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Newsletter -
Winter 2008
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On January 2, 2008, the Appellate Division of the Superior Court started the New Year by ruling that first party carriers must provide PIP and UM coverage to passengers who are riding in stolen vehicles. The Court ruled in the reported decision of Hardy v. Abdul-Martin, 2008 WL 34784 that a carrier can only deny PIP and UM benefits upon proof that the passenger knew or had reason to know that the vehicle in which he was riding was not being operated with the permission of the owner.
The Court rendered its decision from an appeal of the trial court’s grant of summary judgment in favor of defendant Liberty Mutual. Liberty Mutual sought dismissal of Hardy’s first party claims for PIP and UM coverage on the grounds that the vehicle operated by defendant Abdul-Martin was stolen, and Liberty Mutual’s policy excludes PIP coverage for claims arising out of the operation or occupation of an automobile without the owner’s permission. Liberty’s policy also excluded UM coverage for using a vehicle without the reasonable belief that the insured is entitled to do so. Notably, Liberty’s UM exclusion requires an element of knowledge on the part of the insured, while the PIP exclusion lacks any such requirement.
Plaintiff Hardy, a fourteen year old boy and resident of Newark, N.J., sought PIP and UM coverage from Liberty Mutual, the insurance carrier for Hardy’s grandmother, with whom he resided, for injuries sustained when the stolen motor vehicle in which he was a passenger crashed into a PSE&G vehicle at a high rate of speed and burst into flames. During Hardy’s deposition, he lacked recall of the accident. He admitted knowing Abdul-Martin, the operator, and another passenger who was a relative of Hardy’s paramour. Hardy also lacked the ability to explain how he came to be a passenger in the vehicle, when his intended destination was a café approximately one block from his residence. Equally important, Hardy denied knowledge that the car was stolen. Hardy’s deposition was conducted after Liberty Mutual moved for summary judgment.
Based on the foregoing facts, the Appellate Division determined that a question of fact existed as to whether Hardy knew or should have known that the car was stolen. To that end, the Court ruled that because the UM exclusion required Hardy to possess a reasonable belief that the vehicle was being operated without the permission of its owner, the trial court’s grant of summary judgment and dismissal of Hardy’s UM claim was improper.
The Appellate Court’s reversal of the trial court’s summary dismissal of Hardy’s PIP claim proved to be much more interesting. The Appellate Court acknowledged that Liberty Mutual’s PIP exclusion lacked any requirement of knowledge that the vehicle was being operated without the owner’s permission. The Court further acknowledged that Liberty Mutual’s PIP exclusion tracked the language of N.J.S.A. 39:6A-7. Equally important, the Court recognized that the plain language of both the statute and the PIP exclusion lacks any requirement that the claimant knew or should have known the car to be stolen in order to trigger the exclusion.
Despite the language of the statute and the insurance provision, the Court determined that the statutorily created exclusion “should be construed to require knowledge or a reasonable basis for knowledge by the claimant that the vehicle in which he was riding was being operated without the owner’s consent.” To support its position, the Court relied upon a public policy statement contained in the 1988 New Jersey Supreme Court decision of Werner Indus. v. First State Ins. Co, 112 N.J. 30 (1988). In that decision, the Supreme Court opined that
[i]nsureds are entitled to coverage in accordance with their objectively-reasonable expectations that are supported by any fair interpretation of the law. The Court continued ‘[o]bjectively reasonable expectations may govern even in the absence of ambiguity, in recognition of the generally one sided nature of insurance contracts.”
In view of the Werner Court’s language, the Hardy Court declared
In our view, an exclusion from coverage of persons who did not know or have reason to know that they were riding [in] a car that was being operated without the permission of the owner would be unrealistic and not objectively reasonable [because] [a] passenger cannot be expected to inquire, upon entry into a vehicle, as to the status of the car and driver, unless existing facts place the passenger on notice that the use of the car is questionable.
As such, the Hardy Court concluded that to interpret the statute and policy as written would act to “exclude such an unknowing person from coverage, if injured, and would unjustifiably narrow the coverage reasonably expected by the insured.” As such, summary judgment was inappropriate in this case because a question of fact existed as to whether plaintiff Hardy knew or had reason to know that the car was stolen.
The simple conclusion is that the Appellate Division decided to impute elements not contained in the plain language of the legislation or legislative history solely to reach its intended result of providing recovery to an injured person. Unfortunately, this type of judicial legislation is becoming increasingly common over time.
Eric S. Schlesinger, Esq.
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