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MSZL&M Earns Favorable Result in New Jersey Court While Contesting UM Claim Under N.J.S.A. 17:28-1.1(f)

Jan 1, 2007 - Recent Verdicts by Jason G. Wehrle

Controlling Statutes and Legal Principles

In the State of New Jersey, N.J.S.A. 17:28-1.1 is an important statute pertaining to insurance coverage for uninsured and underinsured motorists (“UM/UIM”). In 2007, the statute was amended to specifically require that UM/UIM benefits be made payable to individuals employed by the named insured regardless of whether that individual is an additional named insured on the policy. Section (f) of the amended statute reads in pertinent part as follows:

“…A policy that names a corporate or business entity as a named insured shall be deemed to provide the maximum uninsured or underinsured motorist coverage available under the policy to an individual employed by the corporate or business entity, regardless of whether the individual is an additional named insured under that policy or is a named insured or is covered under any other policy providing uninsured or underinsured motorist coverage.”

With regard to determining whether an individual is “employed by” a corporate or business entity for purposes of N.J.S.A. 17:28-1.1, controlling New Jersey case law pertaining to the difference between employees and independent contractors is often instructive. It is well known that a person who retains an independent contractor “has no right of control over the manner in which the work is to be done.” Baldasarre v. Butler, 132 N.J. 278, 291 (2006). In this regard, the independent contractor “rather than the employer is the proper party to be charged with the responsibility for preventing the risk, and administering and distributing it.” Id.  By contrast, the servant is traditionally one who is “employed to perform services in the affairs of another, whose physical conduct in the performance of the service is controlled, or is subject to the right of control by the other.” Mavrikidis v. Petullo, 153 N.J. 117 (1998).  The Mavrikidis Court established a list of several factors that a court must consider to determine whether a principal maintains the right of control over an individual or a corporation claimed to be an independent contractor.

Dismissal of UM Claim Made Against MSZL&M Client by Hudson County Court

John Doe Taxi Driver (hereinafter “Plaintiff”) initiated the suit against ABC Insurance Company (hereinafter “ABC”) seeking to recover damages arising from a 2013 motor vehicle collision in which Plaintiff was operating a taxicab owned by Taxi Company Z and insured by ABC. While it was undisputed that Plaintiff was not at fault for the subject collision, the tortfeasor operating the other vehicle involved in the collision did not have any insurance coverage. In this regard, Plaintiff filed a claim for UM benefits pursuant to Taxi Company Z’s insurance policy with ABC.

Significantly, while the policy issued by ABC to Taxi Company Z contained a UM/UIM Endorsement for insureds and persons listed on the Schedule of Named Drivers, Plaintiff was not listed as one of the scheduled drivers on the ABC policy. The policy did contain a provision that provided “…for drivers who are not specifically named in this Schedule of Named Drivers, this policy shall not provide the limits of liability stated in this insurance policy but shall instead provide a reduced, stepped down amount of liability coverage equal only to the amount necessary to satisfy the minimum limits of liability coverage requirements of the financial responsibility laws of the State of New Jersey.”

At the time of Plaintiff’s deposition, Plaintiff testified that he never entered into a written contractual agreement with Taxi Company Z.  Plaintiff testified that he was never provided with a fixed schedule by Taxi Company Z, but that he would typically begin working whenever Taxi Company Z’s owner contacted him to request that he do so. Plaintiff further stated that he maintained the ability to stop driving the taxi at any point of the day if he found that there were insufficient passengers seeking his taxi services. At the conclusion of each day, Plaintiff was responsible for filling the cab’s tank with gas and parking the cab along the street in miscellaneous areas throughout Jersey City, NJ.  Plaintiff would pay Taxi Company Z’s owner a portion of the funds he collected as taxi fares and would keep the remainder of the funds for himself. Notably, Plaintiff specifically testified that he never filed tax returns in conjunction with driving the cab for Taxi Company Z.

Based upon the substance of Plaintiff’s deposition testimony, MSZL&M filed a Motion for Summary Judgment on behalf of ABC. Within this Motion for Summary Judgment, and pursuant to the various factors established in Mavrikidis, MSZL&M argued that Plaintiff was an independent contractor of Taxi Company Z at the time of the 2013 automobile collision and therefore was not entitled to the UM benefits specifically reserved for insureds and employees of insureds under N.J.S.A. 17:28-1.1.

In response to MSZL&M’s motion, Plaintiff’s counsel submitted that N.J.S.A. 17:28-1.1 entitled Plaintiff to maximum UM benefits regardless of the fact that Plaintiff’s name did not appear on the policy’s Schedule of Named Drivers.  In addition to arguing that the determination as to whether Plaintiff was an employee or independent contractor was a question of fact that should be reserved for the jury at the time of trial, Plaintiff’s counsel further argued that the language in the applicable policy at the very least provided Plaintiff with a stepped down amount of coverage in the amount of the State’s minimum limits of required coverage.

After the parties vigorously argued their positions during oral argument, the Hudson County Court granted summary judgment in favor of ABC and thereby dismissed Plaintiff’s lawsuit. In making this ruling, the Court found that Plaintiff was working as an independent contractor of Taxi Company Z at the time of loss and therefore was not entitled to the UM benefits specifically reserved for insureds and employees of insureds under N.J.S.A. 17:28-1.1. The Court refuted plaintiff’s counsel’s argument that Plaintiff was entitled to a stepped down amount of coverage and thereby dismissed Plaintiff’s complaint in its entirety.