Khandelwal v. Zurich Insurance
50 A.3d 52
N.J. Super. Ct. App. Div.2012Background
- Lalitkumar Khandelwal rented a Budget Rent-A-Car in North Brunswick for a family trip; he purchased Supplemental Liability Insurance (SLI) offered at the counter, though he was not told explicitly that it would cover injuries to family members.
- Plaintiffs Swarnlata, Shreya, and Shruti, who are Lalitkumar's wife and daughters, sustained serious injuries in a head-on collision while Lalitkumar was driving the rental car; they asserted coverage under the SLI policy issued by Empire (under Zurich).
- The rental jacket stated basic coverage as required by law and that SLI would be primary if elected; the SLI policy included an intra-family exclusion barring coverage for injuries to the insured's family members living in the same household.
- Harvan Rentals, MHL, and Lewis—responsible for selling SLI—were trained to promote SLI, but the training materials did not disclose the intra-family exclusion; brochures outlining exclusions were inconsistently distributed.
- Empire denied coverage based on the intra-family exclusion; plaintiffs moved for summary judgment seeking coverage under SLI; the trial court denied plaintiffs’ motion and granted Empire’s cross-motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of intra-family exclusion in auto policy | Intra-family exclusion void as public policy in NJ auto policies. | Exclusions may be valid where clearly stated and not contrary to policy. | Intra-family exclusion is not permissible in auto policies; exclusion unenforceable against insured. |
| Effect of two-policy structure on omnibus coverage | Two interrelated policies create a more restrictive omnibus coverage than required by law. | SLI is simply optional excess coverage; structure should be enforceable. | Two-policy structure improperly narrows omnibus coverage; invalid as to auto policy framework; SLI coverage is operative for plaintiffs. |
| Coverage entitlement under SLI when basic coverage is primary | Plaintiffs are entitled to SLI coverage for their injuries. | If exclusion applies, no coverage under SLI for family injuries. | Plaintiffs are covered by the SLI policy; the expulsion of intra-family exclusion requires amendment of policy to conform to NJ law; remand for further proceedings. |
Key Cases Cited
- Zacarias v. Allstate Ins. Co., 168 N.J. 590 (2001) (intra-family exclusions in auto policies generally public policy barred)
- Kish v. Motor Club of Am. Ins. Co., 108 N.J. Super. 405 (App. Div. 1970) (statutory omnibus coverage cannot be narrowed by exclusions)
- Horesh v. State Farm Fire & Cas. Co., 265 N.J. Super. 32 (App. Div. 1993) (auto policy exclusions invalid where they diminish statutorily required coverage)
- Foley v. Foley, 173 N.J. Super. 256 (App. Div. 1980) (intra-family exclusions scrutinized in NJ insurance cases)
- Weitz v. Allstate Ins. Co., 273 N.J. Super. 548 (App. Div. 1994) (distinction between auto liability and umbrella policies in coverage interpretation)
- Willis v. Security Ins. Group, 104 N.J. Super. 410 (Ch. Div. 1968) (omnibus coverage and statutory mandates governing auto coverage)
- Allstate Ins. Co. v. Malec, 104 N.J. 1 (1986) (statute controls where in conflict with policy; broad auto coverage favored)
- Selected Risks Ins. Co. v. Zullo, 48 N.J. 362 (1966) (policies automatically amended to conform to statutory omnibus coverage)
- Doto v. Russo, 140 N.J. 544 (1995) (ambiguity rules and protective interpretation of coverage)
- Princeton Ins. Co. v. Chunmuang, 151 N.J. 80 (1997) (exclusion interpretations and insurer burden to demonstrate applicability)