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Appellate Division Finds That Umbrella Insurance Policy Was Unambiguous In Its Exclusion Of Underinsured Motorist Coverage

By on July 16, 2021 in Coverage with 0 Comments

In 2014, Plaintiff Yvonne Zabala-Lugo was a passenger in a car driven by Jasmine Lugo when the vehicle struck a phantom car that swerved into her lane to avoid hitting a pedestrian.  After that impact, the Zabala-Lugo vehicle was struck from behind by another car driven by Betsey Tavares.  Plaintiff discovered that the Tavares’ insurance policy did not provide bodily injury liability insurance and asserted an underinsured motorist (UIM) claim under her auto and homeowners insurance policy with Skylands Insurance Association (“Skylands”) and also submitted a UIM claim with defendant Stillwater Property & Casualty Insurance Company (“Stillwater”) under her umbrella policy.  The issue in Zabala-Lugo v. Stillwater Property & Casualty Insurance Co., 2021 N.J. Super. Unpub. LEXIS 1349 (App. Div. July 2, 2021) was whether the Stillwater umbrella policy provided UIM coverage for this accident. 

After plaintiff discovered that the Tavares insurance policy did not provide bodily injury liability insurance, it notified Stillwater that she intended to file a UIM claim under her policy. Stillwater informed plaintiff that her policy did not provide UIM coverage.

The declarations page of the Stillwater policy contained a schedule on the underlying insurance coverage that plaintiff was required to maintain during the term of the Stillwater policy.  As to the UIM coverage, the required coverage column was blank but Stillwater described its coverage as “available in states where required by law” and that the required underlying coverage limit is described as “limit must be the same as that carried for automobile liability.”  However, New Jersey does not require UIM coverage.  The Stillwater policy also contained a summary of current coverages which did not include UIM coverage.

Zabala-Lugo contacted Stillwater to notify the company that Skylands had offered her $100,000 to settle her UIM claim under her underlying policy and that she intended to file a UIM claim under the Stillwater policy.  Stillwater denied the claim because her policy did not include UIM coverage.  Further, Stillwater advised the plaintiff that because she did not have UIM coverage, she need not request its consent to accept the Skyland settlement.

Thereafter, plaintiff filed a declaratory judgment action, seeking a declaration that her Stillwater umbrella policy did include UIM coverage.  Stillwater filed a motion for summary judgment, seeking a dismissal of the complaint. 

At the trial court level, the court issued an order granting Stillwater’s motion and dismissed the plaintiff’s complaint.  It found that the Stillwater policy unambiguously stated that it did not provide UIM coverage.  The court also found that Zabala-Lugo could not have a reasonable expectation of having obtained such coverage.  This appeal followed because the plaintiff argued that the trial court made a mistake in finding that the Stillwater policy was not ambiguous and it should be read in her favor.  She also asserted a public policy argument, arguing that it should be construed to provide UIM coverage.

The Appellate Division noted that insurance policies are to be construed liberally in the insured’s favor to the end that coverage is afforded “to the full extent that any fair interpretation will allow.”  The Court also noted that “the words of an insurance policy should be given their ordinary meaning.”  Further, the Court stated that “in the absence of an ambiguity, the Court should not engage in a strained construction to support the imposition of liability or write a better policy for the insured then the one purchased.”

Last, the Court noted that “an insured will be charged with what the average insured person would understand from reading the policy.”

The Appellate Division agreed with the trial court’s conclusion that the Stillwater policy is unambiguous in its exclusion of UIM coverage.  The Court found that there were several provisions of the policy, including the exclusions page, which clearly stated that UIM coverage was not included.  Absent an express endorsement of UIM coverage, which was not found in the policy, plaintiff did not obtain such a coverage.  The Appellate Division agreed with the trial court’s assessment that “to interpret the Stillwater policy to provide UIM coverage, as argued by Zabala-Lugo, would strain the plain language of the agreement and give her coverage for what she has not paid a premium.”

Further, the Appellate Division adopted the trial court’s conclusion that public policy did not require that it adopt the plaintiff’s interpretation of the Stillwater policy. The Court noted that the Legislature “had enacted a number of requirements for automobile insurance policies, including minimum coverage and limits,” but it has not extended those requirements to umbrella policies.  The Court did not find any of the plaintiff’s arguments convincing for a judicial declaration that the New Jersey “[s]tatutes provide insufficient protection from a public policy perspective to policy holders who elect to obtain coverage under an umbrella policy.”  Thus, the Appellate Division affirmed the trial court’s decision, granting summary judgment in favor of Stillwater and finding that the plaintiff’s policy from Stillwater was unambiguous in its exclusion of UIM coverage.


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About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 25 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

For the years 2020 and 2021, Ms. Ramos was selected for inclusion in The Best Lawyers in America© in the practice area of Litigation - Insurance. The attorneys on this list are selected based upon the consensus opinion of leading lawyers about the professional abilities of their colleagues within the same geographical area and legal practice area. A complete description of The Best Lawyers in America© methodology can be viewed via their website at: https://www.bestlawyers.com/methodology.

In 2021, Capehart Scatchard and Ms. Ramos received the “Best Law Firm” ranking in the area of Litigation – Insurance (Metro, Tier 3) published by U.S. News & World Report and Best Lawyers®. Law firms included on the list are recognized for professional excellence with consistently impressive ratings from clients and peers. To be eligible for a ranking, a firm must have at least one attorney who has been included in the current edition of Best Lawyers in America, which recognizes the top five percent of practicing lawyers in the United States. Betsy Ramos (Litigation – Insurance) was recognized for this prestigious award in the 2021 edition. For a description of the “Best Law Firm” selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

“Best Law Firms” is published by Best Lawyers in partnership with U.S. News & World Report. For a description of the selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

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