Ambrosio v. Affordable Auto Rental, Inc.

Citations: 307 N.J. Super. 114; 704 A.2d 572; 1998 N.J. Super. LEXIS 1

Court: New Jersey Superior Court Appellate Division; January 5, 1998; New Jersey; State Appellate Court

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The court, led by Judge Newman, addressed the obligations of various insurance companies related to automobile liability policies in a case involving a car accident. The key determination was that all insurance policies are co-primary and will contribute equally to the settlement, limited to the lowest coverage amount of any insurer. The incident involved Joel A. Nierenberg, employed by Fortune Garden, who was driving a vehicle rented by Leonard Weinberger when he collided with Darren Ambrosio and Vincent Ottomano. Ambrosio and Ottomano subsequently sued Nierenberg, Affordable Auto, Weinberger, and Fortune Garden. Weinberger filed a third-party complaint against Allstate Insurance Company.

The trial judge initially ruled that the insurance policy from Unity Fire and General Insurance Company for Affordable Auto was primary, with secondary coverage from Progressive and First Trenton. If these limits were exceeded, Allstate would cover further damages. The parties settled but agreed that the court could review the apportionment of coverage. Fortune Garden argued that the First Trenton policy, issued to Nierenberg’s father, should be primary. The judge found that Nierenberg was a permissive user under the First Trenton policy, supporting his status as an insured individual. This conclusion was based on credible evidence and aligns with existing legal definitions of permissive use.

Fortune Garden argues that First Trenton's insurance policy is primary over any other available insurance based on two 'other insurance' clauses. The first clause, from the uninsured/underinsured motorists section, is deemed inapplicable. However, the second clause from the liability section is relevant, stating that if the insured has other liability insurance, First Trenton will pay only a proportional share of damages based on its limits relative to all collectible insurance. For substitute or non-owned cars, First Trenton's liability is limited to damages not covered by other insurance.

Fortune Garden claims that the absence of the term 'excess liability' implies that First Trenton should provide primary coverage. The analysis, however, concludes that the policy's plain language indicates that First Trenton is co-primary with other applicable insurance. Specifically, when a non-owned vehicle is involved, First Trenton is responsible only for damages not covered by other insurance policies. In this case, Nierenberg was driving a vehicle owned by Affordable Auto and rented by Weinberger, which qualifies as a non-owned car under the policy.

The policy clearly differentiates between owned and non-owned vehicles, suggesting distinct coverage provisions. While the word 'excess' is not explicitly stated, the language implies excess coverage. The trial judge ruled that the Allstate policy, which covers Weinberger, is secondary and activates only after all other coverage for Nierenberg is exhausted, noting that Allstate’s coverage applies due to the temporary nature of the rental vehicle. Allstate contests this ruling, arguing that the vehicle operated by Nierenberg does not qualify as a temporary substitute vehicle under its policy.

The Allstate insurance policy stipulates that it will cover damages for bodily injury or property damage for which an insured person is legally responsible due to an auto accident. The term 'insured' includes anyone using a covered auto, defined as a vehicle not owned by the policyholder but used temporarily while another vehicle is out of normal use due to breakdown, repair, servicing, loss, or destruction. Allstate argues that Weinberger failed to prove that the rented vehicle qualified as a 'temporary substitute.' Despite Weinberger stating that he rented the vehicle due to his own car being 'mechanically unreliable' and having starting issues, he could not confirm whether his vehicle was in service or repair on the rental day. The trial judge ruled that the rented vehicle was indeed a 'temporary substitute,' as Weinberger's car was out of normal use due to its breakdown. Allstate's insistence on the need for the own vehicle to be actively serviced or repaired was deemed misplaced, as the policy only requires the vehicle to be out of normal use. Thus, there were no genuine material facts that would prevent the trial judge from granting summary judgment in Weinberger's favor, affirming coverage for the rented vehicle.

Additionally, the policy's 'other insurance' clause indicates that Allstate will only pay its share of any loss in conjunction with other applicable insurance, specifying that coverage for non-owned vehicles is excess over any other collectible insurance. The trial judge's conclusion that Unity's policy provided primary coverage was contested, as the determination of coverage priority should focus on the insurance covering the vehicle involved in the accident rather than the vehicle closest to the incident. This has implications under New Jersey statutes pertaining to rented or leased motor vehicles.

N.J.S.A. 45:21-2 mandates that every vehicle owner must file an insurance policy with their municipality's clerk, which covers liability for bodily injury or death to individuals other than employees or occupants of the vehicle, resulting from negligent vehicle operation. The statute defines "owner" as anyone in the business of renting or leasing vehicles without drivers for non-passenger transport. Minimum insurance limits are set at $10,000/$20,000 for bodily injury or death. The liability section of the Unity policy states it will cover damages from accidents related to the ownership or use of a covered vehicle. An “insured” includes anyone using a covered vehicle with permission, except rentees or their drivers. If a rentee has no other insurance, they are insured only up to statutory minimums; if they have insurance below those limits, they are covered only for the difference. Nierenberg and Fortune Garden argue this provision is an illegal escape clause. In Selective Ins. Co. v. Charter Risk Retention Group Ins. Co., the court ruled that insurance must cover lessees without exception, deeming restrictive provisions as illegal. The Unity policy's limitation on coverage for rentees with other insurance similarly constitutes an illegal escape clause. Exclusionary clauses that conflict with statutory requirements are invalid. Consequently, Weinberger and Nierenberg qualify as insureds under the Unity policy, and the policy's "other insurance" provision indicates that Unity is not the exclusive primary insurer when other insurance exists.

Fortune Garden held an automobile insurance policy with Progressive, which covers liability for bodily injury or property damage from the ownership or use of a covered auto. Nierenberg, deemed a permissive user of a non-owned vehicle, qualifies as an insured under this policy. The policy's 'other insurance' provision stipulates that for owned vehicles, it is primary insurance, while for non-owned vehicles, it acts as excess coverage over any other collectible insurance. This provision indicates that since Nierenberg was driving a non-owned vehicle, Progressive's coverage is excess and shared on a pro rata basis with other insurers. 

According to the precedent set in *Cosmopolitan Mutual Ins. Co. v. Continental Casualty Co.*, excess insurance cannot exist without primary insurance, and conflicting 'other insurance' provisions necessitate mutual sharing of settlement costs among insurers. Therefore, Progressive, First Trenton, Allstate, and Unity must share the settlement costs. However, Nierenberg's assertion for pro rata sharing based on policy limits is inconsistent with *Cosmopolitan*, which favored equal apportionment of liability. 

In this case, since Progressive is the only insurer allowing for pro rata sharing for non-owned vehicles, and the other three insurers do not provide for such sharing, equal apportionment of liability is appropriate. The total settlement claims amount to $145,000, with policy limits of $30,000 (Unity), $300,000 (First Trenton), $500,000 (Progressive), and $500,000 (Allstate). Following equal apportionment, each of the four insurers is liable for the lowest per accident limit of $30,000, totaling $120,000. The remaining $25,000 should be equally divided among the other insurers, resulting in an additional $8,333 liability for First Trenton, Allstate, and Progressive.