguous, I would construe the policy language in “‘accord with the objectively reasonable expectations of the insured.’ ” Ibid, (quoting Doto v. Russo, 140 N.J. 544, 556 , 659 A.2d 1371 (1995)). More specifically, I believe that the failure to list natural persons in the policy creates an ambiguity and that the policyholder would reasonably expect that employees would be considered named insureds under the contract.

A

In an insurance policy, an ambiguity exists when an “average policyholder cannot make out the boundaries of coverage.” Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247 , 405 A.2d 788 (1979). It is axiomatic that “any ambiguity in an insurance contract must be resolved against the insurer and in favor of coverage.” Botti v. CNA Ins. Co., 361 N.J.Super. 217, 224 , 824 A.2d 1120 (App.Div. 2003).

*420 In this matter, as noted, the policy lists only corporations as named insureds. Listing a corporate entity as the named insured on a policy creates an ambiguity because that language can be interpreted in two ways. One could read the reference to the corporation as the named insured in its most literal sense and conclude that the named insured is only the corporate entity and not its employees. Alternatively, one could reasonably interpret the same language as shorthand for all of the corporation’s employees and determine that the employees are named insureds. Thus, on its face, the policy provision is susceptible to multiple meanings because the reference to the corporation as the named insured may encompass none or all of the corporation’s human employees. Now that an accident implicating the step-down provision has occurred, NJM predictably advocates for the first interpretation which would favor the insurer. Although NJM’s theory “is understandable, ... it seems highly unlikely that the ordinary insured would have so understood it on his or her own reading.” Gerhardt v. Cont’l Ins. Cos., 48 N.J. 291, 299 , 225 A.2d 328 (1966).

The majority opinion discusses Cook-Sauvageau v. PMA Group, 295 N.J.Super. 620 , 685 A.2d 978 (App.Div.1996), in which the Appellate Division found that an employee was covered by the corporation’s insurance policy. Ante at 414, 874 A.2d at 525. In Cookr-Sauvageau, supra, the panel explained that “although [the plaintiff] was not specifically named in [the] business automobile policy, it [was] ... clear ... that the essential risk for which [the defendant’s] business automobile policy was intended to provide coverage was an accident involving an employee’s operation of one of the employer’s vehicles.” 295 N.J.Super. at 627 , 685 A.2d 978 . According to the majority, Cook-Sauvageau and similar cases are distinguishable because they focused on whether the policies provided any coverage at all for employees not individually named, but did not specifically involve step-down in coverage provisions. However, regardless of whether interpreting a step-down provision or the policy as a whole, the ambiguity exists because it arises *421 from naming the corporation without referencing any natural persons.

B

Due to the ambiguity in the policy, we must effectuate coverage consonant with an insurance purchaser’s reasonable expectations. See Sparks v. St. Paul Ins. Co., 100 N.J. 325, 336 , 495 A.2d 406 (1985). The record before us does not provide sufficient detail on this question. Our practice is to “place particular emphasis on the declarations page when determining the reasonable expectations of the insured.” President v. Jenkins, 180 N.J. 550, 565 , 853 A.2d 247 (2004) (citing Zacarias v. Allstate Ins. Co., 168 N.J. 590, 602-03 , 775 A.2d 1262 (2001)). In this appeal, the declarations page supplies no additional information; it simply reiterates that the corporation is the named insured.

However, it is not difficult to discern the employer’s likely expectations when it purchased insurance for forty-eight vehicles at the substantial premium of $88,233. In addition to the price of that premium, we also know that, given the nature of its business, this purchaser’s employees bore an increased risk of being involved in a vehicular accident while acting in the course of employment. As a matter of business judgment, an employer would be unlikely to spend substantial capital to receive almost no benefit in return.

If the employees are not named insureds, and the step-down provision applies to them, employees would be eligible for the $1 million benefit only in the rare circumstance in which they are uninsured. Because New Jersey requires drivers to maintain a minimal amount of car insurance, the likelihood that one of the purchaser’s employees would be uninsured is so small as to render the coverage purchased by the employer virtually illusory. Thus, almost no one will benefit from the insurance contract — except the insurer. Such a result counters both business and common sense.

Instead, a corporation would reasonably expect that the policy that it purchased would provide an extra layer of insurance for its *422 employees, especially in situations like the present one where the nature of the job increases the likelihood of injury. Prior ease law demonstrates that employers can intend individuals to be named insureds, even though they are not listed as such. See, e.g., Macchi v. Conn. Gen. Ins. Co., 354, N.J.Super. 64, 74, 804 A.2d 596 (App.Div.2002) (stating that plaintiff was “for all intents and purposes an individual named insured under [the] policy” where corporation purchased policy and plaintiff was primary user of vehicle); Araya v. Farm, Family Cas. Ins. Co., 353 N.J.Super. 203, 210-11 , 801 A.2d 1194 (App.Div.2002) (holding that “ambiguity arises from ... failure to designate a natural person ... entitled to UIM coverage” and relying on declarations page as indicator of purchaser’s reasonable expectations). I recognize that those decisions do not apply with syllogistic precision to this matter, just as the attempt by defendants to shoehorn this appeal into other insurance ease law is an imperfect fit. However, Macchi and Araya do support the reasonableness of an employer’s expectation of coverage for its employees.

For the reasons discussed above, I believe that the policy is ambiguous and that the purchaser reasonably expected it to cover his employees. Therefore, I respectfully dissent.

Justice ALBIN joins in this opinion.

For affirmance — Chief Justice PORITZ, and Justices LaVECCHIA, WALLACE and RIVERA-SOTO — 4.

Concurring in part; dissenting in part — Justices ZAZZALI and ALBIN — 2.