Illegal Escape Clause in "Garage Policy"

In another unanimous opinion by the New Jersey Supreme Court, it was held that a "garage policy" which insured a loaner vehicle, and contained a provision which did not conform to the Regulations promulgated by the MVC, contained an illegal escape clause.

In this matter, a dealership procured insurance coverage for its loaner vehicles which provided for liability coverage in the event of an accident. However, the insurance policy contained a provision that the procured insurance only provided coverage when the "customer lacked the minimum insurance required by law." When the customer with the loaner car got into an auto accident, and the injured sued, the dealership's insurer disclaimed coverage because the customer had personal auto insurance with the legally minimum coverage of $15,000/$30,000.

Upon challenge by the injured, the court reviewed the law and the plain language of the regulations revealed that a "garage policy" must provide for liability insurance of $100,000/$250,000. Thus the court found the disclaimer of coverage, which was based upon language contained in a clause of the policy, to be unlawful, and the injured would be able to demand damages up to the "garage policy" limits. Huggins v. Aquilar (A-78-19).