Several years ago, the New Jersey Supreme Court upheld a “step-down” provision in a business auto policy restricting the amount of UM/UIM coverage to the limit contained in an employee’s personal auto policy. The practical effect of this provision was to deny an employee access to the UM/UIM coverage contained in the employer’s auto policy. In response, the New Jersey legislature enacted a statute prohibiting a business auto policy from discriminating between a named insured and employee with regard to the limits of its UM/UIM coverage. In other words, a business auto policy could not provide a lower limit — or “step-down” in coverage– in the event that an employee as opposed to a named insured filed a claim for UM/UIM coverage under his employer’s auto policy.
The question remained whether this legislation applied retroactively. The Appellate Division held that it did not and enforced a “step-down” provision despite the new law. The Appellate Division reasoned that the new statute did not state that it was retroactive and, more importantly, the Supreme Court already found that this provision did not violate New Jersey’s public policy. Therefore, the court did not interfere with the “common law right of freedom to contract” in the absence of a public policy violation. Adding further clarity, the Appellate Division held that the prohibition against this “step-down” provision only applied to UM/UIM claims relating to accidents that occurr after September 7, 2007.
This case represents a favorable trend in New Jersey where the courts are permitting clear and unambiguous policy language to be enforced as written.
The phrase “arising out of” has long been broadly construed by New York’s courts. This has proven beneficial to many a would be additional insured. Unfortunately, the party may be about to stop. In the case of Worth v. Admiral, et al. (May 1, 2008), the Supreme Court was confronted with a situation in which a general contractor and would-be additional insured sought coverage from the subcontractor and named insured’s insurer. The general contractor argued that even though it had conceded that the subcontractor’s work was not negligent, the underlying personal injury action “arose” from the subcontractor’s work and therefore it was entitled to coverage. The First Department agreed and ordered the subcontractor’s carrier to provide coverage. The Court of Appeals, however, disagreed and held that once the general contractor conceded that the subcontractor was not negligent, it could no longer argue that the underlying accident arose out of the “general nature” of the subcontractor’s work.
In Consalvo v. City of New York et al, a hit-and-run driver struck and killed a sanitation worker who was removing a dead cat from a roadway. In this wrongful death action, the plaintiffs asserted that the defendants were negligent in failing to dispatch two sanitation workers at the time of this accident. The defendants moved for summary judgment arguing that they breached no duty owed to the decedent. The trial court denied the defendants’ motion.
In reversing the trial court and dismissing the plaintiffs’ case, the Appellate Division, Second Department held that “the duty of an employer to provide its employees with a safe place to work does not extend to hazards which are part of or inherent in the very work which the employee is to perform nor to secure the safety of an employee against the condition, or even defects, risks or dangers that may be readily observed by the reasonable use of the senses, having in view the age, intelligence and experience of the employee.” Here, with ten years on the job, this decedent’s work included picking up dead animals from the roadway and the risk of being struck by a car was readily observable. Moreover, plaintiffs failed to produce any evidence that the defendants were required to assign more than one worker to retrieve a dead cat.
In a pair of rulings , the New Jersey Appellate Division denied efforts to expand the doctrine of Rova Farms v. Investors Ins. Co., 65 N.J. 474 ( 1974), to allow recovery for damages in excess of policy limits for a carriers bad faith handling of uninsured and underinsured motorist claims. In both Taddei v. State Farm and Accisano v. Allstate, the Appellate Division affirmed lower court rulings that molded excess verdicts to the UM/UIM policy limits, plus prejudgment interest.
The plaintiff’s had argued that without a first party bad faith remedy, insurers have no incentive to settle claims in a timely manner since their exposure cannot exceed policy limits. The jury in Taddei awarded $2.5 million and State Farm had $100,000 UM coverage limits. In refusing to apply the bad faith rationale of Rova Farms to these claims, the Appellate Division noted that UM/UIM claims are different from third party claims since the carriers failure to settle within policy limits does not place the insureds assets at risk.
The Court did leave open the possibility of a claim against the insurer for breach of the covenant of good faith and fair dealing, or punitive damages in an exceptional and particularly egregious case.
Details are sketchy and many issues must still be worked out, but the recreation of the New York Insurance Exchange is in the works. If all goes according to plan, the Exchange will re-open in the next 18 months. The question is — will pubs and coffee houses follow?