Unlike the court in a recent post on this blog, a New Jersey court nullified exclusions in an auto policy that left the driver uncovered and the victim without compensation.
In Proformance Ins. Co. v. Jones, 2005 WL 3489004 (N.J. December 22, 2005), a woman lent her pickup to a relative with express instructions not to use it in his moving business. Of course, he not only did, he allowed one of his workers to drive it. And of course the worker then fell asleep while driving, and hit a car and a pedestrian, and injured another worker riding in the pickup. The passenger and the pedestrian sued. The insurer denied coverage because of the “business use” exclusion in the policy.
The trial court, the appellate court and the New Jersey Supreme Court all found there was coverage. New Jersey uses the initial permission rule, also referred to as the “Hell or High Water” rule, that extends coverage to secondary users and even subsequent permittees under almost any circumstances as long as their use falls short of theft or conversion. The sole question for the state supreme court therefore was whether the business use exclusion was contrary to public policy. The court said it was unenforceable because it would violate the Legislature’s intent to see accident victims compensated. However, liability under the $100,000 policy was enforced only up to the statutory minimum for auto liability coverage of $15,000.