new jersey automobile insurance plan
OFFICE OF LEGISLATIVE RESEARCH
April 29, 1997 97-R-0597
You want a summary of New Jersey ‘ s automobile insurance choice plan. You want to know the plan ‘ s effect on rates, how long it has been in effect, and whether any state has adopted a similar plan. You also want to know if federal legislation is pending on this subject.
Senators McConnell, Dole, Moynihan, and Lieberman introduced S. 1860, The Auto Choice Reform Act of 1996, in the 104th Congress. The bill was the subject of a hearing but no further action on it was taken. No choice bill is currently pending. A copy of the 1996 bill is attached.
The New Jersey auto insurance reform plan consists of a four-choice plan that allows drivers to keep their current insurance at a savings or select among other new, less expensive policy options. The options allow people to have full access to the courts for any economic losses they suffer as victims in an accident, and at the same time enjoy reduced rates for agreeing to sue only for economic losses, and not for non-economic claims, such as pain and suffering.
The first option (The Economic Choice Policy) provides coverage for medical bills up to $250,000, lost wages, and other costs. Policyholders can sue and be sued for economic losses, but agree not to sue or be sued for pain and suffering.
The second option (The Scheduled Benefit Policy) provides the same basic coverage as option one. But, it adds benefits for pain and suffering claims based on a predetermined schedule to be paid by one ‘ s own policy, without the need for litigation.
The third option (The Serious Injury Policy) is similar to New Jersey ‘ s current No-Fault verbal threshold policy, which limits the ability to sue for pain and suffering to certain listed serious injuries. The new proposal differs from the current policy in that it imposes tighter limits on lawsuits, allowing them only for the most serious injuries.
The fourth option (The Lawsuit Recovery Policy) is similar to New Jersey ‘ s current zero threshold policy, which allows policyholders to sue for pain and suffering regardless of the severity of the injury.
The New Jersey plan retains two compulsory insurance components, medical coverage and liability for economic losses. Requiring medical coverage, regardless of fault, ensures that medical treatment for injuries is available and paid promptly, without the need to sue or shifting the cost of treatment to the healthcare system or to taxpayers. Requiring liability for economic losses ensures that drivers are held accountable when they cause injury or property damage to others.