Recently, the Appellate Division examined the issue of whether a plaintiff, who was insured by an out-of-state insurance automobile policy, could collect Uninsured Motorist (UM) benefits from a resident relative’s New Jersey automobile policy. On August 14, 2008, the Appellate Division affirmed a lower court decision that found that a plaintiff’s out-of-state insurance policy was considered statutorily reformed and rewritten, pursuant to the “deemer” statute, to provide minimum personal injury protection (PIP) and UM benefits. In addition, it found that a second available insurance policy’s step down provision was enforceable, limiting the plaintiff’s recovery to his own out of state automobile insurance policy’s UM limits.
In Chavez et al v. The Proformance Insurance Company, plaintiffs, Jose and Maria Chavez, and their daughter Mariana Chavez, were involved in a motor vehicle accident with a vehicle that was uninsured. The plaintiffs’ vehicle was operated by Jose Chavez, who was insured by Executive Risk Indemnity Company (“Executive”), a subsidiary of Chubb Insurance Group. At the time of the accident, Executive was a California insurance company licensed to do business in New Jersey. The policy did not provide for PIP and UM benefits. However, because Executive was licensed to do business in New Jersey, it was obligated under N.J.S.A. 17:28-1.4, also known as the “deemer” statute, to provide minimum PIP and UM benefits. The deemer statute requires an out of state insurance company that does business in the state of New Jersey to provide minimum coverage for PIP and UM benefits whenever a vehicle insured under the policy is involved in a motor vehicle accident in New Jersey.
The Executive policy was issued to the Chavez family while Mr. Chavez resided in California. The plaintiffs relocated to New Jersey and were living with Maria Chavez’ brother, Sergio Cartagena (“Cartagena”) at the time of the accident. Mr. Cartagena was insured by Proformance Insurance Company which provides both liability and mandatory PIP and UM benefits.
Following the accident, plaintiffs received PIP benefits as well as the statutory minimum UM benefits of $15,000/$30,000 under the Executive policy. Plaintiffs, as members of Cartagena’s household, also sought recovery of UM benefits from Proformance. The Proformance policy provided higher UM benefits in the amounts of $100,000/$300,000 to members of its insured’s household who sustain injuries caused by the operator of an uninsured motor vehicle. The policy also contained a step-down provision that lowered the benefits available to an injured party who was directly insured by that party’s own policy, such as in the case of the Chavez’. The step-down provision limited coverage available to the injured party to the maximum available coverage under a similar policy, which in the case of the Chavez’ would be limited to $15,000/$30,000. Because Plaintiffs were insured by Executive and, under that policy, were subject to the statutory minimum coverage for UM benefits, Proformance denied UM benefits to Plaintiffs.
Plaintiffs then commenced a personal injury action in Superior Court against the driver of the uninsured vehicle, along with Executive and Proformance. In their Complaint, plaintiffs sought relief against Executive and Proformance, including a declaration that they were entitled to UM benefits and UM arbitration as well as compensatory damages and punitive damages resulting from the carriers’ gross misconduct, bad faith, and breach of their duty of good faith and fair dealing owed to Plaintiffs.
Thereafter, the plaintiffs moved for summary judgment against Proformance only, seeking an order requiring it to pay UM benefits. Plaintiffs argued that the step-down provisions of the Proformance policy did not apply because the coverage under their Executive policy did not contain “similar coverage.” Proformance filed a cross-motion for summary judgment, arguing that the deemer statute rewrites policies issued by out-of-state insurance companies authorized to do business in New Jersey to conform the policies to New Jersey law. In addition, Proformance argued that its policy issued to Cartagena contained an enforceable step-down provision.
During oral argument, the motion judge noted that both sides agreed that the deemer statute was in force and effect. Additionally, it was noted that the deemer statute was utilized for PIP coverage benefits, and would be utilized for the uninsured motorist coverage by Executive. The only question before the Court was whether the Executive policy, which did not provide any PIP and UM coverage, should be construed to include New Jersey’s statutorily mandated PIP and UM coverage. The judge found that the Executive policy was automatically reformed, in accordance with the deemer statute, to provide the minimum statutory UM and PIP benefits to plaintiffs. Plaintiffs appealed the Court’s decision.
On appeal, the panel noted that its decision was based upon the language of the deemer statute. The Court further noted that Executive, which is a subsidiary of Chubb Insurance, transacted insurance business in the State of New Jersey and was therefore subject to the deemer statute. Because the Executive policy provided the required UM and PIP benefits, the step down provision in the Proformance policy was enforceable against the Plaintiffs, limiting their UM benefits to $15,000/$30,000.
Insurance carriers should be aware of all other available policies, even those that are issued out of state, when evaluating UM claims. As this case shows, an out-of-state policy will be subject to enforceable UM step down provisions, in the event it is subject to the deemer statute, which would limit a Plaintiff’s recovery.
Ayesha T. Rashid
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