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VOLUME 10 August 2005 | ||||||
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WHAT HAPPENED TO NEW JERSEY’S THRESHOLD? By Seth A. Kurs, Esq.
New Jersey has long required that all vehicles registered in the State must be protected by liability insurance. Some form of motor vehicle security responsibility or compulsory insurance has been in place in New Jersey since 1929. As of January 1, 1973, the registered owner of any motor vehicle registered or principally garaged in the State of New Jersey is required to purchase and maintain insurance coverage on that motor vehicle. The statutory policy limits and options have changed numerous times over the years, however, the underlying liability protections have remained.
Much to the chagrin of New Jersey residents, New Jersey is widely held as the state with the highest cost of personal automobile liability insurance rates in the country. Our legislature has undertaken numerous attempts to supplement or augment the established laws in efforts to help contain these skyrocketing insurance rates. The first of these attempts to control litigation and insurance costs was in 1972, when the Legislature enacted the No Fault legislation, properly termed the New Jersey Automobile Reparation Reform Act, which provides for medical treatment through Personal Injury Protection (PIP), without regard to fault. (N.J.S.A. 39:6A-1 through 39:6A-20).
Subsequent adjustments to the statutes include: The Unsatisfied Claim and Judgment Fund, used to provide limited coverage to individuals injured by uninsured motorists (N.J.S.A. 39:6-61 to 39:6-91); mandatory Uninsured Motorist Coverage (N.J.S. 39:6A-14, N.J.S. 17:28-1); the New Jersey Automobile Insurance Freedom of Choice and Cost Containment Act of 1984, provided for Pedestrian PIP, mandatory option for Underinsured Motorist Coverage, Deemer statute (N.J.S. 17:28-1.4).
Others have followed, but probably the most notable, and most debated aspect of the New Jersey automobile liability insurance scheme, is the enactment of the “Verbal Threshold.” The Verbal Threshold was implemented in an attempt to eliminate litigation, and its associated costs. Notable is that the limitation on lawsuit is applicable to all policies, unless the purchaser affirmatively elects otherwise. Nine categories of injuries were enunciated by the Act, and recovery for damages, other than non-economic expenses, had to both fall within one of the nine categories and exceed an established dollar amount.
The original statute was amended in 1998, with the enactment of the Automobile Insurance Cost Reduction Act (AICRA). Among other changes to the automobile liability landscape, AICRA had a big effect on the Verbal Threshold (now officially referred to as the “Limitation on Lawsuit”). AICRA eliminated subjective injuries, and abbreviated the categories of injuries from nine to six. The broad terminology found in the original categories six through nine, were replaced by a new category six which reads, “…a permanent injury within a reasonable degree of medical probability…An injury shall be considered permanent when the body part or organ, or both, has not healed to function normally and will not heal to function normally with further medical treatment.” Additionally, the Act requires a “Permanency Certification” signed by a physician, setting forth that the plaintiff has sustained a qualifying injury, based on, and referring to, objective clinical evidence.
The Court’s holding in the seminal case of Oswin v. Shaw required evidence that the plaintiff’s injury fit within one of the categories described in the statute, but also that the plaintiff had suffered a serious life impact as a result of the injury. The serious life impact had been textual language in the original Verbal Threshold legislation, but was not included in the language of AICRA. With the Oswin Court’s holding, the plaintiff was now required to show a qualifying injury, that was both permanent in nature and had a significant life impact.
As to be expected, the underlying decision in Oswin was later challenged, but the Appellate Court upheld post-AICRA, two-pronged Oswin analysis in James v. Torres. This struck a real blow to both the plaintiff, and plaintiff’s bar.
On June 14, 2005, the Supreme Court of New Jersey ruled on two companion cases, DiProspero v. Penn and Serrano v. Serrano. The Court held that the plain language in N.J.S.A. 39:6A-8(a) does not contain a serious life impact standard, and therefore the Court rejected importing a “judicially-crafted serious impact test into AICRA’s threshold…” Thus, returning to the pre-Oswin and Torres standard, which requires a permanent qualifying injury.
On July 11, 2005, the Appellate Division, in two companion cases, Beltram v. Delima, and Pungitore v. Brown, determined that the Supreme Court’s recent decisions in DiProspero and Serrrano are to be given “pipeline retroactivity.” These decisions are likely to have a substantial impact to the defense bar, as well as the judicial system.
Acknowledging the “tsunami effect” such retroactivity would have on the administration of justice, the Court stated that “the consequences of any such judicial burden [is on the Legislature] as evidence it may wish to consider when pondering whether its manner of resolving the automobile insurance cost crisis achieved its desired goal.” As per the Court’s holding in Beltran, the pipeline retroactivity is now “applicable to all prejudgment matters pending in the trial courts and to those matters that are on direct appeal.”
Along with the increase in activity anticipated by the retroactivity noted above, the defense bar should be prepared that in the coming months there will be an increase in the number of new personal injury complaints filed on behalf of individuals involved in motor vehicle collisions. Given that the Court has removed the most subjective prong of the verbal threshold analysis, the plaintiff’s bar will be less fastidious about the cases that they will undertake to represent. The defense bar should also expect that the number of successful motions for summary judgment based upon the verbal threshold will decrease proportionately. |
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