In Payor v. N.J. Mfrs. Ins. Co., 2015 N.J. Super. Unpub. LEXIS 609 (App. Div. 2015), the Superior Court of New Jersey, Appellate Division, affirming the lower court’s decision, rejected a plaintiff’s argument that she should be treated as a “named insured” under her father’s car insurance policy based on the “reasonable expectation doctrine.”

The plaintiff was the named insured on her own $100,000 policy. She was injured in a car accident with a driver who also had a $100,000 policy. After settling with the other driver, the plaintiff made a UIM claim on her father’s $500,000 car insurance policy. New Jersey Manufacturers Insurance Company (NJM) denied the plaintiff’s UIM claim based on the policy’s step-down clause.

In Payor, the court addressed the issue of when an individual is entitled to coverage as a “named insured” under a policy. In this case, NJM denied coverage because the step-down clause in the father’s policy applied to any person “insured” under the policy who was not a “named insured” on that policy. The declarations page in the father’s policy had a section clearly labeled “named insured.” The father was the only individual listed under that section. The plaintiff’s name was not listed anywhere on the declarations page.

The plaintiff argued the since the term “named insured” wasn’t defined in her father’s policy, the policy must be ambiguous. If found to be ambiguous, she argued she should have been covered under the “reasonable expectation doctrine” since her father would have expected that his UIM coverage would have been available to her.

The plaintiff relied heavily on Lehrhoff v. Aetna Cas. & Sur. Co., 271 N.J. Super. 340 (App. Div. 1994), which held that despite exclusions buried in the policy, a plaintiff injured in a traffic accident was entitled to coverage under his father’s car insurance policy because he was included as a covered driver of the insured vehicle on the policy’s declarations page.

The court distinguished Lehrhoff since the plaintiff in this case was not listed anywhere in the declarations page. The court determined the policy was not ambiguous and as a result, denied the plaintiff coverage.

Under the rule of liberal construction of insurance policies, ambiguities in a policy are typically resolved in favor of the insured.  While Payor does not directly alter this rule because the subject policy was not ambiguous, it establishes that the lack of a definition for a term does not equate to an ambiguity.  Of course, the better practice is to define important terms in a policy.