CHARMAINE CASTELLI VS. ALLSTATE INSURANCE COMPANY (L-2235-14, MIDDLESEX COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-1514-16T3

CHARMAINE CASTELLI,

Plaintiff-Respondent,

v.

ALLSTATE INSURANCE COMPANY,

Defendant-Appellant.
____________________________

Argued March 15, 2018 – Decided July 10, 2018

Before Judges Simonelli, Haas and Rothstadt.

On appeal from Superior Court of New Jersey,
Law Division, Middlesex County, Docket No.
L-2235-14.

Frederic J. Regenye argued the cause for
appellant (Kenneth N. Lipstein, attorneys;
Frederic J. Regenye, on the briefs).

Alex Lyubarsky argued the cause for respondent
(Wilentz, Goldman & Spitzer, PA, attorneys;
Randall J. Richards, of counsel; Alex
Lyubarsky, on the brief).

PER CURIAM

In this insurance coverage case, defendant Allstate Insurance

Company (Allstate) appeals from the August 7, 2015 Law Division
order, denying its motion for summary judgment and granting summary

judgment to plaintiff Charmaine Castelli. Allstate also appeals

from the September 18, 2015 order denying its motion for

reconsideration; the July 22, 2016 order denying its motion to

vacate the prior orders; and the November 7, 2016 consent

judgment.1 We reverse.

We derive the following facts from the evidence submitted by

the parties in support of, and in opposition to, the summary

judgment motion, viewed in the light most favorable to the party

who opposed entry of summary judgment. Edan Ben Elazar v.

Macrietta Cleaners, Inc., 230 N.J. 123, 135 (2017).

On September 22, 2011, plaintiff was injured while a passenger

in a vehicle owned and operated by Luis Ruiz. Ruiz's vehicle was

struck in the rear by a vehicle owned by Elizabeth Rodriguez-

Garcia and operated by Cindy Parreno.2

GEICO insured Rodriguez-Garcia's vehicle under a policy that

had a $15,000 bodily injury limit. Allstate insured Ruiz's

1
Allstate consented to entry of judgment in the amount of $85,000.
The consent judgment is appealable because it reserved Allstate's
right to appeal the coverage issue and made payment contingent on
the outcome of this appeal. See Whitfield v. Bonanno Real Estate,
419 N.J. Super. 547, 550-51 and n. 3 (App. Div. 2011); Janicky v.
Point Bay Fuel, Inc., 410 N.J. Super. 203, 207 (App. Div. 2009).
2
We shall sometimes refer to Rodriguez-Garcia and Parreno
collectively as the tortfeasors.

2 A-1514-16T3
vehicle. The policy listed Ruiz as the named insured and provided

$100,000 in underinsured motorist (UIM) coverage to the named

insured, spouse of the named insured, and resident relatives of

the named insured. The policy had a step-down provision limiting

UIM coverage to $15,000 for those who were not in those categories.

The policy also had a fraud or misrepresentation provision, which

stated coverage would be denied if "any insured person has made

false statements or concealed any material fact or circumstance

in connection with any claim for which payment is sought under

this policy[.]"

On September 27, 2011, Ruiz advised Allstate that plaintiff

was his resident daughter-in-law and was injured in the accident.

On September 30, 2011, plaintiff's representative also advised

Allstate that plaintiff was Ruiz's resident daughter-in-law.

Without notifying Allstate, plaintiff filed a complaint

against the tortfeasors in December 2012, and settled for the

$15,000 bodily injury policy limit on January 6, 2014. Without

notifying Allstate of the settlement, on January 8, 2014, plaintiff

made a claim for UIM benefits under Ruiz's policy and gave

Longworth3 notice, stating that unless she received written notice

of Allstate's intention to pursue its subrogation rights against

3
Longworth v. Van Houten, 223 N.J. Super. 174 (App. Div. 1988).

3 A-1514-16T3
the tortfeasors within thirty days, she would accept the $15,000

bodily injury policy limit and execute a release. The UIM

claim/Longworth notice identified plaintiff as a passenger in

Ruiz's vehicle, but did not specify whether she was a resident

relative of Ruiz. On February 10, 2014, plaintiff sent Allstate

a second Longworth notice, which extended the thirty-day deadline

for an additional ten days.

Again without notifying Allstate, plaintiff executed a

release to the tortfeasors on March 10, 2014, received a settlement

check in the amount of $15,000 on March 17, 2014, and dismissed

the lawsuit she had filed against the tortfeasors with prejudice

on March 21, 2014.

On April 1, 2014, Allstate notified plaintiff it was still

investigating her UIM claim and sent her a notice of claim form

with instructions to complete and return. The form sought

verification of her address and relationship to the named insured,

among other things. Allstate advised plaintiff it would attempt

to resolve the claim once it received the requested information.

Plaintiff did not return the notice of claim form. Instead,

on April 14, 2014, she filed a verified complaint against Allstate,

seeking a declaration that her UIM claim fell within the policy's

UIM provision, and compelling Allstate to proceed to arbitration.

Plaintiff alleged that at the time of the accident she was a

4 A-1514-16T3
passenger in vehicle insured by Allstate and did not own a motor

vehicle or reside with any relative who owned an insured motor

vehicle. However, she did not reveal she had finalized the

settlement with the tortfeasors, executed a release, received the

settlement funds, and dismissed her lawsuit against them with

prejudice.

Allstate filed an answer, asserting as affirmative defenses

that "[p]laintiff is not an insured under the policy under which

claim is made and no benefits are owed[,]" "[p]laintiff is excluded

from [UIM] . . . coverage under the insurance policy under which

claim is made[,]" and "[p]laintiff is subject to a stepdown clause

of the insurance policy which limits or excludes coverage in this

matter."

In a May 12, 2014 letter, GEICO advised plaintiff that Parreno

would provide an affidavit confirming there was no other insurance

available. Plaintiff submitted a copy of the letter to Allstate,

leading Allstate to believe her claim against the tortfeasors was

pending. On May 20, 2014, plaintiff provided Parreno's affidavit

of no insurance to Allstate, again leading Allstate to believe her

claim against the tortfeasors was still pending.

On May 21, 2014, plaintiff served answers to interrogatories.

She certified that Ruiz was her father-in-law, he resided in

Carteret, and she resided in Iselin. She attached her hospital

5 A-1514-16T3
records dated the day of the accident, which showed that Ruiz's

son, George Ruiz (George) was her spouse and they resided at the

same address in Carteret where Ruiz resided.

Based on this information, in a July 25, 2014 letter, Allstate

granted Longworth consent to settle with the tortfeasors and

advised plaintiff that it made "no coverage references with [the]

letter. It only applies to the Longworth subrogation rights."

Allstate was unaware at the time that plaintiff was not a resident

relative of Ruiz and had already settled the claim against the

tortfeasors, received the settlement funds, executed a release,

and dismissed the lawsuit against them with prejudice.

On October 30, 2014, plaintiff was deposed and confirmed that

she resided with Ruiz and George in Carteret at the time of the

accident, but revealed for the first time that she was not married

to George and Ruiz was not legally her father-in-law. She

testified that she referred to Ruiz affectionately as her father-

in-law because she and George had been in a long-term romantic

relationship and Ruiz considered her a daughter.

Based on plaintiff's sworn deposition testimony, on November

18, 2014, Allstate notified her that the policy's step-down

provision applied, coverage was limited to $15,000, and she had

no claim for UIM benefits under the policy because that coverage

6 A-1514-16T3
was co-equal to the bodily injury coverage available to the

tortfeasors.

Both parties moved for summary judgment. In denying

Allstate's motion and granting plaintiff's motion, the motion

judge focused on whether plaintiff was a resident relative of Ruiz

at the time of the accident and did not consider whether plaintiff

and Ruiz misrepresented that she was his daughter-in-law. The

judge noted that plaintiff's interrogatory answers, which Allstate

received before granting Longworth consent to settle, indicated

she was not a resident relative of Ruiz because she did not reside

at his Carteret address. Thus, the judge determined Allstate was

not deceived in any way into granting Longworth consent to settle.

Allstate responded that plaintiff's sworn deposition

testimony confirmed she resided with Ruiz at the time of the

accident, but was not his daughter-in-law. The judge did not

reconsider his ruling, but instead replied:

Because I've got other things to go through.
[Defense] [c]ounsel, if you can demonstrate
that Allstate did, in fact, rely on some --
they had all of this and that's what they
relied on in order to issue that Longworth
letter, I'll gladly entertain a motion for
reconsideration. All right?

Allstate filed a motion for reconsideration. In denying the

motion, the judge found there was no misrepresentation of

plaintiff's relationship to Ruiz, but rather, their reference to

7 A-1514-16T3
her as his daughter-in-law was "simply an inaccurate way to

characterize their legal relationship." The judge focused on the

verified complaint and found plaintiff's allegation that she did

not reside with any relative who owned an insured motor vehicle

should have prompted Allstate to further investigate and clarify

the parties' relationship before granting Longworth consent to

settle. The judge ruled that Allstate was equitably estopped from

asserting the step-down provision based on its failure to

investigate. The judge ignored evidence that Allstate was

investigating plaintiff's UIM claim before it granted Longworth

consent, and had sent her a notice of claim form requesting

verification of her address and relationship to the named insured,

to which she did not respond. The judge also ignored that

plaintiff certified in her interrogatory answers that Ruiz was her

father-in-law and attached documents showing George was her spouse

and they resided with Ruiz at the time of the accident.

Allstate filed a motion to vacate, which the judge denied.

The judge again focused on the verified complaint and found

Allstate should have determined at the inception of this litigation

that there was no UIM coverage because plaintiff was not a resident

relative of the named insured. The judge ignored the defenses

Allstate asserted in its answer to the complaint, which Allstate

filed approximately thirty days after the complaint was filed.

8 A-1514-16T3
The judge also found plaintiff detrimentally relied on Allstate's

failure to act sooner based on the time and resources she expended

preparing the case.

On appeal, Allstate argues that the policy's step-down

provision applies because plaintiff was not a resident relative

of the named insured and could only claim coverage in the amount

of $15,000 as a passenger in the named insured's vehicle. Allstate

concludes that plaintiff was not entitled to UIM benefits under

the policy because she received $15,000 from the tortfeasors.

Allstate also argues it should not be equitably estopped from

asserting the step-down provision for not investigating

plaintiff's relationship to Ruiz before granting Longworth consent

to settle. Allstate posits that Ruiz and plaintiff misled it into

believing she was entitled to UIM benefits by misrepresenting that

she was Ruiz's daughter-in-law, and plaintiff repeated that

misrepresentation in her certified interrogatory answers.

Allstate avers that it investigated the matter and acted promptly

to invoke the step-down provision when it discovered the

misrepresentation.

Allstate further argues, in part, that because of the

misrepresentation, granting Longworth consent to settle did not

equitably estop it from asserting the step-down provision. Lastly,

Allstate argues that the material misrepresentation made about

9 A-1514-16T3
plaintiff's familial relationship to Ruiz precludes coverage under

the policy's fraud or misrepresentation provision. Allstate

maintains that plaintiff repeatedly and falsely asserted she was

a resident relative of the named insured, and falsely asserted she

detrimentally relied on Allstate's consent to settle when she had

actually settled with the tortfeasors months before receiving the

consent to settle letter.

Plaintiff counters that the judge properly applied equitable

estoppel to bar Allstate from denying UIM coverage based on its

delay in asserting the step-down provision in response to the UIM

claim/Longworth notices and verified complaint, all of which

evidenced she sought coverage as a passenger, not a resident

relative of Ruiz. She also argues that she detrimentally relied

on Allstate's delay in investigating her UIM claim, and there was

no material misrepresentation because she always identified

herself as a passenger in Ruiz's vehicle.

Our review of a ruling on summary judgment is de novo,

applying the same legal standard as the trial court. Conley v.

Guerrero, 228 N.J. 339, 346 (2017). Thus, we must determine

"whether the evidence presents a sufficient disagreement to

require submission to a jury or whether it is so one-sided that

one party must prevail as a matter of law." Liberty Surplus Ins.

Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007) (quoting

10 A-1514-16T3
Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 536 (1995)).

Summary judgment must be granted "if the pleadings, depositions,

answers to interrogatories and admissions on file, together with

the affidavits, if any, show that there is no genuine issue as to

any material fact challenged and that the moving party is entitled

to a judgment or order as a matter of law." Templo Fuente De Vida

Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189,

179 (2016) (quoting R. 4:46-2(c)).

"To defeat a motion for summary judgment, the opponent must

'come forward with evidence that creates a genuine issue of

material fact.'" Cortez v. Gindhart, 435 N.J. Super. 589, 605

(App. Div. 2014) (quoting Horizon Blue Cross Blue Shield of N.J.

v. State, 425 N.J. Super. 1, 32 (App. Div. 2012)). "[C]onclusory

and self-serving assertions by one of the parties are insufficient

to overcome the motion." Puder v. Buechel, 183 N.J. 428, 440-41

(2005) (citations omitted).

If there is no genuine issue of material fact, we must then

"decide whether the trial court correctly interpreted the law."

DepoLink Court Reporting & Litig. Support Servs. v. Rochman, 430

N.J. Super. 325, 333 (App. Div. 2013) (citation omitted). We

review issues of law de novo and accord no deference to the trial

judge's legal conclusions. Nicholas v. Mynster, 213 N.J. 463, 478

(2013). "[F]or mixed questions of law and fact, [an appellate

11 A-1514-16T3
court] give[s] deference . . . to the supported factual findings

of the trial court, but review[s] de novo the lower court's

application of any legal rules to such factual findings." State

v. Pierre, 223 N.J. 560, 577 (2015) (citations omitted). Applying

the above standards, we conclude that Allstate, not plaintiff, was

entitled to summary judgment.

"UIM coverage . . . is 'personal' to the insured. Coverage

is linked to the injured person, not the covered vehicle." Aubrey

v. Harleysville Ins. Cos., 140 N.J. 397, 403 (1995) (citation

omitted). "UIM coverage provides 'as much coverage as the insured

is willing to purchase, for his or her protection[,] subject only

to the owner's policy liability limits for personal injury and

property damages to others.'" Ibid. (quoting Prudential Property

& Casualty Ins. Co. v. Travelers Ins. Co., 264 N.J. Super. 251,

259-60 (App. Div. 1993)).

Because it is linked to the injured party, "[o]ur case law

recognizes the legitimacy of step-down provisions even though they

may result in differential treatment of similar plaintiffs based

on the existence of other available insurance." Pinto v. N.J.

Mfrs. Ins. Co., 183 N.J. 405, 412 (2005). Accordingly, where a

passenger seeks to recover damages under the UIM provision of the

car owner's insurance policy in which the passenger was injured,

an "insurer[] [is] free to modify the insurance policy language

12 A-1514-16T3
to limit the UIM coverage of [the] passenger[] and others who are

named insureds under other insurance policies." Id. at 412-13

(citing Magnifico v. Rutgers Cas. Ins. Co., 153 N.J. 406, 418

(1998)).

Disputes involving insurance contracts are resolved by

looking to the language of the policy. Riccio v. Prudential Prop.

& Cas. Ins. Co., 108 N.J. 493, 499 (1987). As contracts of

adhesion, insurance policies are subject to special rules of

interpretation. Araya v. Farm Family Cas. Ins. Co., 353 N.J.

Super. 203, 206 (App. Div. 2002). Insurance policies should be

construed liberally and in favor of the insured's reasonable

expectations of coverage. Gibson v. Callaghan, 158 N.J. 662, 671

(1999). Notwithstanding, words of an insurance policy should be

given their ordinary meaning. Zacarias v. Allstate Ins. Co., 168

N.J. 590, 595 (2001). "In the absence of any ambiguity, courts

'should not write for the insured a better policy of insurance

than the one purchased.'" Gibson, 158 N.J. at 67 (quoting

Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537 (1990)). If the

expressed language of the policy is clear and unambiguous, the

"court is bound to enforce the policy as it is written." Royal

Ins. Co. v. Rutgers Cas. Ins. Co., 271 N.J. Super. 409, 416 (App.

Div. 1994) (quoting Flynn v. Hartford Fire Ins. Co., 146 N.J.

Super. 484, 488 (App. Div. 1977). "These principles have been

13 A-1514-16T3
applied to enforce step-down provisions in insurance policies,

provided the provisions are expressed in clear and unambiguous

language." Morrison v. Am. Int'l Ins. Co. of Am., 381 N.J. Super.

532, 538 (App. Div. 2005).

A policy of insurance may be voided by an insurer for a

willful misrepresentation of a material fact or circumstance made

before or after the claimed loss. Longobardi, 121 N.J. at 539-

40. As our Supreme Court stated:

[W]hen an insurer clearly warns in a
"concealment or fraud" clause that it does not
provide coverage if the insured makes a
material misrepresentation about any material
fact or circumstance relating to the
insurance, the warning should apply not only
to the insured's misrepresentations made when
applying for insurance, but also to those made
when the insurer is investigating a loss.
Such misrepresentations strike at the heart
of the insurer's ability to acquire the
information necessary to determine its
obligations and to protect itself from false
claims. Thus, an insured's commitment not to
misrepresent material facts extends beyond the
inception of the policy to a post-loss
investigation.

[Id. at 539.]

A misrepresentation is material if, when made, "a reasonable

insurer would have considered the misrepresented fact relevant to

its concerns and important in determining its course of action."

Id. at 542. It must relate to a subject relevant to an

investigation by the insurer of the claim and its determination

14 A-1514-16T3
of a proper course of action. Palisades Safety & Ins. Ass'n v.

Bastien, 344 N.J. Super. 319, 322-23 (App. Div. 2001), aff'd, 175

N.J. 144 (2003). To be material, the false statement must have

"naturally and reasonably influence[d] the judgment of the

underwriter in making the contract at all, or in estimating the

degree or character of the risk, or in fixing the rate of premium."

Mass. Mut. Life Ins. Co. v. Manzo, 122 N.J. 104, 115 (1991)

(alteration in original) (quoting Kerpchak v. John Hancock Mut.

Life Ins. Co., 97 N.J.L. 196, 198 (1922)). "Forfeiture does not

depend on proof that an insured harbored an intent to recover

proceeds to which he or she was not entitled. An insurer may

refuse payment if an insured willfully misrepresented material

facts after a loss, even if the insured did not harbor such an

intent." Longobardi, 121 N.J. at 540.

Plaintiff does not dispute that the step-down provision

applies, nor could she. The step-down provision clearly and

unambiguously limited coverage to $15,000 for those who are not

the named insured, spouse of the named insured, or resident

relatives of the named insured. Plaintiff did not fall into any

of these categories, and thus, neither she nor Ruiz could have had

a reasonable expectation of UIM coverage. Plaintiff was never

entitled to UIM benefits under the policy.

15 A-1514-16T3
 In addition, the policy's fraud or misrepresentation

provision voids coverage. Shortly after the accident, Ruiz and

plaintiff misrepresented to Allstate that she was his resident

daughter-in-law. Notwithstanding plaintiff's subsequent UIM

claim/Longworth notices and verified complaint identifying herself

as a passenger in Ruiz's vehicle, when Allstate attempted during

its investigation to verify her relationship to Ruiz, she certified

in her interrogatory answers that he was her father-in-law and

submitted documents showing his son was her spouse. Regardless

of how plaintiff characterized her relationship to Ruiz, she knew

she was not married to George and that Ruiz was not legally her

father-in-law. As such, she knowingly made a material

misrepresentation of fact during Allstate's investigation of her

UIM claim, on which Allstate reasonably relied in granting

Longworth consent to settle. This misrepresentation voided UIM

coverage under the policy.

Further, we conclude that Allstate was not equitably estopped

from asserting the step-down provision and denying UIM coverage.

"Estoppel is an equitable doctrine, founded in the fundamental

duty of fair dealing imposed by law." Marsden v. Encompass Ins.

Co., 374 N.J. Super. 241, 249 (App. Div. 2005) (quoting Casamasino

v. City of Jersey City, 158 N.J. 333, 354 (1999)). "The doctrine

is designed to prevent injustice by not permitting a party to

16 A-1514-16T3
repudiate a course of action on which another party has relied to

his detriment." Ibid. (citation omitted). A party invoking

equitable estoppel must show that

the alleged conduct was done, or
representation was made, intentionally or
under such circumstances that it was both
natural and probable that it would induce
action. Further, the conduct must be relied
on, and the relying party must act so as to
change his or her position to his or her
detriment.

[Miller v. Miller, 97 N.J. 154, 163 (1984).]

Detrimental reliance is a key factor. See Boritz v. N.J.

Mfrs. Ins. Co., 406 N.J. Super. 640, 649 (App. Div. 2009) (estoppel

arises when the plaintiff justifiably relies on the UIM carrier's

consent to settle); Barrett v. N.J. Mfrs. Ins. Co., 295 N.J. Super.

613, 618-19 (App. Div. 1996) (estopping the UIM carrier from

denying UIM coverage because the plaintiff detrimentally relied

on its consent to settle as the insurer's expressed or implied

acknowledgment that its policy provides coverage).

An insurer's "[u]nreasonable delay in disclaiming coverage,

or in giving notice of the possibility of such disclaimer . . .

can estop an insurer from later repudiating responsibility under

the insurance policy." Griggs v. Bertram, 88 N.J. 347, 357 (1982);

Barrett, 295 N.J. Super. at 618. A showing of prejudice from the

17 A-1514-16T3
delay "is critical to a finding of estoppel." Shotmeyer v. N.J.

Realty Title Ins. Co., 195 N.J. 72, 90 (2008).

Allstate made no expressed or implied acknowledgement that

the policy provided UIM coverage to plaintiff. When Allstate

granted Longworth consent to settle, it explicitly advised

plaintiff that it made "no coverage references" and the consent

to settle "only applie[d] to Longworth subrogation rights."

More importantly, plaintiff did not detrimentally rely on the

Longworth consent to settle. She had settled her claim against

the tortfeasors before submitting the UIM claim and first Longworth

notice to Allstate, and received the settlement funds and executed

a release four months before receiving the consent to settle

letter.

Further, Allstate did not unreasonably delay in giving notice

of the possibility of a disclaimer of coverage. Plaintiff did not

submit her UIM claim until January 8, 2014. She identified herself

as a passenger in Ruiz's vehicle, but did not specify whether she

was a resident relative of Ruiz. On April 1, 2014, Allstate

advised her it was investigating her claim and would attempt to

resolve it once she returned the notice of claim form verifying

her address and relationship to the named insured. Plaintiff did

not return the form, but instead, filed a complaint on April 14,

2014, alleging she was a passenger in the vehicle insured by

18 A-1514-16T3
Allstate and did not reside with any relative who owned an insured

motor vehicle. Approximately one month later, Allstate filed its

answer, asserting as affirmative defenses that plaintiff was

excluded from UIM coverage under the policy and subject to the

step-down provision. Thus, Allstate gave plaintiff notice of the

possibility of a disclaimer of UIM coverage in its answer and did

not unreasonably delay in so doing.

Nor did Allstate unreasonably delay in disclaiming coverage.

Again, Allstate attempted to verify plaintiff's address and

relationship to Ruiz in April 2014, but plaintiff did not return

the notice of claim form. Instead, she served interrogatory

answers, certifying Ruiz was her father-in-law. When Allstate

discovered this misrepresentation on October 30, 2014, it

disclaimed coverage twenty days later. This time period was not

unreasonable, and there was no prejudice to plaintiff, as she was

never entitled to UIM benefits under the policy.

Reversed and remanded for entry of an order dismissing this

matter with prejudice.

19 A-1514-16T3