NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3151-15T4
PETER FONTANA AND KATHY
FONTANA,
Plaintiffs-Respondents,
v.
EXECUTIVE CARS, NEW YORK BLACK
CAR.COM, ROYAL DISPATCH SERVICES,
INC., KING LEE CHEUNG and TWIN LIGHTS
INSURANCE COMPANY,
Defendants,
and
GLOBAL LIBERTY INSURANCE COMPANY
OF NEW YORK,
Defendant-Appellant.
____________________________________
Argued September 11, 2017 – Decided November 8, 2017
Before Judges Messano, Accurso and Vernoia.
On appeal from the Superior Court of New
Jersey, Law Division, Essex County, Docket No.
L-1359-11.
Vincent F. Gerbino argued the cause for
appellant (Bruno, Gerbino & Soriano, LLP,
attorneys; Michael R. Tucker, Jr., on the
briefs).
Robert A. Jones argued the cause for
respondents.
PER CURIAM
In this insurance coverage dispute, defendant Global Liberty
Insurance Company of New York appeals from orders declaring that
defendant King Lee Cheung and his automobile had coverage under
an automobile liability insurance policy Global issued to
defendant Royal Dispatch Services, Inc.1 Based on our review of
the record, we affirm the court's order finding Cheung's vehicle
was a covered auto under the policy. Because we conclude the
clear and unambiguous terms of the policy do not support a finding
that Cheung was an insured, we reverse the court's order requiring
that Global defend and indemnify Cheung, and remand for further
proceedings.
I.
Royal operates in the transportation industry as a franchisor
that provides dispatching services to its franchisees. Pursuant
to its franchise agreements, Royal dispatches the franchisees in
their own vehicles to provide limousine services to Royal's
customers. Cheung was a franchisee of Royal.
1
Royal is also referred to as Executive Cars, New York Black
Car.com, Last Radio Group Corp. and Velocity Limo Inc. We refer
to the entities collectively as Royal.
2 A-3151-15T4
In 2010, Royal dispatched Cheung to transport plaintiff Peter
Fontana, an employee of one of Royal's customers, from New York
City to a location in New Jersey. During the trip, the vehicle
was involved in a single-vehicle accident in which Fontana suffered
significant injuries.
Fontana and his wife filed a complaint against Cheung and
Royal alleging that Cheung, individually and in his capacity "as
the agent, servant, employee of" Royal, negligently caused the
accident and Fontana's injuries. An amended complaint also sought
a declaratory judgment that plaintiffs were third-party
beneficiaries of the Global insurance policy and entitled to
coverage because Cheung's vehicle was listed as a "covered auto[]"
under the policy."
The court conducted a bench trial on plaintiffs' request for
a declaratory judgment that Cheung and his vehicle had liability
coverage under the Global insurance policy. The evidence showed
that at the time of the accident, Cheung had a franchise agreement
with Royal pursuant to which Royal dispatched Cheung to provide
limousine services to Royal's customers. The agreement states
that Cheung is "an independent businessman, and shall not be deemed
to be an employee or agent of" Royal. In accordance with the
3 A-3151-15T4
agreement's requirements, Cheung maintained an automobile
liability insurance policy with a bodily injury limit of $100,000. 2
Royal separately maintained the Global automobile liability
insurance policy at issue here. The policy provides coverage for
Royal's use or operation of "non-owned automobiles," with a
coverage limit of $1,000,000 and a $100,000 self-insured
retention. The declarations section of the policy is entitled,
"Business Auto Declarations," and states in large, bold print that
the policy is for "NON-OWNED AUTO ONLY," and describes the policy's
coverage through references to other portions of the policy
entitled "items." Item One states that the policy is issued to
Royal and lists Royal as the named insured.
Item Two includes a schedule of coverages and covered
automobiles, and states that the policy provides automobile
liability coverage for "symbols [7/9] from the [c]overed [a]utos
[s]ection of the Business Auto Coverage Form." The Business Auto
Coverage Form provides definitions for the "symbols 7 and 9." All
of the 234 automobiles owned by Royal's franchisees and used in
their provision of transportation to Royal's customers fall within
the definitions of covered autos under Business Auto Coverage Form
2
Following the accident, Cheung's insurance company paid
plaintiffs its $100,000 bodily injury coverage limit.
4 A-3151-15T4
symbols 7 and 9. The policy, however, does not list, mention or
identify any of the franchisees.
"Symbol 7" includes automobiles, otherwise referred to as
"specifically described 'autos,'" which are "those 'autos'
described in Item Three of the [d]eclarations for which, a premium
charge is shown." Item Three lists all of the vehicles used by
Royal's 234 franchisees and the premium charged by Global for each
vehicle. Cheung's vehicle is listed as a covered automobile.3
The Business Auto Coverage Form also defines "symbol 9"
automobiles, otherwise referred to as "[n]on[-]owned 'autos,'" as
"those 'autos' you [Royal,]4 do not own, lease, hire, rent or
borrow that are used in connection with your business." The policy
includes an "endorsement [which] modifies [the] insurance provided
under" symbol 9, and provides that coverage for damages that would
otherwise be payable will be reduced by a $100,000 self-insured
retention.
During trial, the court heard testimony concerning Royal's
operations, its purchase of the policy and the policy's terms.
Royal's president Turgot Ozen testified that Royal has twenty-
seven employees, but they do not drive vehicles to perform their
3
Cheung's vehicle is listed as vehicle "#109."
4
The policy defines "the words 'you' and 'your'" as the "Named
Insured," i.e., Royal.
5 A-3151-15T4
job duties or provide transportation for Royal's customers. The
employees perform only dispatch and other administrative services.
Royal's employees do not maintain or drive the vehicles used by
Royal's franchisees.
Ozen completed the policy application and was required to
provide Global with "driver information" for all of Royal's 234
franchisees. Ozen was not required to provide any information
about Royal's twenty-seven employees, and the employees' vehicles
are not listed in the policy. The annual premium for the policy
was in excess of $94,000.
According to Ozen, Royal purchased the Global policy for non-
owned vehicles to insure the company if "one of [its]
employees . . . got into an accident" while driving a non-owned
vehicle while performing Royal's business. He also testified,
however, that Royal's employees do not drive any of the non-owned
vehicles covered autos listed in the policy.
When asked if he purchased the policy to provide excess
coverage if one of the dispatched franchisees was involved in an
accident, Ozen responded, "I don't think that was the intent. I'm
not sure." On cross-examination, however, Ozen acknowledged that
at his deposition he testified that he understood the policy
provided coverage "over and above the coverage that [a franchisee]
would have if he [or she] was involved in an accident," and that
6 A-3151-15T4
the policy covered the franchisee's vehicles if there was an
accident and the franchisee was found liable.
Ozen acknowledged the policy included a $100,000 self-insured
retention, which was identical to the amount of insurance each
franchisee was required to maintain. Royal did not have any
insurance coverage for the self-insured retention.
Ozen also testified that upon request, Royal provided a
"certificate of insurance" to its customers showing Royal had a
$1,000,000 automobile liability policy. Royal provided a
certificate of insurance to Fontana's employer, which had
contracted with Royal for transportation services.
Robert King, Global's senior vice president, testified
concerning the underwriting process for the policy. He considered
the driving credentials, records and primary insurance coverage
of the franchisees in assessing the policy's insurance coverage
risk. Through that process, Global arrived at the insurance
premium it charged for each of the designated covered vehicles
listed in the policy. King acknowledged that Global did not review
the credentials, driver history or insurance of any of Royal's
twenty-seven employees.
King explained that Royal is the only named insured under the
policy. He testified the policy does not insure Cheung for his
own negligence, but instead insures Royal for its active
7 A-3151-15T4
negligence. King testified that, for example, the policy provided
coverage if Royal dispatched an intoxicated driver that was
involved in an accident.
Plaintiffs presented Edward Ragan as an expert in commercial
liability insurance underwriting. Ragan described the policy as
"a non-owned automobile policy that appears to have been . . .
scheduling individual automobiles with individual premium charges
for each vehicle under . . . standard [insurance services office
(ISO)] commercial automobile forms." He found it "rather
unorthodox" that the policy listed individual vehicles "on the
dec[larations] page," which suggested "that the policy is limiting
the scope of its coverage to those designated vehicles for which
a specific premium charge is" made.
Ragan explained the "standard ISO" coverage for symbols 7 and
9 as those terms were defined in the Business Auto Coverage Form
of the policy, stating that symbol 7 "seems to be somewhat
redundant because [symbol] 7 is only for specific described
autos . . . referencing the non-owned vehicles" and the vehicles
are also listed in Item Three of the declarations section. He
testified that based on his experience with standard ISO forms,
the "symbol 9" coverage is "consistently worded," in a manner
intended to cover vehicles that are used for business purposes.
8 A-3151-15T4
Ragan also addressed the $100,000 self-insured retention,
which was set forth in what he described as "a manuscripted
endorsement." He testified that the self-insured retention
"seem[s] to interface with" the requirement that the franchisees
maintain their own insurance policies with liability limits of
$100,000.5
Ragan testified that based on his experience, a non-owned
automobile coverage insurance policy "follows the car," meaning
"if there is a loss while that vehicle is in operation and it's
covered under the commercial auto policy, the policy covers that
auto." He opined that the policy offered "clear coverage" for
Cheung's vehicle because "[i]t was being used pursuant to Royal['s]
business." He also testified that the premium charged for the
policy was consistent with the provision of $1,000,000 in excess
coverage for the listed vehicles because each of the vehicles had
primary insurance of at least $100,000.
During trial, Cheung briefly testified about the franchise
agreement and the details of his insurance policy. He also stated
that he understood Royal provided additional insurance coverage
in excess of his personal insurance policy.
5
By its express terms, the endorsement providing the $100,000
self-insured retention applies only to covered autos under symbol
9.
9 A-3151-15T4
The court issued a written opinion and found the policy
described in detail the "non-owned automobiles providing services
to [Royal's] customers." The court stated that "[i]t is clear
that Royal is the insured," but relied on what it determined were
the reasonable expectations of the parties and concluded "there
is coverage for the accident by virtue of the business auto
declarations which include . . . Cheung and his vehicle." The
court did not find that Cheung was an insured under the policy,
and did not otherwise explain or identify the policy provision
pursuant to which it concluded Cheung had coverage. Instead, the
court relied solely upon what it found were the reasonable
expectations of the parties for its determination there was
coverage for "Cheung and his vehicle."
The court granted a declaratory judgment that the policy's
coverage "extends to Cheung's vehicle." The court entered an
order stating that the "$1,000,000[] . . . bodily injury liability
coverage set forth in [the policy] extends to and covered
[Cheung's] vehicle . . . in excess of [Cheung's] $100,000[] . . .
liability limit," and that the coverage "shall be available . . .
in the event the [j]ury awards damages to [plaintiff] in excess
of $100,000[]." (emphasis added).
Global's counsel sought clarification as to whether the trial
court's order was limited to a finding the policy provided only
10 A-3151-15T4
coverage for Cheung's vehicle or if the court also found the policy
provided coverage for Cheung's negligence. In response, the court
held a conference and explained that the insurance policy named
"every vehicle, the make and model of the vehicle's identification
number with an individual premium," and that those vehicles "can
be matched to the drivers whose licenses and other information
were attached to the application for coverage and used for
underwriting purposes."
The court found the policy provided coverage "to the vehicle
and the drivers," regardless of whether Cheung's status with Royal
was as "an employee or an independent contractor." Thus, the
court determined that the policy provided coverage to Cheung for
his own negligence, even if Royal was without any fault and
Cheung's negligence could be not otherwise be attributed to Royal.
In essence, the court found that Cheung was an insured under the
policy and thereby covered by its terms. The court entered an
order stating the insurance extends to Cheung's vehicle in excess
of Cheung's $100,000 liability limit and "covers and requires
Global to defend and indemnify" Cheung for his negligence
regardless of his status with Royal.
The parties subsequently reached a settlement agreement which
stipulated that plaintiff suffered damages in the amount of
$750,000, and provided that $100,000 would be paid from Cheung's
11 A-3151-15T4
policy. The balance is to be paid by Global subject to the outcome
of this appeal. The court entered a final order memorializing the
parties' settlement. This appeal followed.
II.
Our review of a trial court's findings following a bench
trial is limited. We owe "deference to those findings of the
trial judge which are substantially influenced by [the judge's]
opportunity to hear and see the witnesses and to have the 'feel'
of the case, which a reviewing court cannot enjoy." State v.
Locurto, 157 N.J. 463, 471 (1999) (quoting State v. Johnson, 42
N.J. 146, 161 (1964)). Thus, an appellate court will "not disturb
the factual findings and legal conclusions of the trial judge
unless [it is] convinced that they are so manifestly unsupported
by or inconsistent with the competent, relevant and reasonably
credible evidence as to offend the interests of justice[.]"
Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169
(2011) (quoting In re Trust Created by Agreement Dated December
20, 1961, ex rel. Johnson, 194 N.J. 276, 284 (2008)).
However, "[t]he interpretation of an insurance contract is a
question of law for the [appellate] court to determine . . . ."
Adron, Inc. v. Home Ins. Co., 292 N.J. Super. 463, 473 (App. Div.
1996) (citing Weedo v. Stone-E-Brick, Inc., 155 N.J. Super. 474,
12 A-3151-15T4
479 (App. Div. 1977), rev'd on other grounds, 81 N.J. 233 (1979)).
The trial court's resolution of such purely legal questions is
entitled to no deference. Arthur Anderson, LLP v. Fed. Ins. Co.,
416 N.J. Super 334, 345 (App. Div. 2010).
Although Global appeals both of the court's orders, it does
not argue that the court erred in first finding that Cheung's
vehicle was a covered automobile under the policy.6 Instead,
Global argues only that the court erred by finding the policy
covers Cheung for his own negligence. Global argues that the
plain and unambiguous language of the policy provides coverage
only for Royal's negligence and that the court therefore erred by
relying on the expectations of the parties to interpret the
policy's clear terms. We agree.
The interpretation of an insurance contract requires that we
first examine the plain language of the policy. Oxford Realty
Grp. Cedar v. Travelers Excess & Surplus Lines Co., 229 N.J. 196,
207 (2017). "[I]f the terms are clear, they 'are to be given
6
In its reply brief, Global states that it "does not dispute that
. . . Cheung's vehicle is a 'covered auto'" under the policy. Our
independent review of the policy and the record confirms that the
234 vehicles are covered autos under symbol 7 because they are
listed in Item Three. We offer no opinion as to whether Cheung's
vehicle was a covered auto under symbol 9. The trial court did
not make that finding and resolution of the issue requires factual
determinations as to whether Cheung's vehicle was "lease[d],
hire[d], rent[ed] or borrow[ed]" by Royal when the accident
occurred, and whether Cheung was Royal's "employee[]" at the time.
13 A-3151-15T4
their plain, ordinary meaning,'" Pizzulo v. N.J. Mfrs. Ins. Co.,
196 N.J. 251, 270 (2008) (citations omitted), and "that is the end
of the inquiry," Oxford Realty Grp. Cedar, supra, 229 N.J. at 207
(quoting Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195
N.J. 231, 238 (2008)). "If the plain language of the policy is
unambiguous, we will 'not "engage in a strained construction to
support the imposition of liability" or write a better policy for
the insured than the one purchased.'" Templo Fuente De Vida Corp.
v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 200
(2016) (quoting Chubb Custom Ins. Co., supra, 195 N.J. at 238);
accord Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001).
Applying these principles, we begin our interpretation of the
Global policy, as we must, with the policy's language. Cheung is
not a named insured under the policy. To the contrary, the
policy's declarations section expressly states that Royal is the
named insured. The declarations section also refers to covered
autos and includes the list of vehicles to which the coverage
under the policy applies. It is devoid of any language suggesting
Royal's franchisees are insureds,7 and it makes no mention of
Cheung.
7
The court's finding there was "coverage by virtue of the business
auto declarations which include . . . Cheung and his vehicle" is
contradicted by the policy's unambiguous language. The
14 A-3151-15T4
Section II of the Business Auto Coverage Form defines the
policy's automobile liability coverage. There is nothing unclear
about its terms. In pertinent part, it states that the policy
provides coverage for "all sums an 'insured' legally must pay as
damages because of 'bodily injury' or 'property' damage to which
[the] insurance applies, caused by an 'accident' and resulting
from the . . . use of a covered 'auto.'" There is no ambiguity
in this provision, which grants coverage only to "insureds."
The policy clearly and unequivocally defines the term
"insured." In the first instance, an insured is defined as "[y]ou
for any covered 'auto.'" The term "you" refers solely to Royal.
Thus, Royal has automobile liability coverage as the insured for
sums it legally must pay for bodily injuries and property damage
caused by an accident resulting from the use of a covered auto.
Notably, Cheung is not an "insured" under the first definition,
and plaintiffs do not contend otherwise.
The policy includes a second definition of an insured, but
Cheung does not meet the standard. The policy defines an insured
as:
declarations section of the policy makes clear automobile
liability insurance is provided for covered autos. Contrary to
the court's finding, the declarations section does not "include,"
mention or list Cheung or any of the other franchisees.
15 A-3151-15T4
b. Anyone else while using with [Royals']
permission a covered 'auto' [Royal] own[s],
hire[s] or borrow[s] except:
(1) The owner or anyone else from
whom you hire or borrow a covered
'auto[.]' . . .
(2) Your 'employee' if the covered
'auto' is owned by that 'employee'
or a member of his or her household.
(3) Someone using a covered 'auto'
while he or she is working in a
business of selling, servicing,
repairing, parking or storing
'autos' unless that business is
yours.
. . . .
[(emphasis added).]
Under this definition, "anyone" using a covered auto with
Royal's permission that Royal owns, hires or borrows is an
insured.8 But there is an unambiguous exception: when the "owner"
of a covered auto uses the vehicle, the owner is not an insured
under the policy and is thereby expressly excluded from coverage.
Cheung falls directly within this plainly worded exception to the
second definition of insured because he owned the covered auto he
8
We need not address the other requirement necessary to qualify
as an insured under this provision; that the covered auto is
"own[ed], hire[d] or borrow[ed]" by Royal. We observe only that
if those requirements are not satisfied, "[a]nyone else while
using with [Royal's] permission a covered 'auto'" is not an
insured.
16 A-3151-15T4
used to transport Fontana when the accident occurred. Again,
plaintiffs do not argue otherwise.
Based on our review of the policy's plain language, we are
satisfied Cheung was not an insured entitled to automobile
liability coverage. As the owner of the vehicle he was driving
when the accident occurred, he was expressly excluded from the
policy's definition of insured and therefore not entitled to
coverage.
We are mindful that insurance policies have been recognized
as "contracts of adhesion and, as such, are subject to special
rules of interpretation." Progressive Cas. Ins. Co. v. Hurley,
166 N.J. 260, 272 (2001). We will construe policies "liberally
in [the insured's] favor to the end that coverage is afforded 'to
the full extent that any fair interpretation will allow.'" Id.
at 273 (quoting Kievit v. Loyal Protective Life Ins. Co., 34 N.J.
475, 482 (1961)). However, having found the clear language of the
policy excludes Cheung as an insured, our inquiry concerning
coverage ends and we cannot rewrite the policy's terms or find
coverage where the policy plainly provides none. See Oxford Realty
Grp. Cedar, supra, 229 N.J. at 207; Progressive Cas. Ins. Co.,
supra, 166 N.J. at 273.
The trial court did not address the policy's plain language.
Instead, the court relied upon the reasonable expectations of the
17 A-3151-15T4
parties as the basis for its determination Cheung was entitled to
coverage regardless of his status as "an employee or an independent
contractor." A court may rely on the reasonable expectations of
the parties to construe a contract of insurance in two
circumstances: "to reflect the reasonable expectations of the
insured in the face of ambiguous language and phrasing, and in
exceptional circumstances, when the literal meaning of the policy
is plain.'" Abboud v. Nat'l Union Fire Ins. Co., 450 N.J. Super.
400, 408 (App. Div. 2017) (quoting Doto v. Russo, 140 N.J. 544,
556 (1995)). Here, the court erred by relying on the reasonable
expectations of the parties because neither of the two
circumstances were present.
First, as noted, the policy was not ambiguous. "[T]he test
for determining if an ambiguity exists is whether 'the phrasing
of the policy is so confusing that the average policyholder cannot
make out the boundaries of coverage.'" Nunn v. Franklin Mut. Ins.
Co., 274 N.J. Super. 543, 548 (App. Div. 1994) (quoting Weedo v.
Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979)); accord Templo Fuente
De Vida Corp., supra, 224 N.J. at 200. "An 'insurance policy is
not ambiguous merely because two conflicting interpretations of
it are suggested by the litigants.'" Oxford Realty Grp. Cedar,
supra, 229 N.J. at 207 (quoting Fed. Ins. Co. v. Campbell Soup
Co., 381 N.J. Super. 190, 195 (App. Div. 2005), certif. denied,
18 A-3151-15T4
186 N.J. 365 (2006)). Nor does the separate presentation of an
insurance policy's declarations sheet, definition section, and
exclusion section necessarily give rise to an ambiguity. Id. at
207-08. Here, the plain language of the policy makes clear that
Cheung was not an insured, and the trial court did not find any
ambiguity concerning Cheung's status as an insured under the
policy. Thus, there was no ambiguity in the policy permitting the
court's reliance on the reasonable expectations of the parties to
provide Cheung with coverage under the policy. See Abboud, supra,
450 N.J. Super. at 408.
Second, there is no evidence supporting a finding of
exceptional circumstances permitting coverage in contravention of
the policy's plain language, see id. at 408-09, and the court made
no findings of exceptional circumstances permitting its reliance
upon the reasonable expectations of the parties. "[E]xceptional
circumstances are narrowly confined" and apply "to policy forms
that have characteristics of an adhesion contract." Id. at 409.
A court "may vindicate the insured's reasonable expectations over
the policy's literal meaning 'if the text appears overly technical
or contains hidden pitfalls, cannot be understood without
employing subtle or legalistic distinctions, is obscured by fine
print, or requires strenuous study to comprehend.'" Ibid. (quoting
Zacarias v. Allstate Ins. Co., 168 N.J. 590, 601 (2001)).
19 A-3151-15T4
The "expectations of coverage must be real and "objectively
reasonable." Id. at 410. In the assessment of the expectations,
"a court will consider communications regarding the coverage
between the insured or its broker and the insurer or its agent
that relate to the insured's expectations," ibid., "whether the
scope of coverage is so narrow that it 'would largely nullify the
insurance' and defeat the purpose for which it was obtained,"
ibid. (internal citation omitted), and "whether policies with
'unrealistically narrow coverage' cause 'broad injury to the
public at large[,]' which may preclude enforcement on public policy
grounds," ibid. (quoting Sparks v. St. Paul Ins. Co., 100 N.J.
325, 340-41 (1985)).
Again, the policy here defines insured in a simplistic and
straight-forward manner, clearly excludes from the definition of
insured the owners of vehicles leased, hired, rented or borrowed
by Royal, and does not include any language suggesting Cheung was
an insured. There is no evidence showing communications supporting
a reasonable expectation that Cheung was covered under the policy.
The court's finding that Royal had a reasonable expectation of
coverage was based on Ozen's deposition testimony about his
subjective belief the policy would cover Cheung's negligence. His
opinion concerning coverage is untethered to any communication
20 A-3151-15T4
with Global, policy language or other evidence supporting an
objectively reasonable expectation that Cheung was an insured.
The court also relied on Ragan's testimony that the $100,000
self-retention endorsement was a "manuscript endorsement" that
addressed Royal's "special needs" to support its finding Royal
reasonably expected Cheung would be covered under the policy.
However, the endorsement does not expand the definition of insured
or the coverage provided under the policy. The endorsement simply
provides a self-insured retention for covered autos under symbol
9. There is nothing in the endorsement or Ragan's testimony about
it that supports an objectively reasonable expectation that Cheung
was an insured under the policy.
The court also concluded Royal had a reasonable expectation
that Cheung was covered based on its finding that the only
reasonable interpretation of the policy was that it provided
contingent coverage "on driver owned vehicles" and Royal would not
have spent in excess of $94,000 unless coverage under the policy
extended to Cheung's vehicle. It therefore appears the court
applied the principle permitting reliance on the reasonable
expectations of the insured where the plain language would nullify
coverage or result in unrealistically narrow coverage that would
cause broad injury to the public. See Abboud, supra, 450 N.J.
Super. at 410.
21 A-3151-15T4
We disagree with the court's application of the principle
because the court interpreted the policy too narrowly. Coverage
under the policy is not limited to Royal's liability for its
employees' negligence while driving covered autos or to Royal's
negligence in dispatching a franchisee. Although there was
testimony the policy provides that coverage, the court erred in
viewing the policy's coverage as being limited to those
circumstances.
"Nonownership motor vehicle coverage insures an
employer . . . against liability imputed to [it] by reason of
the negligence of employees and other persons using vehicles not
owned by the insured on the business of the insured. It affords
protection against liability incurred under principles of
respondeat superior." Ins. Co. of N. Am. v. Gov't Employees Ins.
Co., 162 N.J. Super. 528, 535 (App. Div. 1978). That is the
coverage Royal obtained here. The policy provides coverage if
Royal is found vicariously liable for the negligence of anyone
driving any of the 234 covered autos listed in the policy in
furtherance of Royal's business. As such, the plain language of
the policy does not nullify the coverage or result in narrow
coverage inconsistent with the protection of the public. See
Abboud, supra, 450 N.J. Super. at 410. To the contrary, the
policy provides Royal, which dispatches 234 franchisee vehicles
22 A-3151-15T4
to provide services to its customers, with $1,000,000 in coverage
if Royal, as the insured, is held vicariously liable for damages
caused by a driver of a covered automobile.
Because a plain reading of the policy does not result in a
nullification of the insurance coverage or so narrowly limits
coverage to cause broad injury to the public, see Abboud, supra,
450 N.J. Super. at 410, the court erred in ignoring the policy's
plain language in favor of what it determined were the reasonable
expectations of the parties, id. at 410-11. Under the policy's
clear language, Cheung was not an insured and it was error to
conclude he had coverage "regardless of whether his status, at the
time he operated the operated the covered vehicle . . . was an
employee of, or independent contractor of," Royal.
Our determination that Cheung was not an insured under the
policy does not end the inquiry. The policy may provide coverage
for Cheung's negligence, but not because he is an insured. The
policy provides coverage if it is determined that Royal, as the
insured, is vicariously liable for Cheung's putative negligence
that resulted in plaintiffs' alleged injuries.
Issues concerning the status of an individual as an employee,
independent contractor or agent, and vicarious liability are
factually and legally complex. See, e.g., Estate of Kotsovska v.
Liebman, 221 N.J. 568, 592-95 (2015) (explaining standards used
23 A-3151-15T4
to distinguish employees and independent contractors); Baboghlian
v. Swift Elec. Supply Co., 197 N.J. 509, 518 (2009) (explaining
principal's vicarious liability for actions of employees and
independent contractors). The complaint alleged Cheung was acting
as Royal's agent, servant or employee when the accident occurred.
It is unclear why Cheung's status, and Royal's potential vicarious
liability for Cheung's alleged negligence, was not litigated
before the trial court.9 The trial instead focused solely on the
parties' interpretations of the policy language. As noted,
however, under the unambiguous language of the policy, there is
coverage only if Royal is vicariously liable for Cheung's alleged
negligence.
In any event, we affirm the court's order finding Cheung's
vehicle was a covered auto under the policy, reverse the court's
order finding Cheung was covered under the policy regardless of
his status as an employee or independent contractor, and remand
for further proceedings to determine if there is coverage under
the policy because Royal is vicariously liable for Cheung's
putative negligence.
9
During the litigation, the court denied cross-motions for summary
judgment on the issue of Cheung's status as an independent
contractor or agent of Royal. The court found there were genuine
issues of material fact requiring resolution by a jury.
24 A-3151-15T4
We offer no opinion as to whether Royal is vicariously liable
for Cheung's negligence. There is an insufficient evidentiary
record upon which that determination can be made. That issue
must, however, be resolved in the first instance because under the
clear language of the policy Cheung is not an insured. If it is
determined Royal is not vicariously liable for Cheung's
negligence, plaintiff may renew its application for a
determination that there are exceptional circumstances permitting
the reasonable expectations of the parties to overcome the policy's
clear language. See Abboud, supra, 450 N.J. Super. at 410.
Affirmed in part, reversed in part, and remanded for further
proceedings. We do not retain jurisdiction.
25 A-3151-15T4