Facts
- Joao Zacarias purchased an Allstate boatowner’s liability policy for a 20-foot recreational boat; the policy included a declarations sheet and an 18-page form with a table of contents and headings.
- The policy defined an “insured person” as the named insured and, if a resident of the household, any relative or dependent in the insured’s care.
- Under a conspicuous heading, “Losses We Do Not Cover,” the policy excluded “bodily injury to an insured person.”
- Zacarias allegedly caused a boating accident while operating the boat, injuring his wife, Maria Zacarias, who resided in his household.
- Zacarias sought liability coverage for his wife’s negligence claim; Allstate denied indemnity based on the intra-family exclusion but provided a defense under a reservation of rights.
- Zacarias filed a declaratory judgment action seeking to invalidate the exclusion as contrary to public policy or, alternatively, to obtain coverage based on reasonable expectations and alleged failure by Allstate/its agent to highlight the exclusion.
Issues
- Whether the intra-family exclusion for “bodily injury to an insured person,” read with the definition of “insured person,” was clear and enforceable to bar coverage for a resident spouse’s bodily injury claim.
- Whether the reasonable-expectations doctrine could override the exclusion based on the policy’s format, alleged lack of notice, or the adhesion nature of the contract.
- Whether an agent’s alleged failure to call attention to the exclusion, absent an affirmative misrepresentation, could estop the insurer or otherwise create coverage beyond the policy’s terms.
- Whether public policy required invalidation or limitation of the exclusion in a recreational boatowner’s liability policy.
Decision
- The Supreme Court of New Jersey affirmed summary judgment for Allstate.
- The Court held the intra-family exclusion was plain, unambiguous, and presented in a manner sufficient to provide notice.
- The Court ruled the reasonable-expectations doctrine did not apply because the policy was not misleading or confusing and contained no ambiguity requiring a pro-insured construction.
- The Court rejected arguments based on adhesion and on the agent’s failure to highlight the exclusion, finding no basis to impose coverage contrary to clear policy language.
- Allstate had no duty to indemnify Zacarias for his wife’s injuries.
Legal Principles
- Insurance policies are enforced according to their plain language; courts will not revise a policy to supply coverage that the contract clearly excludes.
- Ambiguities are construed against the insurer, but the reasonable-expectations doctrine generally operates when policy language is ambiguous or the policy’s structure is misleading or unusually confusing.
- A clearly stated exclusion, placed under a conspicuous exclusion heading and linked to a defined term, is enforceable even in an adhesion contract absent statutory constraints or deception.
- In contexts lacking a comprehensive mandatory-coverage statutory scheme (unlike certain automobile-insurance settings), exclusions are less likely to be limited on public policy grounds.
- An agent’s failure to specifically highlight an exclusion does not create coverage without affirmative misrepresentation or a specific assurance inconsistent with the written policy.
Conclusion
The court enforced Allstate’s intra-family exclusion in a boatowner’s liability policy, holding that clear and conspicuously presented policy language barred coverage for a resident spouse’s bodily-injury claim and that neither reasonable expectations, adhesion principles, nor an agent’s silence justified rewriting the contract.