January 22, 2008

Re: Passenger PIP and UM Benefits

TO THE COMPANIES IN INTEREST:

In Hardy v. Abdul-Martin, A-2153-06T3, the Superior Court of New Jersey-Appellate Division determined that a passenger injured while riding in a stolen car may be denied PIP and UM benefits only on proof that he knew or should have known that the car was being driven without the owner’s permission.

In Hardy, the plaintiff, 14-year-old Tyrell Hardy, was injured when the stolen car in which he was a passenger was involved in an accident. Hardy sought PIP and UM benefits as a family member covered under an automobile insurance policy issued by defendant Liberty Mutual Insurance Company to his grandmother, with whom he lived. Despite Hardy’s claim that he was unaware that the car was stolen, the lower court motion judge granted summary judgment to Liberty Mutual, finding that PIP benefits were barred by the policy’s exclusion from recovery of “any insured operating or occupying an auto without the permission of the owner of the auto,” which substantially mirrors the text of N.J.S.A. 39:6A-7b(2). Plaintiff appealed.

The appellate court held that the exclusion permitted by N.J.S.A. 39:6A-7b(2), incorporated into the PIP provisions of Liberty Mutual’s policy, should be construed as requiring knowledge, or a reasonable basis for knowledge, by the claimant that the car in which he was riding was being operated without the owner’s consent.  The court found that exclusion of coverage from persons who did not know or have reason to know that they were riding in a car that was being operated without the owner’s permission would be unrealistic and not objectively reasonable. The court further noted that a passenger cannot be expected to inquire, on entry into a car, as to the status of the car and driver unless existing facts put him on notice that the use of the car is questionable. An interpretation of 39:6A-7b(2) that would exclude such an unknowing person from coverage would unjustifiably narrow the coverage reasonably expected by an insured. The court also noted that public policy considerations support an expansive interpretation of the PIP and UM statutes. Because Hardy’s knowledge of the status of the car raised contested issues of material fact, the summary judgment on Liberty Mutual’s behalf was reversed and the matter was remanded for trial.

If you should have any questions regarding this opinion, please do not hesitate to contact Glen Danks, Esquire at (856) 751-5285.