The majority of a split New Jersey Appellate Division panel has sided with Geico over whether an insured driver's vehicle must specifically be listed on a policy to be covered by underinsured motorist insurance.

The majority ruling by Judge Richard S. Hoffman turned on whether an insurer may refuse to pay underinsured motorist coverage for an accident involving a vehicle that, although owned by the insured, was not specifically listed on the policy.

The three-judge panel in its published ruling also addressed whether an insurance company can enforce exclusions not listed on the policy declaration page but that are found elsewhere on the policy.

Hoffman and Judge Larry Fisher said yes.

But in a strong dissent, Judge Karen L. Suter suggested the majority calls into question whether underinsurance motorist coverage follows the insured driver who obtained the coverage rather than the vehicle an insured driver is operating.

2015 motorcycle accident

Geico had denied coverage to plaintiff and policyholder Robert Katchen, who filed for underinsured motorist benefits after he was injured in a 2015 motorcycle accident with an underinsured driver whose policy had a $25,000 ceiling.

Because the motorcycle, which Katchen owned and was riding when the accident occurred, was not specifically listed on the policy he purchased from Geico, the insurance company contended that exclusions contained in the body of the policy — but not on its declarations page — supported its decision not to pay underinsured motorist coverage.

Katchen's Geico policy declarations page stated the insurance company “will 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.” The declaration page did not list any exclusions, according to the court order.

But another section of the policy excluded underinsured motorist coverage involving a motor vehicle “owned by an insured and not described in the declarations.”

'Exclusion is clear and unambiguous'

Wrote Hoffman: “A rule that would require exclusions to appear on the declaration page would result in even more fine print and run the risk of making insurance policies more difficult for the average insured to understand. It would also eviscerate the rule that a clause should be read in the context of the entire policy.”

“The [policy] declaration page here does not control,” Hoffman continued. “The failure to list the exclusion at issue on the declaration page does not automatically render the contract ambiguous. Reading the Geico policy in its totality, we conclude the exclusion is clear and unambiguous. The fact that the exclusion is not mentioned on the declaration sheet does not bar its enforcement.”

Darren Kayal of Rudolph & Kayal argued the case for Geico. Kayal said in an email that the Geico policy “contained a clear and easily understood policy exclusion.”

“I believe that most people would understand that a personal automobile policy would not have to provide underinsured motorist coverage for an accident that took place on motorcycle insured under a different policy by a different insurance company,” he said. “There have been several unreported appellate division decisions on this Geico exclusion. I am glad that my client has a definitive resolution on this important policy provision.”

David Fried of Blume Forte Fried Zerres & Molinari represented Katchen. Fried wasn't available for comment.

Reversed lower court that directed Geico to pay claim

The ruling reversed a finding by a Morris County Superior Court judge who determined Geico's policy was ambiguous and directed it to pay Katchen's claim. Two other insurance companies that had issued policies, including underinsured motorist coverage to Katchen — Riders Insurance Co. and Farmers Insurance of Flemington — agreed to pay their share and sided with Katchen on appeal.

Farmers and Riders argued the Geico policy violated a New Jersey statute mandating that all motor vehicle liability policies, except basic automobile insurance policies, must 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.”

Underinsurance, not uninsured

But Hoffman said, “This case does not involve [uninsured motorist] coverage. Plaintiff did not present a claim for [uninsured motorist] benefits, only [underinsured motorist] benefits. Whether the clause is ambiguous as to the [uninsured motorist] benefits has no bearing on whether the clause is ambiguous in regards to [underinsured motorist] benefits.”

Riders and Farmers also contended that Geico's policy exclusion ran afoul of the intent of the state's underinsured motorist statute because the declarations page gave no warning of the exclusion and improperly tied underinsured motorist coverage to the insured vehicle rather than the insured person.

William Vaughan of Kriney & Vaughan represented Riders. Murray A. Klayman represented Farmers. Klayman could not be reached for comment.

In her dissent, Suter said the Department of Banking and Insurance Auto Insurance Buyers Guide does not reference any nuanced exclusion for underinsured motorist coverage if another vehicle is not listed on the policy.

“The reasonable expectation by an insured before this decision was that [underinsured motorist ] coverage followed the insured and not the vehicle,” Suter wrote. “According to the majority, therefore, if the car is not covered then the insured is not covered.”

R. Robin McDonald (rmcdonald@alm.com) is a staff reporter for the ALM New Jersey Law Journal and Daily Report.

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Geico wins appellate court reversal of underinsured policy coverage

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