Sexton v. BOYZ FARMS, INC.
2011 U.S. Dist. LEXIS 49720
| D.N.J. | 2011Background
- Sexton was injured in a December 18, 2007, motor vehicle accident involving an uninsured motorist; the tractor-trailer was owned by Casie Pro Tank and insured by Zurich.
- Sexton was an insured under Zurich's policy and also under his own CURE personal policy for UM/UIM coverage; Zurich offered up to $1,000,000 and CURE offered up to $15,000.
- Zurich's policy contained a step-down clause reducing employee UM/UIM recovery to the employee's personal policy limits when applicable, which New Jersey later prohibited.
- New Jersey enacted N.J. Stat. Ann. § 17:28-1.1(f) on September 10, 2007, prohibiting step-down clauses and providing that a policy naming a corporate entity as insured provides the maximum UM/UIM coverage to employees; the act took effect immediately.
- Plaintiffs filed suit in New Jersey state court in August 2009 and removed the action to federal court in November 2009; plaintiffs alleged UM/UIM benefits under Zurich and CURE policies.
- Zurich argued the step-down clause should apply under the policy; plaintiffs argued the amendment prohibits step-downs and should apply to Sexton’s post-amendment accident.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of § 17:28-1.1(f) to post-amendment accidents | The amendment applies retroactively to reform existing policies where accidents occur after its passage. | Olkusz requires prospective application; the amendment does not retroactively affect Sexton's post-amendment claim. | § 17:28-1.1(f) applies to Sexton's post-amendment accident. |
| Retroactivity and manifest injustice | Retroactive application is warranted to reform existing policies. | Retroactivity would cause manifest injustice by upsetting contractual expectations. | Retroactive application does not result in manifest injustice in this case. |
| Enforceability of the step-down clause under the Amendment | The step-down clause is unenforceable for accidents after the Amendment. | The clause remains valid under Pinto and prior law. | The step-down clause is unenforceable for Sexton’s claim. |
| Scope of exposure and policy interpretation | Apply maximum UM/UIM coverage under Zurich to Sexton. | Limit should apply to the extent of the step-down clause. | Sexton is entitled to the maximum UM/UIM coverage under the policy, unrestricted by the step-down. |
| Policy timing and reasonable expectations | No significant changes to expectations as of the accident date. | Expectations were governed by the law at policy formation. | Policy interpretation aligns with statutory timing; apply Amendment to the accident. |
Key Cases Cited
- Pinto v. N.J. Manuf. Ins. Co., 183 N.J. 405 (N.J. 2005) (upheld enforceability of UM/UIM step-down clauses)
- Olkusz v. Brown, 401 N.J. Super. 496 (N.J. Super. Ct. App. Div. 2008) (retroactivity limited; remand to prospective application)
- Hand v. Phila. Indem. Ins. Co., 408 N.J. Super. 124 (N.J. Super. Ct. App. Div. 2009) (limited retroactivity to contracts in existence on amendment date)
- Edgewater Inv. Assocs. v. Edgewater, 103 N.J. 227 (N.J. 1986) (equitable considerations in statutory interpretation)
- Gibbons v. Gibbons, 86 N.J. 515 (N.J. 1981) (statutory interpretation factors for retroactivity)
- State, Dept. of Envtl. Prot. v. Ventron Corp., 468 A.2d 150 (N.J. 1983) (prescribed approach to retroactive relief and statutory interpretation)