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UIM Step-Down Provision in Auto Policy Not Triggered When Other Policy is a “Special Policy” Providing No UIM Coverage

By on May 27, 2016 in Coverage with 0 Comments

The Defendant Elmer McCray rear-ended Plaintiff Vanessa Rivera (“Rivera”) while she operated a vehicle owned by her mother, Janet Torres-White, who was insured by NJM. Rivera had her own insurance under a special policy issued by National Continental Insurance Company. Rivera settled her personal injury claim against McCray for his policy limits of $15,000. The issue in the published decision of Rivera v. McCray, 2016 N.J. Super. LEXIS 65  (App. Div. 2016) was whether Rivera had recourse to $85,000 of the $100,000 UIM coverage in her mother’s NJM policy.

NJM claimed that she was not entitled to UIM coverage under its policy based on a step-down provision. Under NJM’s policy, there is no UIM coverage if the injured insured is not a named insured under its policy but is a named insured under another policy “providing similar coverage” that is less than NJM policy’s UIM liability limit. Under the NJM provision, the maximum liability limit for such an insured shall “step down” to the liability limit “under any insurance providing coverage to that insured as a named insured.”

The trial court agreed with NJM and concluded that Rivera did have “similar coverage” that triggered the step-down provision. As a result, Rivera was left with zero UIM benefits because she had no benefits under her own special policy. Her policy was a “special policy” under N.J.S.A. 39:6A-3.3 (a policy available to certain Medicaid recipients of limited income) which provides no UIM coverage at all.

The Appellate Division noted that New Jersey courts have enforced UIM step-down provisions if  “expressed in clear and unambiguous language.” A UIM step-down provision can limit the amount of UIM coverage available to an individual who is not a named insured to the limit of UIM coverage that the individual may recover under his or her own policy.

In McCray, NJM did not dispute that Rivera may qualify as an “insured” under her mother’s policy. However, NJM contended that Rivera was not entitled to collect any UIM benefits under its policy because she may recover zero benefits under her own policy.

The Appellate Division disagreed with NJM as to the application of its step-down provision. The Court found that it did not apply because it required that the insured be a named insured under one or more policies providing “similar coverage.” The Appellate Division concluded that the plaintiff’s special policy did not provide “similar coverage” because it provided no UIM coverage at all.

The Court was not compelled to reach a different result based upon an argument that Rivera presumably, due to her financial circumstances, chose a policy with no UIM coverage. Her mother bought UIM coverage which covered her and her family members driving her vehicle. Thus, the Court found that her mother’s reasonable expectations as to this step-down coverage should not be frustrated by denying her daughter benefits.

However, NJM had an alternate argument that the plaintiff did not reside with her mother and, hence, did not qualify as an insured under its policy. NJM argued that the plaintiff’s own policy indicated a different address than her mother’s address. It claimed that she was not a resident of her mother’s household and, thus, did not qualify as a family member entitled to coverage under its policy. Rivera disputed NJM’s claim and contended that she did reside with her mother.

Because the trial court never reached the residency issue, the Appellate Division remanded the matter back to the trial court to permit a period of discovery as to this issue. Thus, the Appellate Division reversed on the “similar coverage” issue and found that the step-down provision was not triggered. However, the Court permitted NJM to pursue its alternate argument that the plaintiff did not reside with her mother and, therefore, would not be entitled to UIM coverage under her mother’s policy.


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 30 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 2020-2023, 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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