The plaintiff had an automobile insurance policy covering two automobiles with defendant Government Employees Ins. Co. (“ ”). Duddy v. Government Employees Insurance Co., ___ N.J. Super. ___ (App. Div. 2011). One of the cars was a 2004 Pontiac GTO that her son used. He decided to sell the Pontiac and put an ad on Craigslist. An individual named George Gibson responded, inspected the car, and said he would buy it for $15,000. Gibson indicated that he would return for the car and pay for it on April 4, 2008. The plaintiff contacted GEICO to inform it that the Pontiac should be dropped from her policy and a replacement car added to the policy.
When Gibson returned on April 4, he gave the plaintiff $2,000 in cash, along with a $13,000 cashier’s check, and the plaintiff gave him the keys to the car and the title. The next day, the plaintiff deposited the check into her account. However, one week later her account was debited $13,000. After contacting her bank, she discovered that Gibson’s check was fraudulent. An investigation disclosed that Gibson had been paid by an individual named Tony Richardson to act as an intermediary in the transaction. Richardson pled guilty to criminal charges but the car was never recovered.
After realizing what happened, the plaintiff reported her loss to GEICO. GEICO first informed her that the loss was not covered because on April 3 she had requested that the Pontiac be removed from her policy on April 4, and that GEICO had done that at 12:01 a.m. on April 4. Later, GEICO changed its position and declined coverage because the plaintiff had sold the vehicle.
The plaintiff filed suit and asserted that her policy included theft as a covered loss. In response, GEICO claimed that the loss was not covered because a different part of the policy excluded a loss that resulted from the sale of an owned auto. On the parties’ cross-motions, the trial court determined that this was a sales transaction and was within the policy’s exclusionary provision; thus, the court granted summary judgment to GEICO.
The Appellate Division reversed. The court began by discussing basic principles of contract interpretation, including that insurance policies are construed broadly in favor of the insured and that exclusionary policies are construed narrowly. The court then noted that it had not found any New Jersey decisions that had resolved the issue presented in the appeal; thus, the court analyzed analogous cases relied upon by each side. The Appellate Division rejected GEICO’s contentions, as the court questioned whether the transaction between the plaintiff and Gibson could even be considered a sale because there was no meeting of the minds and the plaintiff did not receive the bargained-for consideration. Further, the court explained that treating the transaction as a sale would be inconsistent with well-established precedent that requires exclusionary policies to be interpreted narrowly. Moreover, the Appellate Division expressed its disagreement with the trial court’s statement that the transaction was not a theft. Accordingly, the Appellate Division reversed the trial court’s grant of summary judgment to GEICO and remanded the case for further proceedings.