Monday, February 21, 2011

No Insurance Defenses

No Insurance Defenses

Presumption does not equal guilty

By Kenneth A. Vercammen

The mandatory penalties imposed for driving without insurance are greater than the first-offender penalties for drunk driving or possession of marijuana. Mandatory penalties include automatic loss of license for one year, a $300-$1,000 fine and a period of community service to be determined by the municipal court. N.J.S.A. 39:6B-2. The no-car-insurance statute is one of the few strict liability statutes. There are also court costs and insurance surcharges of $250 per year for three years. Failure to produce at the time of trial an insurance card or insurance policy covering the date of the offense creates a rebuttable presumption that the person was uninsured when charged with the offense. Remember, however, that a presumption does not equal guilty.

In State v. Kopp, 171 N.J. Super. 528 (Law Div. 1980), a law division judge held that knowledge of lack of insurance is not a defense. However, the section, which imposes penalties against an individual who operates a motor vehicle without liability insurance, does not apply to a New Jersey resident who is driving an automobile owned by an out-of-state friend who had been in New Jersey for five weeks. State v. Arslanouk, 67 N.J. Super. 387 (App. Div. 1979).

The most important no-insurance case is State v. Hochman, 188 N.J. Super. 382 (App. Div. 1982). The Appellate Division examined and reversed a conviction for operating without liability insurance where the state failed to carry its burden of proving that automobile liability insurance was lawfully canceled. In this fact-specific case, defendant was charged with operating a vehicle he owned without insurance. It was stipulated that because of long hours defendant worked, he had asked his wife to look after household matters, including insurance matters, and gave her several thousand dollars each month to pay for them. Defendant Hochman’s wife arranged through an insurance broker to have Allstate insure the vehicle. The insurance broker then arranged to finance the insurance premiums through a “Lee Finance” financial service. The defendant’s wife then paid the broker and agreed to pay the balance to the financial service in monthly installments of $48.

Although Allstate claimed it mailed a cancellation notice, it stipulated that it had mailed the cancellation notice to an incorrect address, i.e., mailing it to 313 Park Street rather than 314 Park Street. The Appellate Division noted that in order to convict a defendant-owner of operating a motor vehicle in violation of the insurance provisions, the state did not have to show a culpable mental state, i.e., that defendant knew his vehicle was uninsured. The state simply had the burden of proving beyond a reasonable doubt that (1) defendant owned the vehicle, (2) the vehicle was registered in New Jersey, (3) defendant operated the vehicle or caused it to be operated upon any public road or highway in this state, and (4) the vehicle was without liability insurance coverage required by N.J.S.A. 39:6B-1.

The Appellate Division in Hochman held that the first three elements of the offenses were proven beyond a reasonable doubt. The pivotal issue was whether the state had proven beyond a reasonable doubt the fourth element of the defense, that the vehicle was uninsured. The question was thus whether the liability insurance policy had been lawfully and effectively canceled when defendant Hochman was charged for the offense. The court found that Allstate had not properly canceled the insurance policy. The Hochman court held;

A notice of cancellation of a policy of automobile liability insurance is effective in this State only if it is based on one

or more statutorily enumerated reasons, including the nonpayment of premiums. N.J.S.A. 17:29C-7(A)(a). Moreover, prior to March 10, 1981, where, as here, the cancellation was for nonpayment of premiums, the notice of cancellation must have been mailed or delivered by the insurance carrier (here Allstate) to the insured (here either defendant or his wife) at least ten days prior to the effective date of cancellation and must have been accompanied by a statement of the reason given for such cancellation. N.J.S.A. 17:29C-8. Weathers v. Hartford Ins. Group 77 N.J. 228, 234 (1978). Proof of mailing the notice, however, is not conclusive on the issue. The insured may still offer proof that he never received the notice “for the purpose of refuting the hypothesis of mailing.”

The Hochman court noted that although Allstate claimed that a notice of cancellation was sent to the defendant’s wife, this did not establish that the notice satisfied the statutory requirement of N.J.S.A. 17:29C-8. There is no proof that the notice mailed to the named insured (assuming that defendant’s wife was the insured named in the policy) or that it was mailed to the address shown in the policy, or that its contents complied with statutory requirements. The court held “thus, we are constrained to hold that the state failed to sustain its burden of proving beyond a reasonable doubt that the Allstate automobile liability insurance policy covering defendant’s vehicle was lawfully canceled. The Allstate policy therefore was presumptively in full force and effect... and defendant’s conviction for violating the compulsory insurance provisions of N.J.S.A. 39:6B-2 cannot stand.”

Operation is different in no-insurance matters than in drunk-driving cases. A defendant who is seated in the driver’s seat, behind the steering wheel of a vehicle that is under tow and was in physical control of the vehicle did not “operate” the vehicle for the purposes of prohibiting operating the vehicle while suspended, operating an uninsured vehicle and operating an unregistered vehicle, where the vehicle did not have an engine and was incapable of being operated under its own power. Counsel can argue the state must prove the defendant drove the vehicle. State v. Derby 256 N.J. Super. 702 (Law Div. 1992).

In a case involving Personal Injury Protection/No Fault PIP benefits, the Appellate Division ruled that an insurance company did not properly mail a notice of cancellation, thus the policy was not canceled. See Hodges v. Pennsylvania National Insurance Company, 260 N.J. Super. 217, 222-23 (App. Div. 1992).

In order to be effective, notice of cancellation “must be set in strict compliance with the provisions of N.J.S.A. 17:29C-10.” Lopez v. New Jersey Automobile Full Underwriting Association 239 N.J. Super. 13, 20,(App. Div.), certif. den. 122 N.J. 131 (1990) (absence of proof of personal knowledge of mailing by postal employee or insurer employee renders notice ineffective). The court questioned whether the stamped proof of payment of money in postage was proof of mailing. The Appellate Division in Hodges noted that our courts have interpreted the statute to require a precise proof of mailing, usually the official “U.S. Postal Service Certificate of Mailing.”

If a husband and wife, or both, are named in the policy, Lumbermens Mutual Casualty Co. v. Carriere, 170 N.J. Super. 437, 450 (Law Div. 1979), supports the proposition that both husband and wife named in the policy should receive notice.

A bad check will permit an insurer to cancel insurance policy. In Abdel-Rahman v. Ludas, 266 N.J. Super. 46, 48 (App. Div. 1993), the court held an insured’s failure to pay the premium, which occurs when the check is dishonored, entitles the insurer to cancel the policy.

Nonowner-operated Cases

The charge of simple operation without insurance in nonowner-operated cases presents additional viable defenses to the charge of no insurance. There is not a strict liability provision involving mere operators. The state must prove the operator knew or should have known from the attendant circumstances that the motor vehicle was without motor vehicle liability coverage. Such facts can be gathered from the relationship between the parties, whether or not the vehicle had a valid inspection sticker and testimony by the owner, who often is also issued an uninsured motorist charge.

In Matlad v. US Services, 174 N.J. Super. 499 (App. Div. 1980), where the husband cancelled the policy without telling his wife, deletion was void as against public policy and coverage continued for the wife. The defendant/owner must operate or cause the car to be operated. If a driver took the car without permission that day, the owner did not cause the vehicle to be operated.

The state is still required to provide discovery. Occasionally a case is dismissed because the state failed to provide discovery.

When there is no accident and sympathetic facts, a prosecutor should offer a plea bargain so a driver and taxpayer does not suffer a one-year loss of license. The prosecutors and courts should seek justice, not punishment, which would usually mean loss of a job due to no license. It is also time for the Legislature to enact a limited “Drive to work” license. ■

Reprinted with permission from the JANUARY11, 2010 edition of New Jersey Law Journal. © 2010 ALMMedia Properties, LLC. All rights reserved. Further duplication without permission is prohibited. Vercammen is a trial attorney in Edison. He often lectures for the New Jersey State Bar Association, New Jersey Institute for Continuing Legal Education and Middlesex County College on personal injury, criminal/municipal court law, drunk driving and contested probate estate administration