SERGIO MONROY MILDRED MONROY v. ALLSTATE INSURANCE COMPANY JONATHAN CALLANDS (2011)

Plaintiff Sergio Monroy, an unlicensed driver, appeals from an order denying him Uninsured Motorists (UM) benefits, and an order denying reconsideration.   The question is whether an unlicensed driver can be considered a permissive user under the UM policy issued by defendant Allstate Insurance Company (Allstate).   Conferring permissive user status on a driver presumes that the driver is licensed to operate a motor vehicle, and thus an owner cannot grant permissive user status to an unlicensed driver.   Therefore, we affirm the order denying plaintiff's first-party UM claim, which effectively dismissed his case.

This appeal arises from an accident involving two vehicles.   Plaintiff operated a car owned by Nelson Salguero and insured by Allstate.   Plaintiff obtained Salguero's consent to use the car to transport his son to a doctor's appointment.   The other car was operated by an uninsured tortfeasor, co-defendant Jonathan Callands.¹  Plaintiff sustained injuries as a result of a rear-end collision caused by the tortfeasor.

Plaintiff filed a complaint against Allstate seeking to compel UM arbitration against Allstate.²  Allstate answered the complaint but did not select an arbitrator.   As a result, plaintiff filed a motion seeking to compel Allstate to select an arbitrator or “file papers ․ if it intends not to process UM benefits․”  Allstate opposed the motion.

At oral argument, plaintiff contended that he was entitled to UM benefits because he claimed to be a permissive user of Salguero's vehicle.   Allstate argued that plaintiff was not an “insured person” under its UM policy because he was an unlicensed driver and, therefore, could not be a permissive user.   The motion judge agreed with Allstate and entered an order denying plaintiff's UM claim and dismissing the case.

Plaintiff filed a motion for reconsideration, acknowledged that Allstate's UM policy required that he have permission to drive Salguero's car, but contended that “[the policy] doesn't say [the] permission needs to be lawful․”  Allstate maintained its position that plaintiff did not fit within the UM policy definition of an insured person.   Allstate pointed to the “Additional Definitions For Part 4” language in the policy which stated that “1. ‘Insured Person’ means ․ (b) any other person while in, on, getting into or out of, or getting on or off, an Insured auto [w]ith your permission.”   Allstate argued that plaintiff could not have permission because he knew that he was an unlicensed driver.   The judge denied the reconsideration motion and stated:

Because the plaintiff was an unlicensed driver, he was unauthorized to operate the motor vehicle and, therefore, he cannot satisfy the policy's requirement that a claimant be a user of the vehicle.   And as in the past case—past decision, we rely upon Rutgers Casualty Insurance [v.] Collins, 158 N.J. 542 [ (1999) ] and Martin [v.] Rutgers Casualty Insurance Company, 346 N.J.Super.   320 [ (App.Div.2002) ].

On appeal, plaintiff argues that the judge failed to read the UM policy liberally to find coverage, an unlicensed driver may pursue a claim for personal injuries, and that the Allstate policy does not expressly contain applicable exclusionary language.

We begin by addressing plaintiff's argument that the judge did not read the policy liberally.   A ruling that denies coverage to plaintiff is not contrary to New Jersey's strong public policy of construing insurance policies in favor of coverage.  Motor Club of Am. Ins. Co. v. Phillips, 66 N.J. 277, 293 (1974).   We view such a ruling to be consonant with the policies articulated in N.J.S.A. 17:29C–7, permitting an insurance company to decline coverage if the named insured has had his license revoked or suspended, and N.J.S.A. 17:33B–13, excluding drivers whose licenses have been revoked or suspended from being eligible to purchase insurance.

If Salguero had his license revoked or suspended and sought UM benefits, then Allstate would have the right to decline coverage.  N.J.S.A. 17:29C–7.   If Salguero's license was suspended or revoked, then he would be excluded from purchasing insurance.  N.J.S.A. 17:33B–13.   Salguero cannot confer a greater benefit on plaintiff than possessed by Salguero.   In other words, Salguero cannot permit an unlicensed driver—- plaintiff—- to drive when such permission would exceed Salguero's own driving and insurance restrictions imposed by the State.   See Reilly v. AAA Mid–Atl.   Ins. Co. of N.J., 194 N.J. 474, 478, 495 (2008) (stating the general proposition that an entity cannot exceed the scope of its statutory authority, and is therefore, restricted from overstepping the limitations imposed on it by the State).

Just as Allstate could decline coverage if Salguero's license had been revoked or suspended, Allstate can decline coverage for plaintiff because he was an unlicensed driver.   Sergio cannot benefit from his own illegal conduct of driving without a license by receiving first-party UM benefits.

Plaintiff relies on Burke v. Auto Mart, Inc., 37 N.J.Super. 451, 454–55 (App.Div.1955), certif. denied, 20 N.J. 304 (1956), to support his argument that an unlicensed driver may pursue a claim for personal injuries.   In Burke, we acknowledged the general rule that “one is not precluded from recovery by mere reason of operation of a car without a license․”  Ibid. Plaintiff's reliance on Burke is misplaced, however, because our acknowledgment of that general rule was made in the context of third-party claims, not first-party UM claims.   Here, we are not dealing with innocent third parties injured as a result of the negligence of an unlicensed driver.

Finally, plaintiff contends that the Allstate policy does not expressly contain applicable exclusionary language.   He argues, therefore, that the motion judge relied mistakenly on Collins, supra, 158 N.J. at 542 and Martin, supra, 346 N.J.Super. at 320.   Neither Collins nor Martin are directly on point because each case involved a policy that included “reasonable belief” language in the permissive user portion of the policy.

Collins involved a one-car accident in which a passenger was killed in a car operated by a driver whose license had been revoked.  Collins, supra, 158 N.J. at 546.   The policy excluded from liability coverage for any person “ ‘[u]sing a vehicle without a reasonable belief that that person is entitled to do so.’ ”  Ibid. (quoting exclusion A–8).   After concluding that the “reasonable belief” standard did not govern the passenger's entitlement to coverage, id. at 547, the Court applied the “with permission” language and remanded the matter for further proceedings.  Id. at 551.   Thus, Collins is inapposite to the facts before us.

Martin involved a one-car accident.   Martin, an unlicensed driver, operated the car.  Martin, supra, 346 N.J.Super. at 321–22.   The policy “excluded coverage for bodily injury sustained by a person ‘[u]sing a vehicle without a reasonable belief that that person is entitled to do so.’ ”  Id. at 323 (quoting from the policy).   A presumption existed, under the Martin policy, that an unlicensed driver cannot have a reasonable belief that he was entitled to operate a vehicle.  Ibid. In Martin, we held an unlicensed driver “had to know she was not entitled to drive” was not entitled to UM benefits.  Id. at 325.

Although Martin is not directly on point, the same principle applies here.³  Neither permission nor the initial issuance of insurance bestows an unlimited right to operate an automobile and then to assert a first-party claim under the insurance issued to the owner of a vehicle.   Therefore, plaintiff's decision to disregard his inability to operate a vehicle legally precludes his claim for UM benefits under Allstate's policy.

Affirmed.

FOOTNOTES

FN1. On February 5, 2010, the court entered default against Callands and Callands is not involved in this appeal..  FN1. On February 5, 2010, the court entered default against Callands and Callands is not involved in this appeal.

FN2. Allstate agreed to arbitrate the UM claim filed by Mildred Monroy, a passenger in the car driven by plaintiff..  FN2. Allstate agreed to arbitrate the UM claim filed by Mildred Monroy, a passenger in the car driven by plaintiff.

FN3. Several jurisdictions have applied similar exclusionary language as Martin.   See Century Nat'l Ins. Co. v. Tracy, 789 N.E.2d 833, 834, 836 (Ill.App.Ct.2003) (husband with a suspended license was precluded from bringing a underinsured motorist claim against his wife's insurance company because he could not have had a reasonable belief that he was entitled to use a motor vehicle);  Founders Ins. Co. v. Munoz, 930 N.E.2d 999, 1010 (Ill.2010) (insurance companies “may limit their risk by excluding insureds and permissive users alike who lack the most basic requirement for driving in this state:  a valid license”);  Omaha Prop. & Cas. Ins. Co. v. Johnson, 866 S.W.2d 539, 541 (Tenn.Ct.App.1993) (a sixteen year-old driver could not have had a reasonable belief that he was entitled to drive because he did not have a driver's license and was told he could not drive).  Progressive N. Ins. Co. v. Concord Gen. Mut. Ins. Co., 864 A.2d 368, 373 (N.H.2005) (driver without a valid license given permission to drive “could not as a matter of law have had a reasonable belief that he was entitled to drive”)..  FN3. Several jurisdictions have applied similar exclusionary language as Martin.   See Century Nat'l Ins. Co. v. Tracy, 789 N.E.2d 833, 834, 836 (Ill.App.Ct.2003) (husband with a suspended license was precluded from bringing a underinsured motorist claim against his wife's insurance company because he could not have had a reasonable belief that he was entitled to use a motor vehicle);  Founders Ins. Co. v. Munoz, 930 N.E.2d 999, 1010 (Ill.2010) (insurance companies “may limit their risk by excluding insureds and permissive users alike who lack the most basic requirement for driving in this state:  a valid license”);  Omaha Prop. & Cas. Ins. Co. v. Johnson, 866 S.W.2d 539, 541 (Tenn.Ct.App.1993) (a sixteen year-old driver could not have had a reasonable belief that he was entitled to drive because he did not have a driver's license and was told he could not drive).  Progressive N. Ins. Co. v. Concord Gen. Mut. Ins. Co., 864 A.2d 368, 373 (N.H.2005) (driver without a valid license given permission to drive “could not as a matter of law have had a reasonable belief that he was entitled to drive”).

PER CURIAM