Efforts are under way to bring much needed change to New Jersey’s “no fault” system under AICRA—the Automobile Insurance Cost Reduction Act, N.J.S.A. 39:6A-1, et. seq. The New Jersey State Legislature may soon consider Assembly Bill 1117 and Senate Bill 411. These bills offer greater protection to those injured in automobile accidents by respectively increasing minimum liability limits to $35,000 per person and $75,000 per accident, while imposing mandatory information disclosures on insurance carriers when an insured elects a medical expense limit of $15,000 as opposed to the standard $250,000.
But do these bills go far enough?
The limited tort option, also known as the verbal threshold, has piqued the ire of many who question whether its application achieves AICRA’s intended purpose of reducing insurance costs and, more importantly, whether a consumer fully realizes the consequences of selecting this option. Arguably, an overwhelming percentage of the 6 million drivers required to buy insurance in this state possess little to no understanding that by selecting the limited tort option, they have willfully forfeited their right to recovery in exchange for a reduced premium, unless certain onerous statutory exceptions are met (U.S. Department of Transportation, Federal Highway Administration, Highway Statistics 2016). Indeed, it is similarly debatable that this provision on occasion has been transformed from a cost-saving shield to a squandering sword to the detriment of legitimate claimants. While this proposed legislation is a step in the right direction, the inequities posed by applying the limited tort option to drunken drivers, motorcyclists and underinsured motorist claims (UIM) warrant further refinement to AICRA.
Intoxicated drivers are afforded full opportunity to use the limited tort option as a defense against innocent accident victims’ claims for bodily injuries. While New Jersey possesses a strong public interest in deterring drunken driving, Woodworth v. Joyce, 373 N.J. Super. (114 App. Div. 2004) nevertheless upheld a drunken driver’s invocation of the limited tort option defense on grounds that favored AICRA’s cost-reduction goals over concerns of fundamental fairness. The premise behind this ruling was that insurance costs cannot stay down, and insurance availability cannot stay up, if drunken drivers are barred from this defense. To the contrary, Pennsylvania has succeeded in maintaining its own version of AICRA while expressly barring drunken drivers from invoking its limited tort option (75 Pa.C.S. §1705(d)(1)(i)). New Jersey Assemblyman Jon M. Bramnick proposed an amendment to AICRA reflecting Pennsylvania’s approach two years ago, but the bill (A.1045 ) was never enacted. Pennsylvania has shown that insurance cost-reduction and fundamental fairness are not mutually exclusive; perhaps it is time for New Jersey to follow suit.
Motorcyclists are similarly touched by an untoward application of the limited tort option. AICRA applies this provision to all automobile owners required to maintain medical expense benefits. Our “no fault” system, however, does not permit holders of motorcycle policies to carry medical expense benefits, as do owners of traditional automobiles. These individuals must seek other means to pay their medical bills if injured in an accident, yet they remain subject to the limited tort option. The courts in Koff v. Carrubba, 290 N.J. Super. 544 (App. Div. 1996), and Echeverri v. Blakely, 384 N.J. Super. 10 (App. Div. 2006), confirmed that motorcyclists are governed by the limited tort option even if other, unrelated automobile policies exist in the household. In effect, motorcyclists are getting the bad without the good: They are subject to paying premiums and the cost-saving mechanisms of AICRA (the limited tort option) without the benefit of medical coverage the “no fault” system was intended to provide. Florida and New York have fashioned their counterparts to AICRA with a more judicious approach: no medical expenses benefits, no limited tort option (Scherzer v. Beron, 455 So. 2d 441 [Fla. 5th DCA 1984]; Carbone v. Visco, 115 A.D.2d 948 [4th Dep’t 1985]). These states prove that we can treat our motorcyclists equitably while still achieving the underlying goals of AICRA.
A final concern is the legislature’s need to address statutory ambiguities resulting in the limited tort option’s application to underinsured motorist claims (UIM). N.J.S.A. 17:28-1.1 provides that uninsured motorist claims (UM) are governed by the insured’s elected tort option, but the statute is silent with respect to claims for UIM benefits. As a quick primer, an injured insured can make a claim against his/her own automobile insurance policy for UM benefits if no applicable liability policy exists for the underlying tortfeasor. On the other hand, an injured insured can make a claim against his/her own automobile insurance policy for UIM benefits if the value of his/her injuries exceeds the limit of the torfeasor’s liability policy—hence, uninsured vs. underinsured.
Interestingly, UM coverage is compulsory whereas UIM benefits are available as a supplemental, contractual add-on for a premium increase. Canons of statutory interpretation inform us that the limited tort option should not apply to UIM benefits without clear statutory language, yet scores of motions persist on this issue. So how do we reconcile AICRA with the UM/UIM statute? The answer is simple: The limited tort option should not apply to UIM claims because AICRA’s cost-reduction purpose is achieved by the underlying policy. An insured should therefore be permitted to recover on his/her UIM claim, as a matter of equity, unencumbered by the limited tort option. This approach is consistent both with statutory language and the reasonable expectations of the insured in purchasing UIM coverage above what is required.
While credit should be given to the laudable efforts resulting in Assembly Bill 1117 and Senate Bill 411, much work remains in bringing greater fairness to achieving the cost-reduction ends of AICRA through the limited tort option. Pennsylvania, New York and Florida have proven that we can be fair and save on insurance costs at the same time. By removing the limited tort option from circumstances involving drunken drivers, motorcyclists and UIM claims, our 6 million drivers will achieve an even-handed application of the limited tort option without losing sight of the intent and purpose of AICRA. If the New Jersey Legislature is sincere in its efforts to amend AICRA for the better, these revisions could be a good place to start.
This article is a product of the Personal Injury Department at Einhorn, Harris, Ascher, Barbarito & Frost in Denville. They represent clients with bodily injury claims resulting from motor vehicle accidents, medical malpractice, products liability, dog bites and work-related incidents.