New Jersey Appellate Division Reaffirms Favorable Interpretation of Insurance Contracts for Insureds

On June 13, 2016, the Appellate Division issued its unpublished decision in Comer v. Pacheco, affirming the trial court’s grant of the plaintiff’s cross-motion for summary judgment, requiring the insurer to provide coverage under the subject policy.  In this case, an employee of Pat’s Housekeeping Service, Figueroa, died as a result of a motor vehicle accident that occurred on April 4, 2006.  At that time, Pacheco, the owner of Pat’s Housekeeping Service, was driving Figueroa in Pacheco’s personal vehicle, rather than the vehicle registered to Pat’s Housekeeping Service.  Proformance Insurance Company (“Proformance”), issued a commercial automobile policy to Pat’s Housekeeping Service.  Proformance, upon being provided with a statement of loss, denied coverage, reasoning that the accident involved Pacheco’s personal vehicle, which was not scheduled.
In affirming the trial court’s grant of summary judgment to plaintiff, the Appellate Division reasoned that insurance policies are adhesion contracts, as the insurance company is the expert and unilaterally prepares the policy, whereas the insured is unversed in insurance provisions.  As a result, courts are required to read coverage provisions broadly and to strictly construe exclusionary clauses.  Where the subject claim involves the compensation of an innocent third party, the protection of the innocent third party is a primary concern.  The language of the policy is to be given its plain, ordinary meaning, and if the policy terms are clear, courts interpret the policy as written.  However, if the policy language fairly supports two meanings, the policy is construed to sustain coverage in order to comport with the reasonable expectations of the insured.  Further, the declarations page has “signal importance” in defining the insured’s reasonable expectations of coverage.
In this case, the named insured on the declarations page of the Proformance policy was Pat’s Housekeeping t/a Patricia Pacheco.  Under the policy terms, coverage was afforded to a Ford minivan, the sole scheduled vehicle, and also to “those autos you do not own…that are used in connection with your business.”  The policy defined “you” as the named insured on the declarations page.  Proformance’s denial of coverage was premised on the contention that Pacheco and Pat’s Housekeeping Service were one in the same, i.e., that Pacheco was also a named insured under the policy.  As a result, Proformance argued that the Pacheco vehicle was owned by the named insured and not covered under the policy.
In contrast, the Appellate Division described that the declarations page provided that the named insured was Pat’s Housekeeping Service.  Therefore, the Appellate Division provided that it was reasonable for Pacheco to assume that the references to “you” in the policy referred to Pat’s Housekeeping Service alone.  Thus, the Appellate Division held that it was reasonable for Pacheco to believe that coverage under the Proformance policy existed for the vehicle owned by Pat’s Housekeeping Service, and vehicles not owned by Pat’s Housekeeping Service but used in connection with its business.  Consequently, the Appellate Division provided that the language of the policy fairly supported two meanings; Proformance’s interpretation which would deny coverage, and Pacheco’s interpretation that would provide coverage.  As a result, the Appellate Division concluded that the policy must be construed to sustain coverage in order to comport with the reasonable expectations of the insured, and that Pacheco’s personal vehicle was covered under the policy because it was not owned by Pat’s Housekeeping Service.