Court rules against enforcement of ambiguous auto insurance step-down clause

The New Jersey Appellate Division has refused to enforce a step-down clause in a personal auto insurance policy, emphasizing the significance of the policy's declarations in shaping the insured's expectations. The decision stems from a case involving Charles and Louise Motil, whose daughter Britney was involved in an accident while driving a Jeep covered under their policy with Wasau Underwriters Insurance Co.

In "Britney Motil v. Wasau Underwriters Insurance Co., A-0400-23 (App. Div. April 5, 2024)," the court ruled that despite clear language within the policy reducing underinsured motorist (UIM) coverage to $15,000 for certain drivers, this provision could not override the reasonable expectation of $100,000 coverage as indicated by the declarations page.

The declarations listed Britney as a covered driver and specified UIM limits of $100,000 per person for each covered vehicle. After settling with another driver's insurer for its limit of $15,000 following an accident, Britney sought additional UIM coverage from Wasau but was denied based on her non-residency in her parents' household and other conditions stipulated in the policy.

The trial court granted summary judgment to Britney, supporting her entitlement to $100,000 in UIM coverage due to ambiguities created by conflicting information between the step-down clause and declarations page. The Appellate Division affirmed this decision stating that even permissible provisions will not be enforced if they conflict with what is outlined on the declarations page.

An "objective review" showed that consistent premiums suggested uniform UIM coverage across all insured parties. Furthermore, details such as an alternate garaging address for the Jeep did not adequately inform Britney about any reduced coverage applicability.

This ruling reinforces New Jersey's legal stance prioritizing clear communication of insurance terms through declarations pages over contradictory boilerplate language found elsewhere within policies.