On January 22, 2019, the Appellate Division issued an opinion in the matter of Katchen v. GEICO, et al., 2019 N.J. Super. LEXIS 10. The decision considered whether an insurer may exclude UIM coverage for an accident involving a vehicle owned by the insured, but not expressly covered under the subject policy.
In December of 2015, the plaintiff was injured in a motor vehicle accident while driving his Harley Davidson motorcycle. He submitted UIM claims under three insurance policies: a motorcycle policy issued by Rider Insurance; a commercial policy issued by Farmers’ Insurance; and a personal auto policy issued by GEICO. These claims were submitted before settling with the tortfeasor for liability coverage limits of $25,000, on notice to the UIM carriers. GEICO disclaimed coverage based on an exclusion in its policy.
GEICO’s policy provided that it would:
“… pay damages for bodily injury and property damage caused by an accident which the insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle or underinsured motor vehicle arising out of the ownership, maintenance[,] or use of that vehicle.”
However, in contrast to this provision was a policy exclusion, which indicated that “bodily injury sustained by an insured while occupying a motor vehicle owned by an insured and not described in the [d]eclarations and not covered by the Bodily Injury and Property Damage liability coverages of this policy” would be excluded from coverage. The motorcycle, which was owned by the plaintiff, was not listed on GEICO’s policy. As such, GEICO disclaimed coverage.
In a declaratory judgment action, the trial court denied GEICO’s application for judgment. On appeal, GEICO took the position that its exclusion was plain, clear, and unambiguous, and thus should have been enforced as written. The respondents to the appeal, which included the plaintiff and two other UIM carriers, argued that this exclusion violated N.J.S.A. 17:28-1.1, which requires all motor vehicle liability policies (with limited exception) to include coverage for “payment of all or part of the sums which the insured or his legal representative shall be legally entitled to recover as damages from the operator or owner of an uninsured motor vehicle.” Respondents contended that the violation of this mandate made the policy ambiguous.
The Appellate Division rejected this argument, noting that the statute at issue pertains only to UM coverage. The claim(s) at hand were for UIM benefits, and ambiguity as to UM benefits has no bearing on whether the clause is ambiguous as to UIM benefits. The policy terms were not otherwise ambiguous, and the court found that the challenged exclusion explicitly states UIM coverage is not provided for an insured’s injuries sustained in a motor vehicle owned by the insured but not covered by the policy. “Any ordinary reasonable person understands a motorcycle is a type of motor vehicle.”
Respondents further contended that the exclusion was not referenced on the declarations page, and that this absence of a warning to the insured was insufficient to alter the reasonable expectations of the policyholder. Of course, the Appellate Division reasoned, the “reasonable expectations” of the policyholder are only relevant when a court finds policy language ambiguous in the first place.
Thus, the Court determined that GEICO was entitled to rely upon the exclusion, and enforced it. However, Judge Suter of the Appellate Division dissented, and agreed with the trial court that the exclusion was ambiguous. Given the dissent, the matter may be appealed as of right to the Supreme Court.