Freeman v. Makanash

1

GREGORY B. FREEMAN and TAMMY FREEMAN, his wife,Plaintiffs-Respondents, v. SHADI M. MAKANASH, TMS LOGISTICS, NEW JERSEY MANUFACTURERS INSURANCE COMPANY, NATIONALEASE, and LEASE LINE,Defendants, and FEDERAL INSURANCE COMPANY, Defendant-Appellant.

No. A-2177-21

Superior Court of New Jersey, Appellate Division

October 19, 2022

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 4, 2022

On appeal from the Superior Court of New Jersey, Law Division Middlesex County, Docket No. L-2463-19.

Mark V. Kuminski argued the cause for respondents (Levinson Axelrod, PA, attorneys; Mark V. Kuminski, on the brief).

John M. Bashwiner argued the cause for appellant (Bashwiner and Deer, LLC, attorneys; John M. Bashwiner, of counsel and on the briefs).

Before Judges Geiger and Berdote Byrne.

PER CURIAM

Gregory B. Freeman (plaintiff) was injured in a motor vehicle accident in the course of his employment while driving a vehicle leased by his employer. The other driver, who allegedly caused the accident, fled the scene and has not been identified. Plaintiff and his wife, Tammy Freeman^[1] (collectively plaintiffs) sought uninsured motorist (UM) benefits from his employer's vehicle insurer, Federal Insurance Company (Federal). The vehicle plaintiff was driving was leased, not owned, by plaintiff's employer. Federal denied coverage for UM benefits, claiming the policy did not provide UM benefits for leased vehicles.

Plaintiffs brought this vehicle insurance coverage action, contending they are covered for UM benefits under the policy issued by Federal pursuant to applicable New Jersey statutes. Federal appeals from two adverse Law Division orders. The first granted plaintiffs' cross-motion for summary judgment declaring that Federal must provide UM benefits to plaintiffs up to the policy limits. The second granted plaintiffs' motion to compel submission of their UM claim to binding arbitration and related relief. We affirm both orders.

We glean the following facts from the record. Plaintiff was employed by Glenway Distribution (Glenway) as a driver. On May 15, 2017, plaintiff was seriously injured in a motor vehicle accident while operating a tractor-trailer on behalf of Glenway. The vehicle plaintiff was driving was struck from behind by a tractor-trailer operated by defendant Shadi Makanash (Makanash) and owned by defendant TMS Logistics (TMS). Makanash and TMS claim the accident was caused by a phantom tractor-trailer that stopped abruptly in front of plaintiff's truck and left the scene of the accident before it or its driver were identified.

Glenway leased the tractor-trailer plaintiff was operating from its owner, defendant Lease Line, Inc. (Lease Line), under a short-term lease agreement (STLA). A separate entity NationaLease, brokered the STLA.

The STLA provided that Glenway was responsible for obtaining liability insurance for the tractor-trailer, not Lease Line. At the time of the accident, Glenway had a fleet business vehicle policy with Federal. Federal's policy states that it provides "primary" coverage for "insured contract[s]," which include "[t]hat part of any contract or agreement entered into as part of [Glenway's] business, pertaining to the rental or lease[] by [Glenway] or any of [Glenway's] 'employees'[] of any 'auto.'" The parties agree that the STLA is an "insured contract" and therefore covered by the Federal policy. The Federal policy provides "liability" coverage for "[a]ny" automobile, and "uninsured motorists" (UM) coverage for "[o]wned" automobiles. The coverage limit for each is $1,000,000. The owner of the vehicle, Lease Line, did not provide any other insurance coverage.

At the time of the accident, plaintiffs had a motor vehicle policy with defendant New Jersey Manufacturers Insurance Company (NJM). The NJM policy provides $100,000 of UM coverage.

Plaintiffs initially filed a complaint alleging negligence against TMS and Makanash, the owner and operator of the tractor-trailer that struck plaintiff from behind. Because the other tractor-trailer left the accident scene, the complaint also asserted a claim for UM benefits against NJM and Federal. Thereafter, the trial court granted plaintiffs leave to file an amended complaint that added Lease Line and NationaLease as additional defendants.

Around that same time, Federal moved for summary judgment. Plaintiffs cross-moved for summary judgment against Federal, seeking a declaration that plaintiffs were insured for UM benefits in the amount of $1,000,000 under Federal's policy. On August 7, 2020, the trial court denied both motions, finding them to be premature.

In February 2021, NationaLease filed a motion to dismiss plaintiffs' complaint, arguing it was not obligated to provide UM benefits to plaintiffs. On March 1, 2021, plaintiffs' claims against TMS and Makanash were dismissed by stipulation.

On March 12, 2021, plaintiffs filed a motion "seeking a declaratory ruling regarding plaintiff's entitlement [to UM] benefits" from Federal, NJM, Lease Line, and NationaLease. The court granted dismissal of plaintiffs' claims against NationaLease pursuant to a stipulation of the parties. On July 7, 2021, the court heard oral argument as to the remaining defendants. At the hearing, NJM did not contest that it was required to provide $100,000 in UM coverage to plaintiffs.

Federal opposed plaintiffs' motion, arguing it was required to provide only liability coverage on the vehicle operated by plaintiff, not UM coverage, because it provided UM coverage only on vehicles owned by Glenway, not vehicles that Glenway leased. Recognizing that UM coverage is statutorily required for vehicles registered in New Jersey, Federal repeatedly referred to the case as an "anomaly." Alternatively, Federal argued that if plaintiff was entitled to UM coverage, it would be limited to the "statutory minimum" amount identified in N.J.S.A 17:28-1.1(a).

The court rejected Federal's arguments. The court relied upon the requirements imposed by N.J.S.A 17:28-1.1(f), which provides:

[A] motor vehicle liability policy or renewal of such policy of insurance, insuring against loss resulting from liability imposed by law for bodily injury or death, sustained by any person arising out of the ownership, maintenance or use of a motor vehicle, issued in this State to a corporate or business entity with respect to any motor vehicle registered or principally garaged in this State, shall not provide less uninsured or underinsured motorist coverage for an individual employed by the corporate or business entity than the coverage provided to the named insured under the policy. A policy that names a corporate or business entity as a named insured shall be deemed to provide the maximum uninsured or underinsured motorist coverage available under the policy to an individual employed by the corporate or business entity, regardless of whether the individual is an additional named insured under that policy or is a named insured or is covered under any other policy providing uninsured or underinsured motorist coverage.

Applying the statute, the trial court found Federal issued a motor vehicle liability policy to Glenway, a corporate entity, and plaintiff was an employee of that entity. It further found that the subject vehicle was registered in New Jersey.

The court also found that the phrase "[u]se of a motor vehicle" was a "catch-all" that encompassed leased vehicles.

The court explained that language in a policy "can't render any language in a statute nugatory, meaningless, [or] worthless." The court reasoned that liability coverage and UM coverage are "tied together" and that Federal was required to provide the maximum [UM] coverage available under its policy, which was $1,000,000. Construing N.J.S.A 17:28-1.1(f) to give it its "ordinary meaning," the court found that subsection (f) covered leased vehicles and required the policy to provide UM coverage to Glenway's employees in an amount not less than the maximum coverage available under the policy. Therefore, the court concluded that Federal was statutorily required to provide plaintiff with UM coverage in the amount of $1,000,000, on a pro rata basis with the NJM policy, which provides $100,000 in UM coverage. In reaching that conclusion, the court rejected Federal's argument that requiring it to provide UM coverage constituted impermissible reformation of the policy.

The court next addressed Lease Line's responsibility to provide insurance coverage as the registered owner of the vehicle. Lease Line argued that it had "one statutory obligation," which was to "maintain liability coverage," and that Federal satisfied that obligation on Lease Line's behalf. The court again disagreed, noting that as the owner of the vehicle, Lease Line must provide liability coverage. Because it found the requirements to provide liability coverage and UM coverage were "tied together" under N.J.S.A. 17:28-1.1, the court found that Lease Line was required to provide UM coverage even though it leased the vehicle to Glenway. However, since N.J.S.A 17:28-1.1(f) did not apply to Lease Line, the court concluded that Lease Line was only required to provide $15,000 in UM coverage, the minimum amount of coverage mandated by N.J.S.A 17:28-1.1(a).

Under the court's ruling, NJM, Federal, and Lease Line would provide UM coverage on a pro rata basis. A July 13, 2021 order embodied the court's decision. Federal moved for leave to appeal the trial court's coverage decision. We denied the motion.

Following resolution of the coverage dispute, the amount of UM benefits recoverable for plaintiff's injuries still needed to be determined. Plaintiff, pursuant to the terms of the Federal policy, sent Federal a written demand for...