by Michael Schwartz
November 17, 2012
Over the past 40 years, insurance premiums in New Jersey have on average been among the highest in the nation, leading to tense debate over cost-containment strategies within the State’s Legislature and Judiciary. Although various auto insurance statutes have been enacted since this time, the Court’s interpretation of the statutory language has been inconsistent and at times contradictory. This uncertainty has caused numerous insurance providers to flee the State altogether, leading to a less competitive insurance market which in turn is causing premiums to continue to skyrocket.
First, this commentary will discuss the evolution of the State’s auto insurance policy in light of the 1998 Automobile Insurance Cost Reduction Act (AICRA) and the cases before and after the statute’s enactment. Second, by focusing on the judicial interpretation in Diprospero v. Penn and insurance statistics of out-of-state schemes comparable to New Jersey’s system, it will be demonstrated that AICRA was properly interpreted to not include a “serious life impact” requirement for plaintiffs’ ability to pierce the verbal tort threshold. Finally, this commentary will offer a simple recommendation that may lead to more consistent statutory interpretations.
B. A History of New Jersey’s No-Fault Auto Insurance Scheme
New Jersey’s current no-fault auto insurance scheme was originally adopted in 1972 to provide accident victims with immediate payment of their medical expenses without regard to accident fault. Ever since the no-fault scheme’s enactment, New Jersey’s auto insurance industry has been a constant issue for the Legislature as well as the Judiciary. The State had been attempting to maintain low insurance premiums while upholding a no-fault insurance scheme for the insured. In an attempt to resolve this problem, the Legislature enacted the 1988 amendment to the no-fault insurance scheme, placing a restriction around certain tort victims’ right to sue.
Those victims who are insured are given two policy options; a standard or a basic policy. The standard policy gives plaintiffs an unrestricted right to sue for noneconomic damages in exchange for a higher premium. In contrast, the basic policy allows an injured motorist the right to sue only if he suffers serious or permanent injuries of a certain nature. Over the decades after the no-fault scheme was enacted, insurance providers had grave difficulty providing mandatory coverage to all New Jersey motorists regardless of fault while simultaneously keeping industry premiums within reach for all motorists. The obvious issues of these competing goals lead to New Jersey insurance premiums skyrocketing, causing numerous drivers to remain uninsured and many insurance providers to flee the State.
Following the 1988 amendment, the New Jersey Supreme Court handed down the first landmark case in 1993 to interpret the new insurance statute, Oswin v. Shaw, which remained the controlling case for 17 years. In affirming the Appellate Division’s grant of summary judgment, the Supreme Court held that the verbal threshold test required a plaintiff to prove not only objectively that the plaintiff’s injury fell within one of the nine statutory categories, but also subjectively that “the injury had a serious impact on the plaintiff and the plaintiff’s life.”
Following Oswin, appellate courts had serious difficulty grappling with the “serious life impact test” and its application to the endless factual scenarios. Without a bright line rule, the cost of insurance premiums continued to rise and led to more uncertainty in New Jersey’s auto insurance industry. In response, the Legislature enacted the Automobile Insurance Cost Reduction Act in 1998 (AICRA), which was eventually signed and passed by Governor Christine Todd Whitman.
C. Diprospero v. Penn (2005)
In 2005, the New Jersey Supreme Court in DiProspero v. Penn finally determined whether the Legislature intended the serious life impact test in Oswin to apply to AICRA’s limitation on lawsuit threshold. The plaintiff’s argument was simple, yet analytical. The plaintiff argued that while the Legislature knew of the Oswin standard, the Legislature did not express this additional requirement anywhere in the AICRA and therefore, by its exclusion, the Legislature intended to exclude the Oswin standard. In addition, the Plaintiff argued that Oswin was interpreting the 1988 verbal threshold, a statute using the verbal threshold to exclusively limit the number of lawsuits, while AICRA’s limitation on lawsuit threshold was but one part of a comprehensive statutory scheme aimed at lowering insurance rates. Various other gatekeepers were implemented in AICRA to complement the six category injury requirements, providing further evidence that a subjective serious life impact requirement was not intended to be included.
Ultimately, in looking at the legislative history using prominent statutory interpretation methods, the Court found that the Legislature did not intend to include a serious life impact requirement in AICRA. Using the principle of selective inclusion, “expressio unius est exclusio alterius”, the lack of an express serious life impact requirement demonstrated that the Legislature purposely chose to only require an objective requirement of demonstrating a serious or permanent injury to meet one of the statute’s six injury categories. The Court refused to “torture the legislative history in this case to create an ambiguity in an otherwise clear statute”.
D. A Nationwide Survey of No-Fault Insurance Schemes
Across the nation, a total of twelve states have statutes enacting no-fault insurance schemes. Of them, five states including New Jersey have enacted a “qualitative” or verbal threshold while the remaining six states have enacted a “quantitative” or monetary threshold. Some large states that have included the verbal threshold are: Michigan, Florida, New York and Pennsylvania.
In looking at the various states across the country who, like New Jersey, have some type of coverage option limiting an insured’s right to sue, it can be observed that most of their premiums are significantly lower than New Jersey’s, yet do not necessarily contain any subjective requirements that a party prove a serious life impact. Even when states do require some sort of subjective proof of an injury’s impact to a plaintiff’s life, there is significant evidence demonstrating both a lack of correlation between insurance premiums and the life impact requirement as well as a contrary effect on average insurance premium statistics.
E. Author Recommendation
One possible approach that could standardize AICRA’s threshold categories would be to require the medical community to assist the Legislature in enacting either a new statute or an amendment to AICRA. This change would explicitly list those injuries which are either serious or permanent enough to pierce the verbal threshold. For example, the statute could explicitly state that a patient diagnosed solely with bulging discs in regions of their neck or back does not pierce the threshold. Alternatively, a person diagnosed with a herniated disc would earn the right to sue. While the list of potential injuries might be quite extensive to compile, the time and effort spent creating this legislation would be far less cumbersome than the current costly and inconsistent system of judicial interpretation. In addition, a permanent injury category similar to AICRA’s six injury categories could be included to address only those injuries so rare that they had not been codified into the statute. However, this should not be used as a work-around for plaintiffs to pierce the threshold with non-permanent injuries.
Procedurally, the New Jersey Legislature could develop a special research committee to collect insurance statistics over the last 20 years to determine the rate of which these injuries occur from auto accidents and their relative costs on the insurance industry. With these findings, medical experts could assist in determining which injuries are severe enough to warrant noneconomic damage recovery. This process would establish a bright-line rule for the courts and through statistical analysis create an insurance system that could predict its average costs to control insurance premiums. In addition, insurance companies that originally fled the State would be drawn back to New Jersey and likely embrace a system of predictability and clarity, resulting in a competitive insurance market to benefit the general public.
Therefore, it can be demonstrated not only that the AICRA statute did not intend to include a subjective serious life impact requirement when an injured driver attempts to pierce the verbal threshold, but also that statistical evidence from other states shows a lack of correlation between this requirement and insurance premiums. As a result, other methods of amending the AICRA statute could be used which can lower the cost of insurance premiums to help provide auto insurance to all New Jersey drivers, the ultimate goal of a no-fault auto insurance scheme.