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New Jersey Courts Rule Ambiguous Policy Language Favors Policyholder
The New Jersey Appellate Division again agrees that ambiguous insurance policy language favors the Policyholder in recent decisions:
- In Motil v. Wausau Underwriters Ins. Co., (1471442), the Court held that declaration page language creates a reasonable expectation of coverage.
- In Romhen, et al. v. Franklin Mutual Insurance, Inc. (WL 1776130), the Court determined that policy limitation provisions extend to the next weekday or the weekday following a holiday.
In Motil, the Court refused to enforce a step-down provision in a personal auto policy for a Jeep belonging to a New Jersey couple, reducing the $100,000 underinsured motorist (UIM) coverage to $15,000 per person for bodily injuries for the couple’s daughter. The policy named the daughter a covered driver, noting that the vehicle had an “alternate garaging address” at another New Jersey location. The declarations page also contained premium charges for UIM and uninsured motorists (UM).
While the vehicle was in her possession, the daughter was involved in a car accident. After settling with the other driver’s insurer for its $15,000 policy limit, the daughter sought the $100,000 UIM coverage under her parents’ policy.
Wausau denied the claim per the provision on the declarations page, reducing coverage to $15,000. The company cited the daughter as not being a named insured nor a family member because she was not residing in the insured’s household at the time of the accident. Further, the company argued that the other driver was not a UIM because their policy limit was also $15,000.
In a subsequent lawsuit, the trial Court granted summary judgment to the daughter, finding she was entitled to the full $100,000 UIM coverage. The Court held that the step-down provision was clear and unambiguous, citing the declarations page, which clearly stated the daughter was a covered driver entitled to the full coverage limit, which created a reasonable expectation for full coverage. The Appellate Court affirmed, further holding that even permissible step-down provisions should not be enforced if the policy language is ambiguous or contradicts the declarations page.
In Romhen, another couple filed suit against Franklin Mutual regarding denied coverage for a theft that occurred at their insured residence. Franklin Mutual denied the claim based on a provision in the policy that requires lawsuits against the company to be filed within 12 months after receiving the denial.
The lawsuit was filed on a Monday as the last day of the twelve months fell on a Saturday. Franklin moved to dismiss the lawsuit, arguing that the policyholders filed two days after the deadline stated in their policy. The trial court agreed and dismissed the Complaint.
The Appellate Court reversed the trial court’s decision, noting precedent that “because insurance policies are contracts of adhesion if any ambiguity exists, the ambiguity must be construed so as to effect the ‘reasonable expectations of the insured.’”
In New Jersey, Court rules dictate that “when computing any time period fixed by rule or Court Order, and the last day falls on a Saturday, Sunday, or legal holiday, the time period would not run until the end of the next day which is neither a Saturday, Sunday, nor legal holiday.”
The Court also noted that if policy language supports dual meanings, one favoring the Insurer and the other favoring the Policyholder, the policy should be construed to favor the Policyholder. The Court held that if Frankin Mutual wanted to enforce strict deadlines, it should have explicitly stated that weekend days were included in the timeline, despite being in contrast to New Jersey law. Further, the Court noted that Franklin Mutual could have stated the exact deadline in the denial letter, leaving no ambiguity or dispute, but did not.
Both cases demonstrate that New Jersey Courts place great importance on policy declarations in forming the basis of Policyholders’ coverage expectations and that “boilerplate” language elsewhere in the policy contradicting declarations will not be permitted or tolerated.
Our New Jersey Insurance Lawyers at Herold Law, P.A. Help Clients With Policy Coverage
If your Insurer denies expected coverage as stated in your policy, call our experienced New Jersey insurance Lawyers at Herold Law, P.A. at 908-679-5011 or contact us online to arrange a consultation. Located in Warren, New Jersey, we serve clients in Somerville, Morristown, and throughout the state.
