The Appellate Division recently decided a potentially wide-ranging and impactful question involving the scope of Uninsured Motorist (‘UM’) and Underinsured Motorist (‘UIM’) benefits. Such benefits are often the source of significant confusion and controversy, which allow an insured to recover benefits where the tortfeasor (i.e., the person at fault for the accident) carried either no insurance (uninsured) or less coverage than your own policy limits (underinsured). In a per cur decision, the Panel in Monroy v. Allstate Insurance Company (23-2 -1940) addressed the question of whether the plaintiff-driver, who was unlicensed but had permission to operate same from the owner of the vehicle, can be considered the ‘permissive user’ of a vehicle under the UM policy issued by the defendant insurance company, Allstate. The Appellate Division answered this question in the negative, holding that “because conferring permissive user status on a driver presumes that the driver is licensed to operate a motor vehicle, an owner cannot grant permissive user status to a driver who is unlicensed” (emphasis added).
What makes this outcome interesting (at least to nerdy lawyers such as myself) is how the mere fact that a driver may be unlicensed actually does not preclude him or her from pursuing a claim against the tortfeasor for personal injuries. See Burke v. Auto Mart, Inc., 37 N.J. Super. 451, 454-55 (App. Div. 1955), certif. denied, 20 N.J. 304 (1956). Nevertheless, in reaching its decision the Panel reasoned that because insurance companies are permitted to decline coverage for UM/UIM benefits if its insured’s license was revoked or suspended, see N.J.S.A. 17:29C-7, the owner of the vehicle who gave the plaintiff permission to drive it cannot therefore confer a greater benefit on that unlicensed driver than he himself possessed as the owner and named insured on the policy. As the Appellate Division noted, “In other words, [the vehicle owner] cannot permit an unlicensed driver – – plaintiff – – to drive when such permission would exceed [the vehicle owner]’s own driving and insurance restrictions imposed by the State.” Thus, the rights and benefits of someone injured in an automobile accident can be adversely affected, and to a significant extent, if it turns out that person is unlicensed.