Feb 5, 2019

Insurer May Exclude Coverage for Accident Involving a Vehicle Owned by Insured but Not Covered Under Policy

In a case involving underinsured motorist coverage, the Appellate Division recently held that an exclusion for coverage for an accident involving a vehicle owned by the insured, but not covered under the specific policy, was valid.  Katchen v. Geico, et al. – N.J. Super. – (App. Div. 2019). 

Plaintiff, Robert Katchen, suffered injuries in a motor vehicle accident while operating his Harley Davidson motorcycle which was insured by Ryder Insurance Company.  His household contained two other policies including one issued by Geico and one issued by Farmers Insurance Company.  He settled with the tortfeasor for $25,000.00 and sought UIM coverage under all three policies. 

Geico denied coverage based upon an exclusion in his policy which barred coverage for bodily injuries sustained by an insured while occupying a motor vehicle owned by an insured and not described in the declarations and not covered by the bodily injury portion of the Geico policy. 

The Appellate Division upheld the exclusion and barred coverage under the Geico policy.  The court held that the exclusion was unambiguous.  The court held that it did not matter that the exclusion was not listed on the declarations page.  The court that failure to list an exclusion on a declarations page does not automatically render a contract ambiguous and thus permit the insured to argue that the contract violates his reasonable expectations.

Finally, the court pointed out that plaintiff correctly argued that UIM coverage must follow the driver – not the vehicle.  The court noted that Geico’s exclusion simply barred losses that occur in an owned vehicle not insured under its policy and that if plaintiff had suffered injuries while in a rental car or another vehicle he did not own, the exclusion would not apply.