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Imprecise Policy Language Leads to Unintended Coverage in New Jersey Dog Bite Case

December 1, 2023

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The general rule in New Jersey is that courts will interpret an insurance policy in accordance with its "plain and ordinary meaning." If the terms ae clear, courts should interpret the policy as written and avoid “writing a better policy” than the one purchased. However, any ambiguity will be construed in favor of coverage. The outcome of a coverage dispute often turns on a court’s unique interpretation of the policy at issue, with some courts finding coverage where none was intended if the language is not specific. 


This can be seen in the Appellate Division’s recent decision in Berardi v. FMI Insurance Company. In that case, FMI issued a homeowner’s policy covering plaintiff’s primary home in New Jersey. Plaintiffs also owned a vacation home in New York which was insured by another company. The PMI policy had a $1,000,000 personal liability limit with a sub-limit of $10,000 limit for medical payments to others. The PMI Policy also had a “Personal Excess Liability Umbrella Coverage” endorsement providing for $5,000,000 in umbrella coverage "[i]f the occurrence is covered by a primary policy, the limit of liability under the MPL 80 applies to any damages which exceed the limits of the primary policies described in this coverage form…” The policy also contained an exclusion for bodily injury or property damage “arising out of any premises owned, rented, or controlled by you, other than an insured premises covered by this policy” but the exclusion contained an exception for “bodily injury to a residence employee while performing such duties at other premises.”

The plaintiffs’ dog bit a housekeeper at their New York home and she filed suit for personal injuries. Plaintiffs sought coverage from both insurers but PMI disclaimed coverage. A declaratory judgment action was filed, and the court granted plaintiffs’ cross motion for summary judgment, finding that FMI had a duty to defend plaintiffs in the underlying lawsuit and to reimburse them for defense costs not covered by any other policy.

The Appellate Division affirmed, first finding that the “locations not insured” exclusion did not preclude coverage since the housekeeper was injured while performing duties at a location other than the insured primary residence and the first sentence in the exclusion did not preempt the exception in the second sentence. The Court also found that the umbrella coverage applied to damages above the $10,000 sublimit for medical payments, not the $1,000,000 personal liability limit. In so ruling, the Court stressed that the language of the umbrella endorsement was not specific as to the term “limits”, which could refer to the maximum limits of the policies or the various sub-limits. As such, the Court found that the endorsement was ambiguous and that PMI could have made it clear that it wanted the umbrella coverage to apply solely to damages above the liability limit, and not to any sub-limits in the policies.

The Berardi decision is an example of a court employing a liberal interpretation of a policy to find coverage where none was intended. It also highlights the importance of specificity in insurance language, particularly for limitations and exclusions.

Anthony Berardi and Janet Berardi v. FMI Insurance Company, et al.
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