On January 12, 2012 the New Jersey Appellate Division issued a ruling in a published decision that a vehicle repossessor may not receive coverage under the owner’s policy as the repossessor is not considered a “permitted user” under the policy. Although the matter was decided upon contract interpretation, considering the difficult economic times, it is of importance as many automobile insurance contracts contain similar language.
In 2002, Annetta Jackson entered into a 6-year retail installment contract to purchase a 2002 Isuzu Rodeo. The loan was ultimately assigned to AmeriCredit. Jackson eventually defaulted on the loan. In May 2006, AmeriCredit asked Repossession Specialists (“Repossession”) to repossess the Rodeo. During the early morning hours of May 9, 2006, Repossession’s employee, Theodore Van Santen, entered Jackon’s apartment complex lot with his tow truck to take the Rodeo. Jackson ran to remove some personal items from the trunk of the Rodeo which was already hooked to the tow truck. Jackson climbed onto the tow bar and was trying to unlock the trunk when Van Santen pulled away. Jackson was thrown to the ground, injuring her knee.
Jackson filed suit. Repossession’s insurer, New Hampshire Insurance Company, accepted coverage. Repossession, Van Santen, and AmeriCredit (collectively, “Repo Parties”) also sought coverage from GEICO, Jackson’s insurer. The Repo Parties argued that they were a “permitted user” of Jackson’s automobile and therefore covered under the GEICO policy. GEICO denied coverage to them claiming that the policy only covered Jackson and “any other person using the auto with your permission.” Further, the policy excluded coverage for persons, other than Jackson or her relatives, “employed or otherwise engaged in the auto business.” The Repo Parties thereafter filed a separate lawsuit seeking coverage.
GEICO and the Repo Parties moved for summary judgment. GEICO denied that the Repo Parties were permitted users. Plaintiffs argued they were “permitted users” based upon the terms of the policy and the retail installment agreement which gave the Repo Parties the right to repossess in event of default. The Trial Court granted GEICO’s motion and denied the Repo Parties’ motion. The trial court concluded that although the auto business exclusion was void under Proformance Ins. Co. v. Jones, 185 N.J. 406 (2005), the Repo Parties were not “permitted users.” The trial court stated that once Van Santen took custody of the vehicle, Jackson lost custody and control. Therefore, she could not grant or deny permission to anyone. Further, the repossession was akin to conversion or theft which falls outside a permitted use. The Repo Parties appealed.
The Appellate Division affirmed the trial court’s ruling. Because the Repo Parties’ use of the vehicle was as of right, Jackson lacked the power to revoke or prevent their use of the vehicle. This is inconsistent with the concept of permission which can be denied. The Appellate Division went even further than the trial court stating that Jackson lacked the power to permit, not when Van Santen took custody, but rather once she granted the lender a security interest.
Further, the Appellate Division noted that to rule for the Repo Parties would remove a powerful incentive for repossessors to act with care as if they are covered under the owner’s policy, they would have no reason to implement risk management strategies to ensure their own lower insurance rates. In addition, such a decision would necessarily result in the costs of the risk being eventually borne by the individual policyholders with higher rates despite the fact that the policyholders have no say in choosing the entity that will repossess their vehicle and no control over its conduct.
Considering the economic uncertainty in the nation, the situation described in this decision will likely reoccur. Accordingly, private automobile insurers may now have a good faith basis to deny coverage to a repossessor who is injured or otherwise damaged while repossessing a vehicle.
by Joseph A. Gurski, Esq.