Car insurance change advances, despite warnings of higher costs

TRENTON — A Senate committee advanced a bill that would make it easier for people to take their insurance companies to court after crashes with an uninsured or underinsured driver, despite warnings that it could lead to higher car insurance premiums in New Jersey.

The Senate Commerce Committee advanced the legislation, S1559, after changing it to remove provisions that would have entitled successful claimants to pre-judgment interest, attorney’s fees and litigation expenses. They would be entitled to actual damages awarded by a jury.

“It’s even more narrowly tailored than it was before, so it really is just a matter of fundamental fairness,” said Sen. Nicholas Scutari, D-Union.

Edward Capozzi, president of the New Jersey Association for Justice, a lawyers’ organization, said the proposal covers instances in which a person must turn to their own insurance company for losses that are not covered in accidents with a driver with no insurance or inadequate insurance. He said drivers regularly don’t receive their full amount of coverage.

“We’re only asking for what is fair here, and this is fair and it’s the right thing to do,” Capozzi said.

Business groups and insurance industry representatives said the bill would upend decades of standards for uninsured motorists and render limits on uninsured motorist coverage useless. They say minor or administrative errors would invite lawsuits making claims the insurers were acting in bad faith.

“We will be forced to choose between risking potentially significant litigation or settling for an artificially higher amount,” said Gary La Spisa, vice president at the Insurance Council of New Jersey. “And as average settlements for UM policy claims are driven up, that will mean higher premium costs for that coverage to every New Jerseyans who purchase this mandated coverage.”

Anthony Anastasio, president and chief counsel for the New Jersey Civil Justice Institute, said the state Supreme Court recognized the issue and addressed it through a rule change recommended by its civil practice committee.

“Enhanced penalties like those contemplated by this bill, such as recovery of full trial verdicts in excess of policy limits, could create unwarranted distortions in the insurance market that could result in higher insurance premiums for New Jersey citizens,” Anastasio said.

Tony Cotto, director of auto and underwriting policy for the National Association of Insurance Commissioners, said jury verdicts “often well exceed policy limits” in insurance policies and that the proposed change “goes against actuarial science and all principles of insurance regulation.”

“While this bill is being portrayed and marketed as pro-consumer, it would more appropriately be called pro-litigation,” Cotto said. “Its passage will ultimately have the effect of raising costs for all New Jersey drivers and increasing rather than decreasing the number of uninsured motorists on the road.”

Scutari said it is “really a ridiculous assertion” that litigation would increase under the bill.

“We’ve never had higher rates and worse coverage in the history of New Jersey. We are the last and the laughingstock of the United States of America when it comes to automobile coverage,” Scutari said.

“People are driving with virtually no coverage, and then they can’t even access that coverage because insurance companies will not even provide them that coverage because they have no requirement to act in good faith,” he said. “No requirement whatsoever.”

The bill advanced on party lines, with Democrats in favor and Republicans opposed.

Sen. Gerald Cardinale, R-Bergen, said he fears “a return to the bad old days when you couldn’t get insurance in New Jersey and if you could get it, it was beyond the ability of people to pay.”

“This bill could start to unravel some of those reforms that we saw back in 2003 or so,” said Sen. Anthony Bucco, R-Morris. “And we certainly don’t want to go back to a situation where premiums begin to skyrocket again.”