The New Jersey Supreme Court recently ruled on important questions regarding underinsured motorist (UIM) coverage in commercial vehicle policies. The case, Craig Chiaccheri v. Zurich American Insurance Company (A-9-25), involved a dispute over insurance coverage limits after an employee was injured in a vehicle owned by his employer. The court's decision impacts how UIM coverage is provided to employees under commercial policies, potentially affecting many workers in similar situations across the state.
Craig Chiaccheri was injured in a motor vehicle accident while driving a vehicle owned by his employer, TJX Companies, Inc. The vehicle was insured under a policy issued by Zurich American Insurance Company, which provided $2,000,000 in bodily injury liability coverage but limited UIM coverage to just $15,000. The driver who caused the accident had a liability insurance limit of $100,000, which exceeded the UIM limit of Chiaccheri's employer's policy. As a result, Zurich denied Chiaccheri's claim for UIM coverage, stating that the other driver was not considered underinsured.
Chiaccheri contested the denial, arguing that the UIM limits violated New Jersey law, specifically N.J.S.A. 17:28-1.1(f), which mandates that employees of corporate entities must receive the maximum UIM coverage available under the policy. He sought to reform the policy to provide $2,000,000 in UIM coverage, the same amount as the bodily injury coverage. The case eventually reached the New Jersey Supreme Court after a lower court ruled in favor of Zurich, granting the insurance company summary judgment.
The Supreme Court, in a unanimous decision authored by Justice Patterson, addressed two certified questions from the Third Circuit Court of Appeals. The first question asked what the 'maximum UIM coverage available under the policy' is for employees of a corporate entity. The court ruled that the maximum UIM coverage that must be provided is the limit that the corporate entity selected for the named insured, not the general third-party liability coverage limit. This means that if a business chooses a lower UIM limit, that lower limit applies to employees as well.
The second question from the Third Circuit asked whether endorsements that limit UIM coverage to an amount less than the general third-party liability coverage violate New Jersey law or public policy. The court ruled that such endorsements do not violate the law, provided certain conditions are met. Specifically, the UIM coverage must meet the minimum requirements outlined in N.J.S.A. 17:28-1.1(a) and (b), and the coverage limits for employees must be the same as those for the named insured.
The court stated, "the maximum UIM coverage 'available under the policy' that must be provided to 'an individual employed by the corporate or business entity' is coverage up to the UIM coverage limit that the corporate or business entity selected under the policy for the named insured."
This ruling clarifies the application of N.J.S.A. 17:28-1.1(f) and reinforces the idea that while employees must receive UIM coverage, it does not have to match the higher third-party liability limits unless the employer chooses to set it at that level. The court's decision is significant for employees who rely on their employer's insurance for coverage in case of accidents caused by underinsured motorists.
The ruling also has implications for insurance companies and employers, as it allows them to maintain lower UIM coverage limits without violating state law, provided they comply with the statutory requirements. This could lead to changes in how commercial insurance policies are structured and sold in New Jersey.
Looking ahead, the decision may prompt legislative action if lawmakers wish to further clarify or amend the UIM coverage requirements in response to the court's ruling. The court noted that the Legislature has the authority to amend N.J.S.A. 17:28-1.1 to clarify its intent if needed.
As for appeals, it is unclear if Chiaccheri or Zurich will pursue further legal action, but the ruling effectively settles the questions posed by the Third Circuit for now. The case serves as a reminder of the complexities involved in insurance coverage and the importance of understanding policy limits, especially for employees who may rely on their employer's insurance in the event of an accident.