LEDEE et al v. FELIPE EXPRESS et al

Filing 39

OPINION filed. Signed by Judge Freda L. Wolfson on 9/22/2017. (eaj)

*NOT FOR PUBLICATION*
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
___________________________________
:
21ST CENTURY INSURANCE
:
COMPANY, individually, and as attorney :
in fact for MYRIAM LEDEE,
:
:
Plaintiff,
:
Civil Action No. 15-7075 (FLW) (DEA)
:
v.
:
:
OPINION
FELIPE EXPRESS; FELIPE SANCHEZ
:
JR.; FELIPE SANCHEZ SR.; EDWARD :
SANTANA; PERFECTO HERNANDEZ; :
LUCIA HERNANDEZ; and MILTON
:
SAETEROS; et al.,
:
:
Defendants.
:
___________________________________ :
:
PERFECTO HERNANDEZ and
:
LUCIA HERNANDEZ,
:
Plaintiffs,
:
:
v.
:
:
EDWARD SANTANA; FELIPE
:
SANCHEZ; FELIPE
:
TRANSPORTATION; and FARMER’S
:
INSURANCE GROUP a/k/a
:
21ST CENTURY INSURANCE; et al.,
:
:
Defendants.
:
___________________________________ :
WOLFSON, United States District Judge:
Following an automobile accident on the New Jersey turnpike, Plaintiff 21st Century
Centennial Insurance Company (“21st Century” or “Plaintiff”)1 initiated this action (the “21st

1

21st Century asserts this action individually, and as attorney in fact for Myriam Ledee.
1

Century case”) against various defendants.2 The present dispute centers on 21st Century’s claims
against Felipe Sanchez, Sr., Felipe Sanchez, Jr., and Felipe Express (collectively, the “Felipe
Defendants”) for insurance fraud under the Insurance Fraud Prevention Act (“IFPA”), N.J.S.A.
17:33A-1 et seq. and common law fraud, as well as its claim seeking a declaration that 21st
Century has no coverage obligations under a policy of insurance that it issued to Myriam Ledee.
Perfecto Hernandez and Lucia Hernandez (defendants and consolidated plaintiffs, hereinafter,
the “Passengers”) brought a related action against 21st Century and the Felipe Defendants, which
was subsequently consolidated with the 21st Century case.
Presently before the Court is 21st Century’s Motion for Default Judgment against the
Felipe Defendants, and its Motion for Summary Judgment as to its coverage obligations. The
Passengers cross-move for declaratory judgment on their entitlement to the statutory minimum
coverage requirements mandated under New Jersey’s comprehensive automobile insurance
scheme. For the reasons that follow, 21st Century’s Motion for Default Judgment and Summary
Judgment is GRANTED, and the Passengers’ Motion for Declaratory Judgment is DENIED, as
follows: (1) default judgment against the Felipe Defendants as to all counts asserted in Plaintiff’s
Amended Complaint is granted; and (2) 21st Century owes no coverage obligation to the
Passengers.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This insurance coverage dispute arises out of a motor vehicle accident involving an
Econoline van (the “Van”) insured by 21st Century. See 21st Century’s Statement of Material

Specifically, Plaintiff’s Amended Complaint names as defendants Felipe Sanchez, Sr., Felipe
Sanchez, Jr., Felipe Express, Edward Santana, Lucia Hernandez, Perfecto Hernandez, Luis
Jimnenez Huggins, Quinmarie Rodrigues, the New Jersey Turnpike Authority, Milton Saeteros,
Angelica Umanzor, and various fictitious parties (collectively, “Defendants”).
2

2

Facts (“21SMF”) ¶¶ 15-16; Lucia and Perfecto Hernandez’s Counterstatement of Material Facts
(“HCMF”) ¶¶ 15-16. The relevant 21st Century policy of insurance (the “Policy” or “21st
Century Policy”) lists Myriam Ledee, an Ohio resident and the ex-wife of Felipe Sanchez, Jr., as
the named insured.3 21SMF ¶ 19; HCMF ¶ 19. Defendants Felipe Sanchez, Sr. and Felipe
Sanchez, Jr. are the owners of Felipe Express, a transportation company that operates out of
Silver Springs, Maryland. See 21SMF ¶ 25; HCMF ¶ 25. Felipe Express provides transportation
and taxi services, for a fee, to members of the public between the Washington, D.C. and New
York City areas, including New Jersey. See id.
The underlying facts concerning the accident are undisputed. On March 6, 2015,
Defendant Edward Santana, an employee of Felipe Express, was driving the Van on the
southbound side of the New Jersey Turnpike, during the course of his employment, when he
collided with a vehicle driven by a representative of the New Jersey Turnpike Authority.
Deposition Transcript of Edward Santana (“Santana Dep.”), at 6:15-7:14; 21SMF ¶¶ 22-23;
HCMF ¶¶ 22-23. Perfecto Hernandez and Lucia Hernandez were passengers in the Van at the
time of the accident. 21SMF ¶¶ 31-32; HCMF ¶¶ 31-32. Lucia alleges that she sustained
personal injuries, requiring medical treatment, as a result of the accident. 21SMF ¶¶ 33-34;
HCMF ¶¶ 33-34.

3

As described in greater detail, infra, the Felipe Defendants fraudulently obtained the 21st
Century Policy in the name of Ledee. Specifically, in their Internet insurance application with
21st Century, the Felipe Defendants identified Ledee as the owner of the Van for which coverage
was sought, and indicated that the Van was for personal use, despite knowing that it would be
used commercially by Felipe Express. See 21SMF ¶¶ 7-9; HCMF ¶¶ 7-9.
3

At the time of the accident, the Van was titled and registered to Felipe Sanchez.4 21SMF
¶¶ 16-17, 22; HCMF ¶¶ 16-17, 22. It is undisputed that, at the time of the accident, the Van was
being operated as a livery vehicle or taxi to transport passengers for a fee. See 21SMF ¶ 24;
HCMF ¶ 24. At the scene of the accident, Santana provided police responders with an insurance
card for a policy issued by Progressive Insurance (the “Progressive Policy”).5 21SMF ¶ 17;
HCMF ¶ 17. The Progressive Policy listed Ledee as the named insured. 21SMF ¶ 18; HCMF ¶
18.
Following the accident, Progressive contacted Ledee regarding the Progressive Policy.
Deposition Transcript of Myriam Ledee (“Ledee Dep.”), at 34:24-25:12. Through her
conversation with Progressive, Ledee learned that she was also the named insured under the 21st
Century Policy. See 21SMF ¶ 19; HCMF ¶ 3. At the time of the accident, all vehicles listed on
the 21st Century Policy, including the Van, were registered and owned by Felipe Sanchez.
21SMF ¶ 20; HCMF ¶ 20. Additionally, at the time of the accident, Felipe Express, Felipe
Sanchez, Sr., Felipe Sanchez, Jr., and Edward Santana were not insured or named insured, as
those terms are defined under the 21st Century Policy. 21SMF ¶¶ 26-29; HCMF ¶¶ 26-29.
While it is undisputed that the 21st Century Policy was obtained by way of Internet
application, the parties dispute Ledee’s involvement in the procurement of the Policy. In that
regard, Ledee testified that she did not submit an application for the Policy, did not give anyone,
including Felipe Express, Felipe Sanchez, Jr., and Felipe Sanchez, Sr., permission to obtain the
Policy in her name, and was not aware that the Policy had been applied for or obtained prior to

4

The registration record only indicates that the Van is registered to Felipe Sanchez, without
specifying whether it is registered to Felipe Sanchez, Sr. or Felipe Sanchez, Jr. See Pls.’ Mot. for
Summary Judgment, Ex. J.
5
The Progressive Policy is not at issue in the present case, and therefore, all other references to
the “Policy” in this Opinion pertain to the 21st Century Policy.
4

the accident. Ledee Dep. at 24:14-25:12. Conversely, Felipe Sanchez, Jr. testified that he
overheard his father, Felipe Sanchez, Sr., receive permission over the phone to use Ledee’s name
and information in procuring the Policy, and that Ledee provided Sanchez, Sr. with her name,
date of birth, occupation, social security number, and driver’s license number. Deposition
Transcript of Felipe Sanchez, Jr. (“Sanchez, Jr. Dep.”), at 24:16-25:14; 30:5-19; 47:4-22.
Regardless of Ledee’s involvement in procuring the Policy, Felipe Sanchez, Jr. testified that the
Policy was procured under Ledee’s name, with the intent to use the Policy to cover the Van used
in the Felipe Express transportation service:
Q. Now, the insurance that you were – that was being taken out -- that you were
requesting from 21st Century –
A. Uh-huh.
Q. -- was it for the operation of the vans as part of the transportation service?
A. The answer is, the way they were set up was my -- I admit that I did the wrong -- I did
not know that you cannot set up, first, under somebody else's name which I assumed that
wouldn't be a problem because -- I mean, she lives in Ohio, and the tags are registered
there. And they're in the company's name, and she does work for the company. They
were not in my dad's name. And the insurance -- your answer to the insurance is, no, they
were not set up commercially which they should have been set up. They were set up as
personal insurance policies.
Q. Okay. So the answer to the question there at the end I want to make sure I understand.
The intent to take this policy out was to insure the vans because they were being used as
part of the operation of
A. Correct.
Q. Felipe Express?
A. Correct.
Sanchez, Jr. Dep. at 36:19-37:22.
According to the testimony of Diana Yeager, an underwriting staff consultant for 21st
Century, 21st Century conducted business in New Jersey during the relevant policy period,
5

including the date of the subject accident. Deposition Transcript of Diana L. Yeager (“Yeager
Dep.”), at 22:9-16. Yeager testified that during all relevant periods, 21st Century did not issue
commercial policies, including policies covering taxis, buses, or delivery vehicles. Id. at 22:1723:1.
The Policy’s liability insuring agreement provides, in pertinent part, as follows:
INSURING AGREEMENT
A. Subject to the liability limit stated in your Declarations Page, if you pay the premium
for Liability Coverage, we will pay damaged for which any insured becomes legally
liable due to bodily injury or property damage caused by an accident arising out of the
ownership, maintenance, or use of an auto for which coverage under this Part A applies.
Subject to the limit of liability, the amount we pay will include prejudgment interest
awarded in a judgment against the insured. However, we will not pay for punitive or
exemplary damages. We may settle or defend any claim or lawsuit as we deem
appropriate.
In addition to the limit of liability, we will pay all defense costs we incur. Our duty to
settle or defend ends when our limit of liability has been exhausted by payment of
judgments or settlements. We have no duty to defend any lawsuit of settle any claim for
bodily injury or property damage not covered under this policy.
Pls.’ Mot. for Summary Judgment, Ex. A.
The Policy also includes two exclusions for liability coverage and medical expense
benefits, which apply when the subject vehicle is being used as a public conveyance at the time
of an accident. Specifically, the exclusion pertaining to liability coverage provides as follows:
A. We do not provide Liability Coverage for, nor have a duty to defend, any insured:
5. For any liability arising out of the ownership or operation of a vehicle while it is
being used to carry persons or property for a fee or any compensation, or while it is
available for public hire. This Exclusion (A.5) applies to, but is not limited to, delivery
of goods to customers whether on a wholesale or retail basis such food, newspapers or
flowers. It does not apply to a share-the-expense car pool.
Id., Ex. B. Similarly, the exclusion pertaining to medical expense benefits provides:
We do not provide Medical Payments Coverage for any insured for bodily injury:

6

...
B.
Sustained while occupying your covered auto when it is being used to carry
persons or property for a fee or any compensation or while it is available for public hire.
This Exclusion (B.) applies to but is not limited to delivery of goods to customers either
on a wholesale or retail basis such as food, newspapers or flowers. It does not apply to a
share the expense car pool.
Id., Ex. B.
On September 28, 2015, 21st Century, individually and as attorney in fact for Myriam
Ledee, filed an Amended Complaint against Defendants.6 Count One of the Complaint asserts a
claim for insurance fraud under New Jersey law, pursuant to the Insurance Fraud Prevention Act
(“IFPA”), N.J.S.A. 17:33A-1 et seq., against the Felipe Defendants, alleging that the Felipe
Defendants applied for, and obtained, the Policy covering the Van from 21st Century by
fraudulently assuming the identify of Myriam Ledee. Am. Compl. ¶¶ 28-38. Count Two seeks
declaratory relief that neither 21st Century nor Ledee have any liability or obligation to pay or
indemnify anyone injured in the subject accident for economic or non-economic damages. Id. at
¶¶ 39-42. Count Three asserts a common law fraud claim against the Felipe Defendants. Id. at
¶¶ 43-44.
Additionally, on August 17, 2015, Perfecto Hernandez and Lucia Hernandez filed suit
against 21st Century in the Superior Court of New Jersey, Law Division, Essex County, seeking
personal injury protection benefits and economic and non-economic damages related to the
accident. That case was subsequently removed to federal court on the basis of diversity
jurisdiction, pursuant to 28 U.S.C. §§ 1332(a)(1) and 1441(a). On December 9, 2015, this Court

6

On November 10, 2015, the New Jersey Turnpike Authority was dismissed from this action.
ECF No. 16.
7

granted a motion to consolidate, pursuant to Federal Rule of Civil Procedure 42(a), the actions
filed by 21st Century and the Passengers. ECF No. 17.
On April 24, 2016, default was entered against the Felipe Defendants for failure to plead
or otherwise defend in connection with 21st Century’s action against them. ECF No. 20. On
January 31, 2017, 21st Century moved for default judgment and summary judgment. ECF No.
30. On the same date, the Passengers moved for declaratory judgment. ECF No. 33. Both of
these Motions are presently before the Court.
DISCUSSION
I.

Default Judgment Against the Felipe Defendants
The Court will first turn to 21st Century’s argument that it is entitled to default judgment

as to all Counts against the Felipe Defendants.7
A.

Legal Standard

In order to obtain a default judgment, pursuant to Federal Rule of Civil Procedure 55(b),
a plaintiff must first secure an entry of default under Rule 55(a). Allaham v. Naddaf, 635 F.
App'x 32, 36 (3d Cir. 2015). Once a default is entered, “Rule 55(b) allows the plaintiff to
request that the clerk or the court enter a default judgment against that defendant, depending on
whether the claim is for a sum certain.” Id. The Third Circuit has explained that while the entry
of default judgment “is largely within a district court's discretion, three factors control this
determination: ‘(1) prejudice to the plaintiff if default is denied, (2) whether the defendant
appears to have a litigable defense, and (3) whether defendant’s delay is due to culpable

7

The Court notes that the Passengers have not moved for default or for default judgment on their
third-party claims against the Felipe Defendants. Accordingly, this Court’s ruling on default
judgment is limited to Plaintiff’s claims against the Felipe Defendants (i.e., the 21st Century
case), and should not be construed as affecting the Passengers’ claims against the Felipe
Defendants.
8

conduct.’” Id. (quoting Chamberlain v. Giampapa, 210 F.3d 154, 164 (3d Cir. 2000)). In
considering a motion for a default judgment, courts “accept as true the well-pleaded factual
allegations of the complaint, but the court need not accept the moving party's legal conclusions
or allegations relating to the amount of damages.” Polidoro v. Saluti, 675 F. App'x 189, 190 (3d
Cir. 2017).
B.

Default Judgment Against the Felipe Defendants is Warranted

In the instant case, 21st Century argues that it is entitled to default judgment against the
Felipe Defendants on each of its claims. The Court finds that default judgment is appropriate
against the Felipe Defendants on all counts, because Plaintiff has established a prima facie case
for relief, and the Chamberlain factors support an entry of default judgment.8
First, the Court finds that default judgment is appropriate as to 21st Century’s claim
against the Felipe Defendants for insurance fraud under the IFPA. The New Jersey Legislature
enacted the IFPA to “confront aggressively the problem of insurance fraud in New Jersey.”
N.J.S.A. 17:33A-2. To achieve that purpose, the IFPA “imposes stiff civil monetary penalties
against perpetrators of insurance fraud.” State v. Fleischman, 189 N.J. 539, 544 (2007). The
Legislature added the crime of “insurance fraud” in 2003, as part of a “a comprehensive set of
solutions to the automobile insurance availability and affordability challenges facing insurers,
consumers and regulators in New Jersey.” Id. (quoting Assembly Banking and Insurance
Committee, Statement to Senate Subcommittee for Substitute for Senate Bill No. 63, at 1 (May 5,
2003)).

8

Because 21st Century does not seek a sum certain on any of the counts, the Court will enter
default judgment only as to liability.
9

The IFPA provides, in relevant part, that an individual is liable for insurance fraud if he
or she:
Prepares or makes any written or oral statement, intended to be presented to any
insurance company or producer for the purpose of obtaining . . . an insurance policy,
knowing that the statement contains any false or misleading information concerning any
fact or thing material to an insurance application or contract.
N.J.S.A. 17:33A-4(b); see Liberty Mut. Ins. Co. v. Land, 186 N.J. 163, 172 (2006) (explaining
that, in order to establish liability for insurance fraud, a plaintiff must demonstrate that the
defendant “present[ed] any knowingly false or misleading statement in an insurance
application.”). Thus, the plaintiff must establish: (i) knowledge; (ii) falsity; and (iii) materiality.
Horizon Blue Cross Blue Shield of New Jersey v. Transitions Recovery Program, No. 10-3197,
2015 WL 8345537, at *4 (D.N.J. Dec. 8, 2015). Unlike common law fraud, proof of fraud under
the IFPA “does not require proof of reliance on a false statement or resultant damages.” Land,
186 N.J. at 175. “The applicable burden of proof to prove a violation of the IFPA is a
preponderance of the evidence.” Certain Underwriters at Lloyd's of London v. Alesi, 843 F.
Supp. 2d 517, 530 (D.N.J. 2011).
The unchallenged facts in this case demonstrate that the Felipe Defendants knowingly
made false representations to 21st Century in order to obtain the Policy. In that regard, it is
undisputed that the Felipe Defendants submitted an online application to 21st Century for a
personal insurance policy in the name of Myriam Ledee, knowing that that policy procured
would be used to cover the Van. See Amended Complaint (“Am. Compl.”) ¶¶ 28-29. Indeed, in
his deposition, Felipe Sanchez, Jr. admitted wrongdoing in procuring a personal policy in the
name of Ledee, despite knowing that the Policy would be used for commercial purposes to insure

10

the Van.9 See Sanchez, Jr. Dep. at 36:19-37:22. Those facts are sufficient to constitute a prima
facie violation of the IFPA. Moreover, because the Felipe Defendants have caused significant
delay by failing to answer or otherwise defend this action, despite the fact that it has been nearly
two years since the Amended Complaint was filed, and because no facts suggest that the Felipe
Defendants would have a meritorious defense, the Court finds that default judgment on 21st
Century’s claim against the Felipe Defendants for insurance fraud under the IFPA is warranted.
Second, the Court finds that default judgment is also appropriate as to 21st Century’s
common law fraud claim. To prevail on a claim of common law fraud under New Jersey law, a
plaintiff must establish the following five factors: (1) “a material misrepresentation by the
defendant of a presently existing fact or past fact”; (2) “knowledge or belief by the defendant of
its falsity”; (3) “an intent that the plaintiff rely on the statement”; (4) “reasonable reliance by the
plaintiff”; and (5) “resulting damages to the plaintiff.” Land, 186 N.J. at 175. “A
misrepresentation, made in connection with an insurance policy, is material if, when made, ‘a
reasonable insurer would have considered the misrepresented fact relevant to its concerns and
important in determining its course of action.’” Palisades Safety & Ins. Ass'n v. Bastien, 175
N.J. 144, 148 (2003) (quoting Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530, 542 (1990)).
Here, 21st Century has sufficiently alleged that the Felipe Defendants made a
misrepresentation of fact in applying for a personal policy of insurance in Ledee’s name, with
knowledge that the policy procured would be used for commercial purposes to insure the Van
owned by Felipe Express. See Am. Compl. ¶¶ 27-32. That misrepresentation was undoubtedly
material, in light of Yeager’s testimony that 21st Century would not have issued the policy, had it

9

While Felipe Sanchez, Jr. appeared for a deposition, the Felipe Defendants nonetheless failed to
answer 21st Century’s Amended Complaint, or otherwise defend this action, and therefore, on
April 24, 2016, the Court entered default against the Felipe Defendants.
11

known that it was being used for a commercial vehicle. See Yeager Dep. at 22:17-23:1. Indeed,
the Court finds that the Felipe Defendants applied for the insurance policy with the intent that
21st Century would rely on the information provided in determining whether to issue the policy.
No facts suggest that 21st Century’s reliance on the Felipe Defendants’ misrepresentations was
unreasonable, and 21st Century sustained damages by issuing a personal policy that insured a
vehicle used for commercial purposes. Moreover, the Chamberlain factors weigh in favor of the
entry of default judgment, because 21st Century has been prejudiced by the Felipe Defendants’
failure to defend this action, and no facts suggest that the Felipe Defendants would have a
meritorious defense against the common law fraud claim. Accordingly, the Court finds that
default judgment against the Felipe Defendants as to liability for common law fraud is
appropriate.
Having found that 21st Century is entitled to default judgment against the Felipe
Defendants for fraudulently procuring the Policy, the Court also finds that 21st Century is entitled
to rescind, and void ab initio, the Policy. Rescission is a judicial remedy “rooted in
considerations of equity.” Rutgers Cas. Ins. Co. v. LaCroix, 194 N.J. 515, 527 (2008). “Where a
party has gained an unfair advantage by virtue of a fraudulent misrepresentation, and monetary
damages alone will not satisfy the injury sustained by the aggrieved party, courts have looked to
the equitable remedy of rescission to eliminate the damage.” Id.; see, e.g., Citizens United
Reciprocal Exch. v. Perez, 223 N.J. 143, 151 (2015) (finding that rescission of policy obtained
by fraudulent misrepresentations was warranted). Thus, the object of the equitable remedy of
rescission “is to restore the parties to the status quo ante and prevent the party who is responsible
for the misrepresentation from gaining a benefit.” Bonnco Petrol, Inc. v. Epstein, 115 N.J. 599,
612 (1989).

12

Within the field of insurance, “rescission has long been recognized as an available and
necessary remedy to combat fraudulent behavior by an insured.” LaCroix, 194 N.J. at 527; see
Remsden v. Dependable Ins. Co., 71 N.J. 587, 589 (1976) (“It is settled that a material factual
misrepresentation made in an application for insurance may justify rescission if the insurer relied
upon it to determine whether or not to issue the policy.”). To that end, New Jersey courts have
“recognized the need to declare an insurance contract void from its inception because of a variety
of behaviors by an insured, when the materiality of a misrepresentation strikes at the core of the
agreement to insure.” LaCroix, 194 N.J. 515, 527–28 (2008). For example, in Perez, the
Supreme Court of New Jersey determined that an insurer was entitled to rescind a policy of
automobile insurance, because the insured failed to list a member of her household in applying
for the policy. 223 N.J. at 151. The Perez Court reasoned that, by failing to list the second
household member, the insurance company was “denied essential information relevant to its
assessment of risk and, ultimately, to its decision to issue a policy insuring Perez.” Id.
Accordingly, the Court declared the Policy void ab initio. Id.
Here, the Felipe Defendants made material and fraudulent misrepresentations by applying
for a personal policy of insurance using the identity of Ledee. By failing to disclose their true
identities, the Felipe Defendants deprived 21st Century of the opportunity to examine the driving
histories and other relevant records of the Felipe Defendants. Additionally, by applying for a
personal policy of insurance, despite the fact that the Felipe Defendants knew that the Policy
would be used to cover a commercial vehicle, 21st Century was denied information essential to
determining whether to issue the Policy. Under New Jersey law, the Court finds that 21st

13

Century is entitled to rescind the Policy as it pertains to the Felipe Defendants, precluding the
Felipe Defendants from seeking any coverage as insureds.10
Moreover, because the Policy is void ab initio, default judgment is also appropriate with
regard to Count Two of the Amended Complaint, as it pertains to the Felipe Defendants. In
Count Two, 21st Century seeks an order declaring that: (i) there is no coverage under the Policy
for any claims that may arise out of the accident; and (ii) the Policy is void ab initio. In light of
the Court’s holding that the Policy is void ab initio, the Court also finds that 21st Century is
entitled to a declaration that it owes no coverage obligations, generally, under the Policy, to the
Felipe Defendants for any claims arising from the accident.
II.

21st Century’s Coverage Obligations For The Passengers
Notwithstanding the Court’s entry of default judgment against the Felipe Defendants, and

declaration that the Policy is void ab initio, the Court must determine whether 21st Century has
any coverage obligations to the Passengers, who were innocent third-party victims in the
accident. In that regard, as discussed in greater detail below, it is well-established under New
Jersey law that innocent third-party victims of automobile accidents can, under certain
circumstances, recover benefits under a policy that is declared void ab initio on the basis of fraud
by the named insured. See Bastien, 175 N.J. at 149. Accordingly, the Court must analyze
whether New Jersey’s policy of compensating innocent third-party accident victims requires 21st

However, as discussed further, infra, the Court’s finding that the Policy is void ab initio does
not mean, as a matter of law, that 21st Century escapes its coverage obligations for the
Passengers. See DeMarco v. Stoddard, 223 N.J. 363, 379 (2015) (“[A] fraudulently obtained
policy of insurance is subject to rescission by the insurer, but an innocent third party injured by
the insured before discovery of the fraud may look to the liability coverage in place at the time of
injury up to the minimum mandatory insurance required by law.”).
10

14

Century to provide to the Passengers in this case the minimum insurance coverage required
under New Jersey’s statutory automobile insurance scheme.
21st Century argues that it is entitled to summary judgment and a declaration of no
coverage with respect to the Passengers, because New Jersey’s “deemer statute,” N.J.S.A. 17:281.4, is not implicated in this case.11 The Passengers oppose 21st Century’s Motion for Summary
Judgment, and seek a declaration that, as innocent third-party victims of an automobile accident,
they are entitled to the minimum coverage requirements under the deemer statute.
A.

Legal Standard

Because the Court will analyze 21st Century’s Motion for Summary Judgment and the
Passengers’ Cross-Motion for Declaratory Judgment concurrently, the Court begins with the
relevant legal standards for both Motions. Summary judgment is appropriate where the Court is
satisfied that “there is no genuine issue as to any material fact and that the movant is entitled to a
judgment as a matter of law.” FED. R. CIV. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986); Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1366 (3d Cir. 1996). A factual
dispute is genuine only if there is “a sufficient evidentiary basis on which a reasonable jury could
find for the non-moving party,” and it is material only if it has the ability to “affect the outcome
of the suit under governing law.” Kaucher v. County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006);
see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Disputes over irrelevant or

11

In its Motion for Summary Judgment, 21st Century also argues that: (1) the public conveyance
exclusions contained in the Policy preclude a finding that 21st Century has a coverage obligation
for medical expenses sustained by the Passengers; and (2) under the statutory language of
N.J.S.A. 39:6A-4, 21st Century is under no legal obligation to provide personal injury protection
coverage to the Passengers, because Ledee, the named insured under the Policy, did not provide
permission to the Felipe Defendants, Santana, or the Passengers to use the Van. Nonetheless,
because the Court finds that the Passengers are not entitled to receive from 21st Century the
minimum statutory coverage under the deemer statute, and thus, that 21st Century owes no
insurance coverage obligations to the Passengers, the Court does not reach these arguments.
15

unnecessary facts will not preclude a grant of summary judgment. Anderson, 477 U.S. at 248.
“In considering a motion for summary judgment, a district court may not make credibility
determinations or engage in any weighing of the evidence; instead, the non-moving party's
evidence ‘is to be believed and all justifiable inferences are to be drawn in his favor.’” Marino v.
Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004).
The moving party bears the burden of demonstrating the absence of a genuine issue of
material fact. Celotex Corp., 477 U.S. at 322. Once the moving party has satisfied this initial
burden, the opposing party must identify “specific facts which demonstrate that there exists a
genuine issue for trial.” Orson, 79 F.3d at 1366; see Gleason v. Norwest Mortg. Inc., 243 F.3d
130, 138 (3d Cir. 2001) (“A nonmoving party has created a genuine issue of material fact if it has
provided sufficient evidence to allow a jury to find in its favor at trial.”). The non-moving party
must present “more than a scintilla of evidence showing that there is a genuine issue for trial.”
Woloszyn v. County of Lawrence, 396 F.3d 314, 319 (3d Cir. 2005). Not every issue of fact is
sufficient to defeat a motion for summary judgment; issues of fact are genuine “if the evidence is
such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S.
at 248. Additionally, the nonmoving party cannot rest upon mere allegations; he or she must
present actual evidence that creates a genuine issue of material fact. See FED. R. CIV. P. 56(e);
Anderson, 477 U.S. at 249. In conducting a review of the facts, the nonmoving party is entitled
to all reasonable inferences and the record is construed in the light most favorable to that party.
See Pollock v. American Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986). Accordingly,
it is not the Court’s role to make findings of fact, but to analyze the facts presented and
determine if a reasonable jury could return a verdict for the nonmoving party. See Brooks v.

16

Kyler, 204 F.3d 102, 105, n.5 (3d Cir. 2000); Big Apple BMW v. BMW of N. Am., Inc., 974 F.2d
1358, 1363 (3d Cir. 1992).
Additionally, the Court must determine whether the Passengers are entitled to declaratory
relief under the Declaratory Judgment Act. “The Declaratory Judgment Act, 28 U.S.C. § 2201,
creates a remedy by which federal courts may declare the rights and other legal relations of any
interested party seeking such a declaration when there is a case of actual controversy.” Benihana
of Tokyo, Inc. v. Benihana, Inc., 622 Fed. Appx. 169, 174 (3d Cir. 2015) (quoting Brockstedt v.
Sussex Cnty. Council, 794 F. Supp. 2d 489, 499 (D. Del. 2011)) (internal quotations omitted).
The Declaratory Judgment Act provides, in pertinent part, that “[i]n a case of actual controversy
within its jurisdiction . . . any court of the United States . . . may declare the rights and other
legal relations of any interested party seeking such declaration, whether or not further relief is or
could be sought.” 28 U.S.C. § 2201(a). In determining whether to fashion declaratory relief,
“the question in each case is whether the facts alleged, under all the circumstances, show that
there is a substantial controversy, between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory judgment.” Maryland Cas. Co. v.
Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). Thus, “[a] plaintiff bringing an action for
declaratory judgment must prove, by a preponderance of the evidence, that there is an actual
controversy between the parties.” Benihana, 622 F. App'x at 174.
B.

Automobile Insurance Under New Jersey Law

The Court begins its analysis with a brief introduction to New Jersey’s automobile
liability insurance laws. In 1972, the New Jersey Legislature enacted the New Jersey
Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 et seq. (the “No Fault Act”). The No
Fault Act is designed to “ensure that automobile accident victims are not left without the means

17

to recover financially for their injuries from a judgment-proof tortfeasor.” Caviglia v. Royal
Tours of Am., 178 N.J. 460, 466 (2004); see Proformance Ins. Co. v. Jones, 185 N.J. 406, 414–
15 (2005) (“Our comprehensive insurance scheme of mandating automobile insurance evinces a
strong legislative policy of assuring at least some financial protection for innocent accident
victims.”). The No Fault Act “ushered in ‘a system of first-party self-insurance’ that provided an
automobile accident victim prompt ‘payment of out-of-pocket medical expenses’ without regard
to fault.” DiProspero v. Penn, 183 N.J. 477, 485 (2005) (quoting Caviglia, 178 N.J. at 466).
Specifically, under the No Fault Act, “[a]ll owners of motor vehicles registered or principally
garaged in New Jersey are required to maintain minimum amounts of standard, basic, or special
liability insurance coverage for bodily injury, death, and property damage caused by their
vehicles.” Caviglia, 178 N.J. at 466 (citing N.J.S.A. 39:6B-1). Every policy must also include
personal injury protection (“PIP”), guaranteeing medical expense benefits to those injured in
automobile accidents, including the named insured, his or her household members, and certain
pedestrians and permissive occupants of the vehicle. See N.J.S.A. 39:6A-4.
By 1985, however, New Jersey was confronted with a “growing number of cases where
New Jersey residents were injured in accidents caused by out-of-state drivers whose insurance
coverage was less than New Jersey's statutory requirements.” Gov't Employees Ins. Co. v.
Allstate Ins. Co., 358 N.J. Super. 555, 560 (App. Div. 2003). In response to that concern, the
New Jersey Legislature enacted N.J.S.A. 17:28-1.4, commonly referred to as the “deemer
statute,”12 as part of the state’s no fault insurance plan. See Gov't Employees, 358 N.J. Super. at
561 (“[The deemer statute] sought to ensure that New Jersey-authorized insurance companies

N.J.S.A. 17:28-1.4 is referred to as the “deemer statute” because it “‘deems’ New Jersey
insurance coverage and tort limitations to apply to out-of-state policies.” Zabilowicz v. Kelsey,
200 N.J. 507, 510 n. 1 (2009).
12

18

provide to their out-of-state insureds traveling in New Jersey the same protections required of instate insured vehicles.”). The deemer statute provides, in relevant part, as follows:
[A]ny insurer authorized to transact or transacting automobile or motor vehicle insurance
business in this State, or controlling or controlled by, or under common control by, or
with, an insurer authorized to transact or transacting automobile or motor vehicle
insurance business in this State, which sells a policy providing automobile or motor
vehicle liability insurance coverage, or any similar coverage, in any other state or in any
province of Canada, shall include in each policy coverage to satisfy at least the liability
insurance requirements of subsection a. of section 1 of P.L.1972, c. 197 (C.39:6B-1) or
section 3 of P.L.1972, c. 70 (C.39:6A-3), the uninsured motorist insurance requirements
of subsection a. of section 2 of P.L.1968, c. 385 (C.17:28-1.1), and personal injury
protection benefits coverage pursuant to section 4 of P.L.1972, c. 70 (C.39:6A-4) or of
section 19 of P.L.1983, c. 362 (C.17:28-1.3), whenever the automobile or motor vehicle
insured under the policy is used or operated in this State.
...
“Automobile” means an automobile as defined in section 2 of P.L.1972, c. 70 (C.39:6A2).
N.J.S.A. 17:28-1.4. In short, the deemer statute requires certain insurers who are authorized to
transact business in New Jersey to include in their polices to non-resident insureds coverage
sufficient to satisfy New Jersey’s minimum liability, uninsured motorist, and PIP coverage
requirements, whenever the non-resident insured’s vehicle is operated in New Jersey. See Gov't
Employees, 358 N.J. Super. at 560.
C.

Choice of Law

The first disputed issue in this case is whether New Jersey or Ohio law governs the
Court’s analysis of the scope of 21st Century’s coverage obligations to the Passengers. 21st
Century contends that Ohio law should govern the Court’s interpretation of the Policy, because
the Policy was issued in Ohio to Ledee, an Ohio resident, and 21st Century’s performance under
the Policy was due in Ohio. In opposition, the Passengers argue that in cases where a party seeks

19

coverage under the deemer statute, New Jersey law governs notwithstanding the outcome of a
traditional choice of law analysis.
The Court must apply New Jersey’s choice of law rules to determine whether New Jersey
or Ohio law governs the contract-based coverage claims at issue in this case. See Berg Chilling
Sys., Inc. v. Hull Corp., 435 F.3d 455, 462 (3d Cir. 2006). New Jersey courts engage in a twostep analysis to determine choice of law in a contract dispute. Spence-Parker v. Del. River &
Bay Auth., 656 F. Supp. 2d 488, 497 (D.N.J. 2009). At step one, the court assesses whether an
“actual conflict” between the laws of the potentially interested states pertaining to the dispute at
hand exists. Id. (citation omitted). If a conflict between the potentially applicable laws does not
exist, the court is presented with a false conflict, and the choice of law “inquiry is over.”
Lebegern v. Forman, 471 F.3d 424, 428 (3d Cir. 2006). If an actual conflict exists, however, the
court moves on to the second step of its analysis, which requires the court to determine “which
state has the most meaningful connections with and interests in the transaction and the parties.”
NL Indus., Inc. v. Commercial Union Ins. Co., 65 F.3d 314, 319 (3d Cir. 1995); see Forestal
Guarani S.A. v. Daros Int'l, Inc., 613 F.3d 395, 401 (3d Cir. 2010) (“In making a choice-of-law
determination in a breach-of-contract case, New Jersey courts ask which forum has the most
significant relationship with the parties and the contract.”).
To determine which state has the most significant relationship with the parties and the
contract, the New Jersey Supreme Court has instructed courts to look to the principles set forth in
§ 188 and § 6 of the Restatement (Second) of Conflicts of Laws. See Gilbert Spruance Co. v.
Pennsylvania Mfrs. Ass'n Ins. Co., 134 N.J. 96, 102-103 (1993). Section 188 directs the courts to
consider, among other things:

20

(a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of
performance, (d) the location of the subject matter of the contract, and (e) the domicile,
residence, nationality, place of incorporation and place of business of the parties.
Restatement (Second) of Conflicts of Laws § 188(2) (1971). Section 6 lists the following
nonexclusive factors relevant to a choice-of-law analysis:
(a) the needs of the interstate and international systems, (b) the relevant policies of the
forum, (c) the relevant policies of other interested states and the relative interests of those
states in the determination of the particular issue, (d) the protection of justified
expectations, (e) the basic policies underlying the particular field of law, (f) certainty,
predictability and uniformity of result, and (g) ease in the determination and application
of the law to be applied.
Id. § 6(2).
However, New Jersey courts have eschewed the traditional choice of law analysis and
found that New Jersey law applies in cases brought under the deemer statute. Burlington Ins.
Co. v. Northland Ins. Co., 766 F. Supp. 2d 515, 523 (D.N.J. 2011) (“It has been consistently held
that New Jersey law applies to cases brought on the basis of the ‘deemer’ statute.”); see also
Hamilton v. Gov't Employees Ins. Co., 283 N.J. Super. 424, 429 (App. Div. 1995) (“When
N.J.S.A. 17:28-1.4 applies, there is no choice-of-law issue.”); Adams v. Keystone Ins. Co., 264
N.J. Super. 367, 373-74 (App. Div. 1993) (holding that New Jersey law applied to claims
brought under the deemer statute, despite the fact that New Jersey’s only relationship to the
dispute was as the situs of the accident). Here, because the Passengers seek coverage solely on
the basis of the deemer statute, the Court will apply New Jersey law to determine 21st Century’s
coverage obligations.13

The Court notes, however, that even if Ohio law governed this dispute, the Court’s finding,
infra, that 21st Century does not owe a coverage obligation to the Passengers would not be
altered. To that end, the Passengers have not cited, and this Court, in conducting its own review,
has not found, that Ohio law allows innocent third-party victims to recover benefits under a
policy of automobile insurance, where that policy has been voided ab initio.
13

21

D.

21st Century’s Coverage Obligations to the Passengers
1.

The Van Does Not Qualify as an “Automobile” under N.J.S.A. 39:6A–
2a

The narrow question presented in this case is whether the Van qualifies as an
“automobile” under the deemer statute. In that regard, if the Van qualifies as an “automobile,”
New Jersey’s policy of compensating innocent third-party victims of automobile accidents would
require 21st Century to provide the Passengers with the minimum statutory insurance
requirements set forth in the deemer statute.
The deemer statute provides, in pertinent part, that automobile insurers, such as 21st
Century, who issue policies outside of New Jersey, but are authorized to issue automobile
insurance policies within the state, “shall include in each policy coverage to satisfy at least the
liability insurance requirements of [the No Fault Act] . . . , whenever the automobile . . . insured
under the policy is used or operated in this State.” N.J.S.A. 17:28-1.4. The deemer statute
incorporates the following definition of “automobile,” contained in N.J.S.A. 39:6A-2:
“Automobile” means a private passenger automobile of a private passenger or station
wagon type that is owned or hired and is neither used as a public or livery conveyance for
passengers nor rented to others with a driver; and a motor vehicle with a pickup body, a
delivery sedan, a van, or a panel truck or a camper type vehicle used for recreational
purposes owned by an individual or by husband and wife who are residents of the same
household, not customarily used in the occupation, profession or business of the insured
other than farming or ranching.
N.J.S.A. 39:6A-2. In New Jersey Mfrs. Ins. Co. v. Hardy, 178 N.J. 327 (2004), the Supreme
Court of New Jersey provided the following guidance in interpreting the definition of
“automobile” in N.J.S.A. 39:6A-2:
[T]he statute refers to a “type” of vehicle, and then excludes specific vehicles based on
their use. The first clause of N.J.S.A. 39:6A–2a uses the insurance rating classification
term “private passenger automobile” and includes two types of that classification:
“private passenger” or “station wagon type” automobiles. The definition then exempts
certain private-passenger-type and station-wagon-type automobiles based on their
22

specific use: those that are used “as a public livery or conveyance for passengers” or
“rented to others with a driver” are excepted from the definition. The second clause of the
definition addresses the broader category of “motor vehicle[s].” It establishes that certain
identified types of motor vehicles are considered automobiles for the purpose of the No
Fault Act provided that they are not used for business purposes. Again, the statute begins
with a “type” of vehicle and then exempts some vehicles based on specific uses.
Id. at 334. Accordingly, to determine whether the Van meets the statutory definition of
“automobile,” the Court must focus first on what classification of vehicle the Van falls under,
and then examine its use. See id.
Here, because the Van was used as a public or livery conveyance, and customarily used
in the occupation, profession or business of the insured, the Court finds that the Van does not
constitute an “automobile,” regardless of whether it falls under the first or second vehicle
classification set forth in N.J.S.A. 39:6A-2. First, assuming the Van is “private passenger or
station wagon type” vehicle, it is undisputed that the Van was used as a public or livery
conveyance. See 21SMF ¶ 24; HCMF ¶ 24. Because the Van was operated as a public or livery
conveyance, it does not qualify as an “automobile” under the first classification in N.J.S.A.
39:6A-2a., and 21st Century is not obligated to provide the Passengers with the minimum
insurance requirements set forth in the deemer statute.
Second, even if the Van falls within the second classification of “automobile,” it does not
qualify as an automobile for the purposes of the deemer statute, because it was customarily used
in the business, profession, or occupation of Santana.14 While the term “customarily” is not

While the statute indicates that a vehicle does not qualify as an automobile if it is “customarily
used in the occupation, profession or business of the insured,” N.J.S.A. 39:6A-2 (emphasis
added), the Appellate Division has held that “[t]he term ‘insured’ is not limited to the named
insured but includes the operator of the vehicle at the time of the accident.” Thompson v.
Potenza, 364 N.J. Super. 462, 468 (App. Div. 2003). Accordingly, the Court will look to the
occupation of Santana, the driver of the Van – in addition to that of Ledee, the named insured –
to determine whether the Van qualifies as an “automobile.”
14

23

defined in the statute, the Appellate Division has interpreted customarily to mean “‘usually,
habitually, according to custom; general practice or usual order of things; regularly.’” Thompson
v. Potenza, 364 N.J. Super. 462, 469 (App. Div. 2003) (quoting Black's Law Dictionary, 385 (6th
ed. 1990)). For example, in Hughes v. Dillon, No. A-3730-06T1, 2008 WL 482549 (N.J. Super.
Ct. App. Div. Feb. 25, 2008), the Appellate Division found that a van did not qualify as an
automobile under N.J.S.A. 39:6A-2 – and therefore that the deemer statute was inapplicable –
because the van “was exclusively utilized in [the plaintiff’s] commercial stove repair business . .
. .” Id. at *2. Conversely, in Potenza, the court found that using a van once a week to make
deliveries did not rise to the level of customary use. 364 N.J. Super. at 462. Here, the
undisputed facts indicate that, at time of the accident, Santana was employed as a driver for
Felipe Express, and that the Van was customarily used as a transportation vehicle for Felipe
Express. See 21SMF ¶ 24; HCMF ¶ 24. Indeed, at the time of the accident, Santana was
transporting the Passengers in the Van pursuant to his employment with Felipe Express. See
21SMF ¶¶ 22-23; HCMF ¶¶ 22-23. Thus, because the Van was customarily used in the
occupation, business, or profession of Santana, it does not qualify as an automobile under
N.J.S.A. 39:6A-2, and 21st Century is not obligated to provide the minimum coverage under the
deemer statute.
While the Passengers rely on Giordano v. Allstate Ins. Co., 260 N.J. Super. 329 (App.
Div. 1992), to argue that the Van qualifies as an automobile under N.J.S.A. 39:6A, that case is
inapposite. In Giordano, the driver of a 1989 Ford Aerostar minivan brought an action to
recover PIP benefits under a policy of insurance issued to his wife. See id. at 330. The trial
court held that the minivan was not an “automobile” under the statute, because it was a van
customarily used for business, occupational, or professional purposes. See id. The Appellate

24

Division reversed, finding that the trial court improperly classified the minivan as a “van” under
the statute. See id. at 331-32 (“But we are satisfied that it was not a ‘van’ as that term is used in
the policy and in N.J.S.A. 39:6A-2a. A van is usually understood to be an enclosed vehicle used
for the transportation of goods or animals.”). Rather, the court found that the minivan fell within
statutory classification of a “private passenger or station wagon type vehicle.” Id. at 332-33
(“The conclusion is unavoidable that the minivan was a ‘station wagon type’ vehicle within the
meaning of the insurance policy and the statute.”). Therefore, although the Appellate Division
agreed that the minivan was customarily used for business, occupational, or professional
purposes, that was not a disqualifying use under the statute, because the minivan fell within the
classification of a station wagon type vehicle. See id. at 332.
Giordano is distinguishable from the present case. Importantly, unlike 21st Century here,
the defendant-insurer in Giordano did not argue that the minivan was operated as a public or
livery conveyance. As a result, once the Appellate Division classified the minivan as a station
wagon type vehicle, it did not examine whether the minivan’s usage disqualified it from being
considered an “automobile” under the first classification of vehicle set forth in N.J.S.A. 39:6A2a. Stated another way, the Giordano court did not analyze whether the disqualifying use
provision pertaining to the private passenger or station wagon type vehicle classification was
applicable. Conversely, here, even if the Van falls within the private passenger or station wagon
type vehicle classification, it is not an “automobile” under N.J.S.A. 39:6A-2a, because it was
used as a public or livery conveyance.
In sum, because the Van was operated as a public or livery conveyance, and was
customarily used in the occupation, business, or profession of Santana, the Van does not qualify
as an automobile under N.J.S.A. 39:6A-2, regardless of whether it falls within the statutory

25

classification of a “private passenger or station wagon type” vehicle or a “van.” And, because
the deemer statute only applies policies covering “automobiles,” the Court’s finding that the Van
is not an automobile is fatal to the Passengers’ attempt to seek coverage under the deemer
statute. Accordingly, because the Van is not an automobile, 21st Century is not obligated to
provide the Passengers with the minimum coverage requirements set forth in the deemer statute.
2.

New Jersey’s Innocent Third-Party Exception is Not Applicable

The Court’s finding that 21st Century does not owe a coverage obligation to the
Passengers under the deemer statute does not contravene New Jersey’s policy of seeking to
compensate innocent third-party victims injured in automobile accidents. In that regard, the
Passengers argue that New Jersey’s well-established policy of providing coverage to innocent
third-parties, even where a policy is declared void ab initio based on fraud, should extend to
cases where the vehicle was being used for commercial purposes; i.e., to vehicles that do not fall
within the statutory definition of “automobile” because they are put to an excluded use. The
Court disagrees.
Within the realm of automobile insurance, New Jersey courts have long recognized a
distinction between an insurer’s coverage requirements to its insured and to injured third-parties,
permitting innocent third-parties to recover under policies declared void ab initio due to conduct
of the named insured. See LaCroix, 194 N.J. at 523-24; Proformance, 185 N.J. at 420 (“[T]he
protection of innocent third parties is a primary concern of our personal injury no-fault system . .
. .”); Bastien, 175 N.J. at 149 (“[A]lthough the company may rescind the policy, thereby
disentitling Leonel to any PIP coverage as the named insured, that does not mean that it escapes
liability in respect of innocent, third-party members of the public whose protection is a
paramount concern of the PIP, no-fault system.”); Fisher v. New Jersey Auto. Full Ins.

26

Underwriting Ass'n By & Through Hanover Ins. Co., 224 N.J. Super. 552, 557 (App. Div. 1988)
(“The insurance carrier's liability to its assured who may be guilty of some act or conduct which
renders a policy void ab initio is therefore distinct from its liability to an injured third person.”).
For example, in Fisher, the Appellate Division held that the defendant-insurer was required,
under a policy issued to the owner of a vehicle involved in an accident, to provide PIP benefits to
an injured third-party passenger, despite the fact that the policy was declared void ab initio due
to misrepresentations made by the named insured. 224 N.J. Super. at 557. The court reasoned
that the No Fault Act “is social legislation designed to give the broadest protection to automobile
accident victims,” id. at 557, and therefore, permitting insurers to escape liability as to innocent
third-parties on the basis of a misrepresentation made by the insured “would undermine the
legislative purpose of our No-Fault Law.” Id. at 559.
Similarly, in LaCroix, the New Jersey Supreme Court held that the plaintiff could recover
PIP benefits under a policy of insurance issued to the vehicle’s owner, which was declared void
ab initio due to material misrepresentations of the named insured. 194 N.J. at 519. In so
holding, the Court recognized a distinction between two classes of accident victims with respect
to benefits under the No Fault Act: “[i] the named insured and family members residing in the
household; and [ii] other persons who sustain bodily injury while occupying, entering into,
alighting from or using the vehicle of the named insured with that person's permission.” Id. at
523. With respect to the latter class, the Court explained that “courts have striven to provide
protection to third-party victims in fulfillment of the policy intentions animating the no-fault
system.” Id. Accordingly, even though the policy at issue in that case was declared void ab
initio, the Court found that it was appropriate to mold the equitable remedy of rescission to

27

require the insurer to provide the deemer statute’s minimum coverage to the innocent third-party
victim. See id. at 531-32.
While cognizant of New Jersey’s strong interest in protecting innocent third-party
victims, I cannot find that those policy interests mandate extending the deemer statute’s
minimum coverage obligations to vehicles that, because of their use for commercial purposes, do
not qualify as “automobiles.” Importantly, each of the cases cited by the Passengers as
extending coverage obligations to innocent third-party victims involved private vehicles that
qualified as an “automobile” under N.J.S.A. 39:6A-2. See Perez, 223 N.J. at 146; LaCroix, 194
N.J. at 518; Proformance, 185 N.J. at 409; Bastien, 175 N.J. at 147; Marotta v. New Jersey Auto.
Full Ins. Underwriting Ass'n By & Through Liberty Mut. Ins. Co., 280 N.J. Super. 525, 526
(App. Div. 1995), aff'd, 144 N.J. 325 (1996); Fisher, 224 N.J. Super. at 554; State Farm Mut.
Auto. Ins. Co. v. Wall, 92 N.J. Super. 92, 94 (App. Div. 1966). Moreover, in conducting my own
review, I have not been able to locate any reported New Jersey decision extending coverage
under the deemer statute to innocent third-parties injured in a vehicle that was used for
commercial purposes.15 To wit, it would unnecessarily broaden the scope of the deemer statute,
and the innocent-third party doctrine, if the Court were to find that 21st Century is obligated to
provide coverage to the Passengers, where a condition precedent to the application of that statute
– a finding that the Van is an automobile – is not present.
Indeed, the Appellate Division reached a similar conclusion in Beaugard v. Johnson, 281
N.J. Super. 162 (App. Div. 1995). In that case, the court considered whether the No Fault Act’s
verbal threshold, N.J.S.A. 39:6A-8(a), applied to a fifteen-year-old plaintiff who was injured

15

In predicting how the New Jersey Supreme Court would decide this issue, the Court is not
bound by unreported decisions of New Jersey’s courts. See N.J. Ct. R. 1:36-3 (“No unpublished
opinion shall constitute precedent or be binding upon any court.”).
28

while a passenger on a school bus. Id. at 165-66. To make that determination, the court had to
decide whether the passenger was entitled to PIP benefits, which, in turn, required the court to
determine whether the passenger was injured while occupying an “automobile,” as that term is
defined in N.J.S.A. 39:6A-2. See id. The Appellate Division held that the passenger was not
entitled to PIP benefits, because she “was a passenger in a school bus at the time of the
accident,” and a “school bus is not an ‘automobile’ as that term is defined under the statute.” Id.
at 169. Accordingly, even though the passenger was an innocent third-party victim, the
Appellate Division found that the vehicle’s classification as a non-automobile precluded her
from enjoying the protections of the No Fault Act. See id. The New Jersey Supreme Court’s
subsequent opinions regarding innocent third-party coverage under the No Fault Act have not
abrogated, overruled, or otherwise questioned the decision rendered in Beaugard.
Furthermore, the Court’s finding that 21st Century is not required to provide the
Passengers with the minimum coverage under the deemer statute is supported by basic principles
of statutory construction. Where a statute is clear and unambiguous, courts need not look
beyond the statute’s words and phrases to interpret its true intent and purpose. Beaugard, 281
N.J. Super. at 169. In that regard, the “‘legislature is deemed to have intended what it wrote and
the Court may not construe a contrary concept.’” Pine Belt Chevrolet, Inc. v. Jersey Cent. Power
& Light Co., 132 N.J. 564, 578 (1993) (quoting State v. Duva, 192 N.J. Super. 418, 421 (Law.
Div. 1983)). Here, the plain language of deemer statute dictates that an insurer need only include
in its policies the minimum liability, UM, and PIP coverage required under the No Fault Act
where a covered “automobile,” as defined under N.J.S.A. 39:6A-2, is operated in New Jersey.
See N.J.S.A. 17:28-1.4. And, in the definition of “automobile,” the New Jersey Legislature
specifically excluded vehicles that are used for commercial purposes; i.e., vehicles that are

29

either: (i) used as “a public or livery conveyance for passengers”; or (ii) “customarily used in the
occupation, profession or business of the insured . . . .” N.J.S.A. 39:6A-2. In short, the deemer
statute expressly excludes policies covering vehicles used for commercial purposes from the
minimum coverage requirements of the No Fault Act. Absent clear legislative intent to provide
for the coverage of innocent third-party victims injured in commercial vehicles, the Court will
not read such a requirement into the statute. Thus, the Court finds that the Passengers are not
entitled to coverage under the deemer statute, despite their status as innocent third-party victims
of the accident, because the deemer statute is not triggered where the vehicle in question is not an
“automobile”; e.g., where, as here, the vehicle is used as a public or livery conveyance, and
customarily used in the occupation, business, or profession of the insured.
In sum, because a covered vehicle’s status as an “automobile,” as that term is defined
under N.J.S.A. 39:6A-2, is a condition precedent to an insurer’s minimum coverage obligations
under the deemer statute, and because the Van in this case does not fall within the statutory
definition of an “automobile,” 21st Century is not required, under the deemer statute, to provide
coverage to the Passengers.
CONCLUSION
For the foregoing reasons, 21st Century’s Motion for Default Judgment and Summary
Judgment is GRANTED, and the Passengers’ Motion for Declaratory Judgment is DENIED.
Specifically, the Court finds that: (1) 21st Century is entitled to default judgment as to Counts
One, Two and Three of its Amended Complaint, insofar as those claims are asserted against the
Felipe Defendants; and (2) 21st Century is entitled to summary judgment on the issue of its
coverage obligations to the Passengers, and thus, 21st Century is not obligated, under the Policy

30

or the deemer statute, to provide coverage to the Passengers for any claims arising from the
accident.

Dated: September 22, 2017

/s/ Freda L. Wolfson
Hon. Freda L. Wolfson
United States District Judge

31