Insurance agent hand holding clipboard with policy form and businessman signs agreement protection document.
On Nov. 23, the Appellate Division decided Rafanello v. Taylor-Esquivel, a case marked for publication. Although Rafanello arises in an insurance context, it is primarily a statutory construction decision that reflects statutory language that determines state policy by directing an outcome on a basis far broader than the narrow coverage and exclusions contained in a liability policy.
The facts of the case are simple and straightforward. Plaintiff Rafanello was injured when rear-ended by a dump truck operated by defendant, Taylor-Esquivel, during the course of his employment with NAB Trucking. Rafanello carried his own automobile insurance with Encompass Property & Casualty Insurance Company, having UM/UIM coverage of $250,000 per person and $500,000 per accident. NAB also had a $750,000 liability policy for the dump truck from American Millennium Insurance Company (AMIC). However, the policy included a step-down provision which provided for maximum liability coverage only in the sum of $35,000, for accidents involving drivers not listed as a "Covered Driver" under the policy. Taylor-Esquivel was not listed as a covered driver, although it had been NAB's intent to include him as a covered driver under the $750,000 AMIC liability policy.
Rafanello filed suit for personal injuries against Taylor-Esquivel and Encompass alleging he was entitled to UIM coverage from Encompass because there was insufficient liability coverage under the AMIC policy of NAB. Encompass then filed a complaint against AMIC alleging that it was not required to provide UIM coverage for the benefit of Rafanello.
The issue on appeal was whether New Jersey law required AMIC to provide $750,000 coverage on a commercial motor vehicle carrier, such as NAB, because of statutorily required liability coverage of $750,000, despite the fact that NAB's employee was not listed as a "covered driver" on the AMIC policy.
Encompass argued that the trial judge erred in granting AMIC's motion limiting its obligation to $35,000, rather than the required liability coverage of $750,000 mandated by state and federal law because the dump truck was a commercial motor vehicle. AMIC argued that NAB was not involved in interstate commerce at the time of the accident, that the policy did not include a federal endorsement for interstate truckers and, therefore, the step-down limit of $35,000 was not within federal or state law. Encompass contended that, regardless of whether NAB was engaged in interstate or intrastate commerce, New Jersey statutes and administrative law provisions required AMIC to provide NAB with statutory liability coverage of $750,000.
The legislature had enacted a statutory scheme to establish standards for the transportation of hazardous materials within the State of New Jersey, and also afforded authority to the State Police to promulgate additional safety regulations. The court in its opinion set forth at length the applicable statutory and administrative code requirements and their underlying safety-related bases.
The court found that the express language of these legislative directives clearly established a separate statutory scheme for commercial motor vehicles such as the dump truck involved in the accident and the Legislature, thereby, clearly intended to enroll NAB in the Motor Carrier Safety Assistance Program, the purpose of which was "to support a safe and efficient surface transportation system to apply in both intrastate and interstate commerce." The court held that the fact Taylor-Esquivel was not listed as a covered driver on NAB's policy was irrelevant because resolution of the suit, by proving the failure of Taylor-Esquivel to be listed as a "covered driver" as the determining coverage fact, would distort and ignore the impact of the statutes and regulations adopted to ensure safety for drivers on public roadways and would also be in conflict with bedrock principles of the Interstate Commerce Commission. Therefore, the court concluded that since NAB was in interstate or intrastate commerce, as defined by New Jersey law, the policy step-down provision was invalid and AMIC must provide liability insurance to the $750,000 limit.
Rafanello provides us with a good example of, and teaches us that, an insurer may not include restrictive language in a policy that violates the statutory policy of New Jersey.