Zacarias v. Allstate Insurance
775 A.2d 1262, 2001 N.J. LEXIS 788, 168 N.J. 590 (2001)
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Rule of Law:
An intra-family exclusion in an insurance policy is valid and enforceable if its terms are clear and unambiguous, even if the exclusion is not listed on the policy's declarations sheet, provided the policy as a whole is not misleading or overly complex.
Facts:
- Joao Zacarias owned a boat and purchased a boatowner's insurance policy from Allstate Insurance Company.
- On page three of the policy, under 'definitions', an 'Insured person' was defined as the policyholder and any resident relatives.
- On page thirteen, under the heading 'Losses We Do Not Cover,' the policy contained an intra-family exclusion stating, 'We do not cover bodily injury to an insured person...'
- On September 3, 1995, Zacarias was operating his boat with his wife on board.
- Zacarias allegedly operated the boat in a negligent manner, resulting in his wife sustaining injuries.
Procedural Posture:
- Plaintiff's wife sued plaintiff for injuries sustained in a boating accident.
- Allstate Insurance Company, plaintiff's insurer, disclaimed coverage based on an intra-family exclusion and provided a defense under a reservation of rights.
- Plaintiff Joao Zacarias filed a declaratory judgment action against Allstate in the trial court, seeking to void the exclusion.
- The trial court granted summary judgment in favor of Allstate and dismissed Zacarias's action.
- Zacarias, as appellant, appealed to the Appellate Division of the Superior Court of New Jersey.
- A divided panel of the Appellate Division affirmed the trial court's ruling in favor of Allstate, the appellee.
- Zacarias filed an appeal as of right to the Supreme Court of New Jersey.
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Issue:
Does an intra-family exclusion in a boatowner's insurance policy, which is clearly written in the body of the policy but not on the declarations page, unambiguously bar coverage for injuries sustained by the insured's spouse?
Opinions:
Majority - Verniero, J.
Yes. An intra-family exclusion in a boatowner's insurance policy unambiguously bars coverage for injuries sustained by an insured's spouse when the policy language is direct, ordinary, and not obscured by the policy's structure. The court reasoned that while insurance policies are contracts of adhesion subject to special scrutiny, the doctrine of reasonable expectations only applies when there is ambiguity. Here, the policy's terms were clear: the definitions page clearly described 'insured person' to include a resident relative, and the exclusion section plainly stated that bodily injury to an insured person was not covered. The court distinguished this from cases where exclusions were hidden in fine print or required 'entangled and professional interpretation.' The court also held that failing to list the exclusion on the declarations sheet did not create ambiguity because the sheet directed the policyholder to the main policy document for full terms, and the exclusion itself was not contradictory or confusing.
Dissenting - Long, J.
No. The intra-family exclusion should not bar coverage because the policy is ambiguous and violates the insured's reasonable expectations. The dissent argued that discovering the exclusion requires a 'Herculean effort' by the average policyholder, who must cross-reference the declarations page, the liability coverage section, and the definitions section without any clear direction. A reasonable person purchasing liability insurance would expect it to cover claims from family members, who are the people most likely to be on the boat. Citing 'Lehrhoff,' the dissent contended that the declarations page, which is the part of the policy most likely to be read, failed to provide any warning of this significant exclusion, thereby defeating the insured's reasonable expectation of coverage for all legally cognizable claims.
Analysis:
This decision clarifies the scope of the doctrine of reasonable expectations in insurance law, establishing that clarity and straightforward language within the body of a policy can overcome the absence of an explicit warning on the declarations page. The case reinforces the principle that while ambiguities are construed against the insurer, a policy is not per se ambiguous simply because it requires cross-referencing between sections. This ruling places a greater onus on the insured to read the entire policy, rather than relying solely on the declarations sheet, and may encourage insurers to maintain clear, but not necessarily consolidated, policy structures. It signals that courts will enforce plainly worded exclusions in non-compulsory insurance contexts where there is no overriding public policy to the contrary.
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