Opinion
DOCKET NO. A-2726-12T1
05-19-2014
WILMA CSAP, Plaintiff-Respondent/Cross-Appellant, v. AMERICAN MILLENNIUM INSURANCE COMPANY, Defendant-Appellant/Cross-Respondent, and WESTERN WORLD INSURANCE COMPANY, Defendant-Respondent, and ALPHA CARE AMBULANCE CORPORATION, and/or ALPHA MEDICAL SERVICES, and SHPETIM ELMAZI, Defendants.
James P. Lisovicz argued the cause for appellant/cross-respondent American Millenium Insurance Company (Coughlin Duffy, LLP, attorneys; Mr. Lisovicz, of counsel and on the brief; Timothy P. Smith and Eduardo DeMarco, on the brief). William C. Bochet argued the cause for respondent/cross-appellant Wilma Csap (Muscarella, Bochet, Edwards & D'Alessandro, attorneys; Mr. Bochet, on the brief). Alexa J. Nasta Schmid argued the cause for respondent Western World Insurance Company (Carroll, McNulty & Kull, LLC, attorneys; Margaret F. Catalano, of counsel and on the brief; James T. Byrnes and Alexa J. Nasta Schmid, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner and Ostrer.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8287-11.
James P. Lisovicz argued the cause for appellant/cross-respondent American Millenium Insurance Company (Coughlin Duffy, LLP, attorneys; Mr. Lisovicz, of counsel and on the brief; Timothy P. Smith and Eduardo DeMarco, on the brief).
William C. Bochet argued the cause for respondent/cross-appellant Wilma Csap (Muscarella, Bochet, Edwards & D'Alessandro, attorneys; Mr. Bochet, on the brief).
Alexa J. Nasta Schmid argued the cause for respondent Western World Insurance Company (Carroll, McNulty & Kull, LLC, attorneys; Margaret F. Catalano, of counsel and on the brief; James T. Byrnes and Alexa J. Nasta Schmid, on the brief). PER CURIAM
In this insurance coverage appeal, defendant, American Millennium Insurance Company (AMIC), appeals from two trial court orders dated October 12, 2012, denying AMIC's motion for summary judgment and granting summary judgment to plaintiff Wilma Csap and defendant Western World Insurance Company (Western World). AMIC also appeals from an order dated February 8, 2013, denying AMIC's motion for reconsideration. In a protective cross-appeal, Csap challenges the October 12, 2012 order and December 10, 2012 final judgment, insofar as they grant summary judgment to Western World. We affirm.
Plaintiff was injured when she was being transported in a Mobility Assistance Vehicle (MAV) owned by Alpha Care Ambulance Corporation (Alpha). The ambulance driver, Shpetim Elmazi, failed to secure plaintiff into her wheelchair, and as a result, when he stopped the ambulance abruptly to avoid a collision with another vehicle, she fell out of the wheelchair. As a MAV service, Alpha was required by law to carry $500,000 in vehicle-related liability insurance. N.J.A.C. 8:40-3.3; N.J.S.A. 30:4D-6.4(b)-(c). It obtained two vehicle policies from AMIC, one for $35,000 and the other for "[t]he difference between [$]35,000 combined single limit [a]nd $500,000 combined single limit." The second policy contained a rider limiting coverage to situations in which the ambulance was driven by a listed driver. The purpose of the rider was to allow AMIC to check the employees' driving records before adding them to the policy. Because Elmazi was not a listed driver, AMIC was only willing to pay the $35,000 limit of the first policy, and claimed no coverage was available under the second policy. Western World, which had issued a commercial general liability (CGL) and professional liability policy, denied coverage altogether, relying on an auto exclusion clause in the policy. See N.J.A.C. 8:40-3.3(c),(d) (requiring an ambulance service to have $300,000 each of general liability insurance and professional liability insurance, or a $500,000 limit in a policy that combines CGL and professional liability coverage).
A "MAV" is a mobility assistance vehicle, formerly known as an "invalid coach." See N.J.S.A. 30:4D-3a. MAV services transport persons with illnesses or disabilities, who do not need the kind of emergency service provided by a traditional ambulance company or rescue squad. See N.J.A.C. 8:40-5.2(a). In this opinion, we will use the terms MAV provider and ambulance service interchangeably.
Following non-binding arbitration, Alpha and Elmazi eventually reached settlement with Csap for approximately $400,000.
AMIC claims the second policy was an excess policy that provided coverage for losses over $35,000, up to $500,000. The second policy does not state that it is an "excess" policy, nor was it described that way in a letter from AMIC to Alpha's insurance agent. That letter did state that if a driver was not listed on the policy "there is no coverage for that driver above 'Statutory Limits,'" a term not defined in the letter. Alpha paid approximately $2 7,000 in premiums for the second policy.
In a written opinion, Judge Charles Powers concluded that the Western World policy did not provide coverage, because it contained a complete exclusion of coverage for incidents arising out of the use of a vehicle.
Addressing the AMIC policy in a second opinion, the judge reasoned that even if the "listed driver" requirement were enforceable against an innocent, injured third party such as plaintiff, under well-established insurance law, the policy would be deemed to provide the minimum coverage required by law. The judge concluded that, because N.J.A.C. 8:40-3.3 required an ambulance service to carry $500,000 in bodily injury coverage, that was the minimum limit to which coverage could be reduced based on the ambulance service's failure to comply with the policy terms.
We agree with Judge Powers' analysis concerning the Western World policy. We affirm for the reasons stated in the judge's written opinion. The arguments on this point presented by AMIC and Csap are without sufficient merit to warrant further discussion. R. 2:11-3(e)(1)(E). We add only these comments. Auto exclusion clauses in CGL policies are commonplace and are routinely enforced. See Bogey's Trucking & Paving, Inc. v. Indian Harbor Ins. Co., 395 N.J. Super. 59, 65 (App. Div. 2007); Scarfi v. Aetna Cas. & Sur. Co., 233 N.J. Super. 509, 516-18 (App. Div. 1989). The clause here was unambiguous. The accident arose from the use of an "auto," as defined in the policy, and clearly fell within the exclusion.
The Western World and AMIC policies complemented each other. The Western World policy excluded auto coverage. The AMIC policy excluded professional liability coverage, including "the handling of corpses."
Moreover, contrary to AMIC's and Csap's contentions, the coverage the policy did provide was not illusory. For example, the policy included coverage for professional liability related to health care. The MAV regulations, N.J.A.C. 8:40-3.7, illustrate a variety of "reportable events," including elder abuse and "death [of] a patient . . . while being treated," that could give rise to liability wholly apart from a vehicle-related accident. See N.J.A.C. 8:40-3.7(a)(1), (a)(5). Those types of events would be covered by the Western World policy. Likewise, for example, mishandling of a corpse or failure to administer the proper medication to a patient, would be covered under the Western World policy.
In addressing the AMIC policy, we conclude that the most helpful analysis is provided by the recent decision in DeMarco v. Stoddard, 434 N.J. Super. 352 (App. Div. 2014). DeMarco arose from a medical malpractice claim. The doctor's malpractice carrier sought to void the policy because of alleged misstatements the doctor made during the application process. We relied on precedent from auto insurance cases in concluding that the insurer could not void the policy so as to avoid a claim by an innocent third party:
DeMarco was decided in January 2014, after the last brief was filed in this case. Accordingly, we permitted the parties to file supplemental briefs addressing DeMarco.
In the field of automobile insurance, New Jersey courts have held that the rescission remedy available to insurance carriers when a policy was procured by means of a material misrepresentation may not infringe upon the rights of innocent third parties who might need to rely on insurance coverage to compensate them for their injuries. See, e.g., Rutgers Cas. Ins. Co. v. LaCroix, 194 N.J. 515, 524-31 (2008); Fisher v. N.J. Auto. Full Ins. Underwriting Ass'n, 224 N.J.We further explained that, even if the insurer were entitled to rescind the policy, "the rescission remedy available to the defrauded insurance carrier is 'molded and shaped' by the court under equitable principles so that innocent third parties do not lose the benefits of mandatory insurance protection." Id. at 368 n.1.
Super. 552, 557-59 (App. Div. 1988). Our courts distinguish between the wrongdoing insured, who procured the policy fraudulently or otherwise failed to comply with the terms of the policy, and an innocent third party, who had nothing to do with the fraud or breach of the policy. Dillard v. Hertz Claim Mgmt., 277 N.J. Super. 448, 450-54 (App. Div. 1994), aff'd o.b., 144 N.J. 326 (1996); Fisher, supra, 224 N.J. Super. at 557-58.
Because New Jersey mandates auto insurance coverage, innocent third parties who use the roadways can reasonably expect that other motorists will comply with the law and be covered by a liability policy. Marotta v. N.J. Auto. Full Ins. Underwriting Ass'n, 2 80 N.J. Super. 525, 532 (App. Div. 1995), aff'd o.b., 144 N.J. 325 (1996). Consequently, our courts have refused to declare an auto policy void from its inception and in its entirety as to injured third parties who did not benefit from the fraud committed in procuring the policy. Instead, the voided policies are reformed to provide the minimum liability coverage mandated by law. See Citizens United Reciprocal Exch. v. Perez, 432 N.J. Super. 526, 532-34 (App. Div. 2013); N.J. Mfrs. Ins. Co. v. Varjabedian, 391 N.J. Super. 253, 256-57 (App. Div.), certif. denied, 192 N.J. 295 (2007).
[Id. at 368.]
We also looked to First American Title Insurance Co. Lawson, 177 N.J. 125 (2003), a case involving legal malpractice insurance, reasoning that the Court declined to void coverage for an innocent party.
On the subject of innocent clients, the Court referred only generally to the "policies underlying our Rules of Court that seek to protect consumers of legal services by requiring attorneys to maintain adequate insurance." Lawson, supra, 177 N.J. at 143. The Court emphasized that the rescission remedy depends on equitable principles — "the totality of circumstances in a given case," including the Court's "concern for the public.
[DeMarco, supra, 434 N.J. Super. at 369-70 (additional citations omitted).]
As in this case, in DeMarco we next considered what statute applied to define the minimum coverage required by law. In answering that question, we looked to the statute governing the insured's occupation, in that case, medicine. We reasoned that,
In the same way as the general public that uses our roadways, medical patients can reasonably assume New Jersey doctors are complying with the law and carrying compulsory malpractice insurance. Insurance coverage in at least the minimum compulsory amount should remain available for the benefit of innocent patients who suffered injuries when the policy was in effect.New Jersey law required doctors to carry $1 million in malpractice insurance. After finding that New Jersey law applied to the malpractice litigation, we concluded that New Jersey's mandated coverage amount of one million dollars was also the minimum amount available to pay the injured plaintiff's claim. Id. at 380.
[Id. at 370 (citation omitted).]
As it did in the trial court, AMIC contends here that it should be permitted to deny coverage altogether under the second ($465,000) policy. In support of that position, AMIC argues that, because the minimum "per person" amount of automobile coverage required by the general auto insurance statutes, N.J.S.A. 39:6B-1 and N.J.S.A. 17:28-1.1, is $15,000, no further coverage is required beyond the $35,000 provided by the first policy. AMIC further contends that we should focus solely on N.J.S.A. 17:28-1.1, because "only N.J.S.A. 17:28-1.1 imposes liability limits on insurers issuing auto policies in New Jersey." We cannot agree.
It is the long-held public policy of this State that once an insurance policy is in force, it will not ordinarily be voided after the insured has injured an innocent third party. That policy is reflected, for example, in the initial permission rule. "Underlying the initial permission rule is the intent 'to assure that all persons wrongfully injured have financially responsible persons to look to for damages' because 'a liability insurance contract is for the benefit of the public as well as for the benefit of the named or additional insured.'" Proformance Ins. Co. v Jones, 185 N.J. 406, 413 (2005) (citation omitted). In Proformance, the Court held that the business use exclusion in an auto insurance policy could not be enforced to deny coverage to an innocent injured third party. Id. at 420.
As noted in DeMarco, a long line of cases hold that coverage for an innocent injured third party under a "void policy" is restricted to the minimum limits mandated by "compulsory insurance law requirements." Palisades Safety & Ins. Ass'n v. Bastien, 175 N.J. 144, 147 (2003) (citing Marotta v. NJAFIUA, 280 N.J.Super. 525 (App. Div. 1995), aff'd o.b., 144 N.J. 325 (1996)); Proformance, supra, 185 N.J. at 421. The question, however, is which statute defines the relevant "minimum limits" of coverage. In cases involving ordinary automobiles, there is no separate statute mandating a higher amount of coverage beyond the $15,000 minimum and, hence, that coverage limit controls. In this case, there is a separate regulation mandating a much higher limit.
In construing statutes and regulations, we seek to harmonize enactments on the same subject matter by reading them in pari materia. See Marino v. Marino, 200 N.J. 315, 330 (2009). Where there is an inconsistency between them, a more specific enactment usually controls over a more general one. See Kingsley v. Wes Outdoor Advertising Co., 55 N.J. 336, 339 (1970); Scott v. N.J. Dept. of Corr., 416 N.J. Super. 512, 518-19 (App. Div. 2010). Likewise, the more recent of two inconsistent statutes generally prevails. See Kemp by Wright v. State, 147 N.J. 294, 307 (1997).
In this case, in 1981, the Legislature authorized the Commissioner of Health to adopt regulations mandating certain levels of insurance coverage for ambulance services. N.J.S.A. 30:4D-6.4, L. 1981, c. 134 § 3. Since the existing general auto insurance legislation required $15,000 in coverage for ordinary vehicles, it is unlikely that the Legislature intended the Commissioner to require ambulance services to only carry $15,000 in insurance coverage. See N.J.S.A. 39:6B-1; L. 1972, c. 197, § 1 (adopting mandatory minimum $15,000 coverage for automobile insurance); N.J.S.A. 17:28-1.1; L. 1972, c. 204, § 1 (same). We infer that the Legislature expected the Commissioner to require ambulance services to carry a far more substantial amount of coverage, commensurate with the risks of transporting physically fragile patients.
The Commissioner fulfilled the Legislative mandate by adopting N.J.A.C. 8:40-3.3, which requires an ambulance service to carry "[a]t least $500,000 per occurrence of combined bodily injury/property damage coverage for each vehicle." N.J.A.C. 8:40-3.3(c)(1). Moreover, the regulations define a role for the insurer in permitting an ambulance service to become licensed:
Prior to initial provider licensure, an applicant shall be required to arrange for each insurance carrier or agent to submit an official "Certificate of Insurance" form, issued by an insurance carrier, covering all three types of insurance listed in (c) below.
[N.J.A.C. 8:40-3.3(a).]
Consequently, an insurer such as AMIC knows or should know that its ambulance-service insured is required to carry $500,000 in vehicle liability insurance, and that in certifying that such insurance is in force, the insurer is enabling the ambulance service to become licensed. In turn, members of the public using a licensed ambulance service have the right to expect that it will be appropriately insured with $500,000 in coverage. By contrast, a person injured in an accident with an ordinary automobile has no reasonable expectation that the automobile will be insured for more than the minimum of $15,000 required by the general auto insurance statutes. See Proformance, supra, 185 N.J. at 421.
We conclude that the more recent legislation governing ambulance services, and the more specific regulations adopted pursuant to that legislation - requiring ambulance companies to carry $500,000 in coverage - must prevail over the older and more general auto insurance statutes requiring only $15,000 in coverage. Further, as in DeMarco, where the insured is a regulated entity, such as a medical practice or ambulance company, and is required by law to carry a certain amount of insurance coverage, we look to the specific statute governing the operation of the insured, in determining the minimum insurance coverage on which an innocent third party is entitled to rely. Hence, we conclude that we should look to the statute and regulations governing ambulance services, N.J.S.A. 30:4D-6.4 and N.J.A.C. 8:40-3.3, rather than the general statutes governing auto insurers, N.J.S.A. 17:28-1.1(a)(1) and N.J.S.A. 39:6B-1.
As an insurance provider, AMIC was chargeable with knowledge that its insured was required to carry $500,000 in vehicle insurance, and that the ambulance service could not remained licensed without the certificate of insurance which AMIC would provide. Hence, we find nothing inequitable in the trial court's conclusion that, when AMIC's insured injured an innocent third party, the statutory minimum coverage was the $500,000 required by N.J.A.C. 8:40-3.3. AMIC argues that its "listed driver" requirement furthers an important public policy by helping to ensure that ambulances are driven by responsible, qualified drivers. That may be so, but the Legislature and the Commissioner of Health have stated a specific public policy that ambulance passengers have a specified amount of insurance coverage in the event of an accident. Our role is to effectuate the specifically stated will of the Legislature, as implemented by the agency designated to enforce the MAV statute.
Nothing in our opinion would preclude AMIC from periodically requiring its policyholders to submit, under oath, a written list of all of their current ambulance drivers. Further, nothing in this opinion precludes AMIC from including policy language requiring an insured to reimburse AMIC for sums paid for an accident caused by a non-listed ambulance driver.
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To the extent not specifically addressed, the parties' arguments are deemed without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION