Morrison Mahoney Partners Michael Aylward, Chris Martin and New Jersey Of Counsel Lina Corriston  won a major victory for Federated Mutual in New Jersey’s intermediate appellate court.    

In Engrassia v. Uzcategui, A-2755-15T1 (App. Div. Jan. 11, 2018), the Appellate Division of the New Jersey Superior Court ruled that a garage policy issued by Federated Mutual to a BMW dealership was not obliged to provide coverage for a fatal accident caused by a drunken customer who crashed into an off-duty policeman while driving a service-loaner vehicle.  The Appellate Division upheld language in a Federated Mutual policy, which stated that the policy only extended coverage to customers if their own policies had limits less than New Jersey’s $15,000/$30,000 requirements, which was not the case here.   The Appellate Division agreed with the Superior Court that the exclusionary language in Federated Mutual’s policy was a valid “step down” provision and not an illegal “escape clause.”  Moreover, the court rejected the Superior Court’s finding that Federated Mutual must at least pay the requisite $15,000 New Jersey FR limit, declaring that New Jersey law was clear that the policy’s step down provision eliminated coverage altogether.