 |
New Jersey Law Journal
| Vol. CXLIV, No. 5, Index 465 | April 29, 1996 |
Commentary
By Gerald Baker*
IT'S TIME TO REPEAL THE
NO FAULT ACT
The state of New Jersey adopted the No Fault Act in 1972. The center-piece of the law is the provision of a first-party package of economic benefits to all policyholders, resident family members, occupants of the insured vehicle and pedestrians struck by the insured vehicle. These benefits -- known as personal injury protection coverage -- include medical expenses, income continuation, essential services, death benefits and funeral expenses. PIP benefits are paid "without regard to negligence, liability or fault of any kind." Hence, the name "No Fault."
In return for this package of PIP benefits, the No Fault Act imposes a limit on the right of people injured in automobile accidents to recover noneconomic damages from the negligent driver. As of Jan. 1, 1989, the owner of an automobile has been required to elect the basic tort option (the verbal threshold) or the alternative tort option (no threshold). The verbal threshold provides that the owner or operator of an automobile (the defendant) shall be exempt from tort liability for noneconomic loss (pain and suffering) unless the plaintiff has suffered injuries that fall within one of the nine types set forth in the statute -- including a permanent or significant limitation of use of a body member or function.
The No Fault Act was adopted for four primary reasons: to reduce the cost of automobile insurance (the cost objective); to increase the ready availability of insurance coverage (the availability objective); to provide for the prompt and efficient payment of benefits for all accident victims (the separation objective); and to streamline judicial procedures in liability claims (the judicial objective). The statute has failed in all four of its objectives, and it is time to repeal the No Fault Act.
In the first place, the No Fault Act has not reduced the cost of automobile insurance. The annual survey of the National Association of Insurance Commissioners shows that New Jersey still has the highest average insurance costs in the country. The insurance commissioner has acknowledged that insurance coverage will always be expensive in New Jersey. We have the most people per square mile, the second-highest auto repair costs, the second- highest traffic density, the fifth-highest auto theft rate and the second- highest payout for PIP benefits.
Second, the act has not increased the ready availability of insurance coverage. In fact, New Jersey underwent a crisis in the 1980s because motor vehicle owners were unable to obtain insurance on the voluntary market. In response, the Legislature created the Joint Underwriting Association as a substitute for the Assigned Risk Plan. During the next 10 years, more than 50 percent of all motorists were forced into the JUA, and expensive assessments were necessary to save the automobile insurance system from more than $1 million in debts.
Third, the No Fault Act has not provided prompt and efficient payment of benefits for all accident victims. In fact, many claims for medical expenses have remained unpaid for years, and thousands of disputed claims have been presented to the American Arbitration Association for resolution.
Fourth, the act has not streamlined judicial procedures in liability claims. The verbal threshold has caused unpredictability and has spawned thousands of motions for summary judgment. In many cases, the carriers will not discuss settlement or accept awards under the automobile arbitration program until the court has ruled on the applicability of the verbal threshold.
Repeal Would Lead to Cost Reduction
The repeal of the No Fault Act would result in the elimination of PIP coverage and an immediate cost reduction of about 20 percent for every policyholder. In my opinion, the standard policy should include medical payments coverage of $15,000 -- an amount sufficient to cover 85 percent of all medical treatment. The excess medical bills can be submitted as part of the third-party liability claim, paid by existing health insurance plans or referred to a new catastrophic loss fund.
In addition, the repeal of the No Fault Act would result in the elimination of thousands of verbal threshold motions and PIP arbitrations. The return to a "pure tort" system would streamline the judicial system and permit the earlier settlement of claims.
Two bills that would effectuate the repeal of the no-fault system are pending before the Legislature -- A- 1274, sponsored by Speaker Jack Collins, R-Salem, and Assemblyman Jeffrey Moran, R-Ocean, and S-835, sponsored by Sen. Joseph Bubba, R-Passaic. I believe that these bills have strong bipartisan support in light of the co-sponsorship of a similar bill in 1995 by 39 Assembly members.
After 25 years, the No Fault Act has failed. The time for repeal is now.
*The author, a partner in the Hoboken law
firm of Baker, Pedersen & Robbins, is a certified trial
attorney and a member of the Board of Governors of the Association
of Trial Lawyers of America-New Jersey.
back to top
|
|
