AIA, PIANJ, IIANJ Applaud N.J. Senate’s Rejection of “Verbal Threshold” Bill

December 8, 2003

Following a hearing, at which numerous industry representatives testified (See IJ Web site Dec.5), the New Jersey Senate on Friday, in a 5 to 1 vote, refused to send S-2533, the “verbal threshold” bill to the full Senate for consideration, effectively killing it for the time being.

The American Insurance Association, Professional Insurance Agents of New Jersey Inc. and the Independent Insurance Agents & Brokers of New Jersey all issued statements praising the Senate’s decision.

AIA Vice President and Assistant General Counsel David Snyder called it “a major win for New Jersey drivers.” He noted that had the measure been passed it would have inevitably “led to higher insurance costs, as well as counterproductive regulation. Such regulation would have thwarted the recent improvements the state has seen in its auto insurance system.”

The PIANJ explained that “The bill would have amended the limitation-on-lawsuit option for auto policies in New Jersey. Currently, policyholders who select the option may not sue for pain and suffering resulting from injuries they sustain in an automobile accident, unless their injury falls within one of six types of injuries specified in the law. One of the types of injuries for which a claimant may sue is a permanent injury that has a serious impact upon the claimant’s life. S-2533 would delete the requirement that such an injury would have to have ‘a serious impact to the life of the claimant.'”

Louis Beckerman, CIC, CPCU, PIANJ vice president and president of Colonia, N.J.-based Beckerman & Co., an independent insurance agency, commented, “This erosion of the verbal threshold would allow more lawsuits for minor injuries. It would increase claim expenses and result in dramatically higher insurance premiums for New Jersey drivers.”

Beckerman also noted that it would have eroded the Automobile Insurance Cost Reduction Act (AICRA), enacted by the Legislature in 1998, in an effort to limit costly personal injury lawsuits. “This Legislation would open the floodgates for litigation involving minor injuries, clogging the courts and driving up insurance rates,” he stated. “It also would undermine the recent progress made to stabilize the insurance marketplace.”

The IIANJ bulletin also stressed that the proposals would undermine the AICRA reforms, and said it had spent the last few months informing legislators of the fact. “The Limitation on Lawsuit Threshold
(also known as verbal threshold) should be a viable choice for consumers,” the bulletin stated. “Consumers who choose the option receive premium reductions on their personal automobile insurance policies. The bill, which would permit lawsuits regardless of the injury’s impact on the person’s life, would result in an increase in the number of lawsuits.”

Jeanne M. Heisler, IIANJ Government Affairs Representative and Legislative Agent, commented: “Agents work with consumers on a daily basis. Consumers are not asking for this change in the Limitation on Lawsuit Threshold as they already have the ability to choose which Threshold best meets their individual needs. Consumers who choose the Limitation on Lawsuit Threshold are seeking to control their automobile insurance costs and are willing to limit their right to sue to serious and significant injuries that meet the definition. Increasing the coverage under the Limitation on Lawsuit Threshold effectively reduces the Choice Option and increases the premium for all consumers who choose the Limitation on Lawsuit Threshold.”

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