August 05, 2020

NJ Appellate Court Finds UM/UIM Stepped Down Limits Language Unambiguous

Melvin Reid and Marylynn Reid v. New Jersey Manufacturers Insurance Company, 2020 N.J. Super. Unpub. LEXIS 411 (Opinion Date: February 27, 2020).

In this appeal from a trial court decision, the New Jersey Appellate Court ruled that language in a UM/UIM endorsement describing when limits may be stepped down (to $15,000 per person/$30,000 per accident) was unambiguous, and therefore, enforceable as a matter of law. 

In the underlying matter, Melvin and Marylynn Reid v. Radcliffebivins, Melvin Reid was a passenger in a vehicle operated by his son, Marc Reid.  The vehicle was insured by NJM with $300,000 in underinsured motorist insurance (UIM) coverage. Melvin did not live with his son and was not a named insured on the NJM policy.  Melvin was insured by Allstate with $100,000 in UIM coverage on his personal vehicle. The tortfeasor, Radcliffebivins was insured by GEICO with $20,000 in liability limits.  Upon the filing of the Complaint, Plaintiffs notified both Allstate and NJM that they sought UIM benefits under their respective policies and of the carriers’ rights to intervene in their action against the alleged tortfeasor. Allstate intervened, but NJM did not.

NJM took the position that its UIM exposure was limited because section A.2 of its policy, the “Limits of Liability,” stated that “if an insured is not a named insured or family member under the policy, then NJM’s maximum limit of liability for all damages resulting from any one accident shall not exceed the minimum limits required by the New Jersey law for liability coverage set forth in N.J.S.A. 39:6A-3.” N.J.S.A. 39:6A-3 provides that the minimum coverage limit for the injury to, or the death of, one person, in any one accident is $15,000, and for any one accident, $30,000. Notably, the NJM policy did not specifically set forth a dollar amount of these coverages, referring only to the statute indicated.

When Plaintiffs settled with Rafcliffebivins for $20,000, they notified Allstate and NJM to obtain their consent to settle in accordance with Longworth v. Van Houten, 223 N.J. Super. 174 (App Div. 1998).  Allstate authorized the settlement, but NJM argued that because defendant’s liability limits exceeded the UIM limits under the step-down clause in NJM’s policy, Plaintiffs were precluded from UIM recovery against NJM. The jury returned a verdict for Plaintiffs against Allstate in the amount of $1,125,000 and Allstate disbursed its remaining $80,000 in UIM coverage.

Subsequently, Plaintiffs filed a complaint against NJM seeking the balance of the UIM policy limits. The trial court granted Plaintiffs’ motion for summary judgment, denied NJM’s cross motion, and entered an order entering judgment for $200,000 to Plaintiffs.  This award reflected the difference between the $300,000 NJM UIM policy limit covering the Reid vehicle and the $100,000 disbursed by GEICO and Allstate.

The trial court concluded that the mere citation of a statute in a “step-down” clause contained within a policy or UM endorsement is not enough to inform the average policy holder of what those limits are, and the minimum liability coverage limit of $15,000/$30,000 should have been specifically included in the policy to allow the policy holder to digest the changes of the policy. 

The parties cross-moved for summary judgment and Plaintiff contended that NJM was bound by the decision in Granata v. Rasizer, No. A-1855-14T2 (App. Div. May 19, 2016), certif. denied, 227 N.J. 358 (2016).  In that case, the Plaintiff was injured in an automobile accident while driving her mother's car. The Plaintiff’s mother’s vehicle was insured by NJM, and the Plaintiff was not a named insured on the policy. Defendant, Elaine Rasizer was insured by Progressive with bodily injury liability coverage of $15,000.  Plaintiff filed a claim with NJM seeking UIM benefits pursuant to the belief that she had $300,000 in UIM benefits available. Plaintiff’s claim was denied because the NJM policy had been amended the previous year to include a step down provision reducing uninsured and underinsured motorist coverage available for non-resident relatives to $15,000. Subsequently, Plaintiff amended her Complaint to argue that NJM’s policy step-down provision was invalid. NJM argued that Plaintiff was sufficiently put on notice of the reduction in coverage by its reference to the statute in the policy, and that the actual recitation of the minimum financial responsibility limits of $15,000/$30,000 was unnecessary.

On appeal, the court found that the summary, declaration sheet and policy failed to advise Plaintiff of the reduced amount of UIM coverage provided by the revised policy because neither document contained the amount and only referenced N.J.S.A. 39:6A-3. The court further held that the mere citation of a statute is not enough to inform the average policy holder of what those limits are.

In Reid v. NJM, NJM again argued that the step-down clause contained in the policy was not vague and should be enforceable. The trial court disagreed, by granting plaintiff’s partial summary judgment motion.  The Appellate Division disagreed and reversed the trial court’s ruling, and determined that section A.2 of the NJM policy was not ambiguous even though NJM incorporated the $15,000/$30,000 limits by referencing a statute rather than specifically listing those stepped-down policy limits. The court explained that NJM’s clear reference to N.J.S.A. 39:6A-3 in the step-down clause did not create any ambiguity.  Specifically, the language in the step-down clause was:

1.  Direct and ordinary
2.  Contained bold type
3.  Listed under a heading indicating a “limit of liability”

The Court concluded that an average insured would have read the provision, been able to make out the boundaries of coverage and should be able to understand the plain language of the policy and N.J.S.A. 39:6A-3 without employing subtle or legalistic determinations.


Cipriani & Werner, P.C. handles first and third party property and casualty coverage and defense litigation throughout the firm’s footprint. 

If you have any questions about how this decision may affect your claim inventory or litigated files, feel free to contact Matthew K. Mitchell, Esquire at