AIA Commends N.J. Court Decision in Caviglia Case

February 20, 2004

The American Insurance Association joined other groups in commending the New Jersey Supreme Court’s decision in Cavigilia v. Royal Tours of America upholding the state’s “no pay/no-play” statutory provision against various constitutional challenges. (See lead story above for further details)

David Snyder, AIA vice president and assistant general counsel noted that “‘no-pay/no-play’ provisions rightly limit the ability of people who were breaking the law when they were injured to receive compensation for those injuries through the auto insurance system. This is a big win for law-abiding drivers and insurance policyholders. Not only does this ruling ensure that people who play by the rules don’t have to pick up the tab for those who try to cheat the system, it also affirms a powerful tool to encourage compliance with NJ’s insurance laws.”

The AIA also praised the initiatives taken by Governor McGreevey, Insurance Commissioner Bakke and the legislature to reform N.J.’s auto insurance regulations. It indicated, however, that, although courts play a less well known role, they are nonetheless significant in determining the course of reform. The AIA said that “both today’s Caviglia decision and another recent decision of the New Jersey Supreme Court (Vassiliu v. Daimler Chrysler Corporation, et al) promote cost reduction, fairness, and financial stability in the insurance system.”

It noted that in the Vassiliu case the “Court rejected efforts to expand liability coverage by refusing to consider ‘wrongful death’ and ‘survivorship’ actions as separate actions under liability coverage, which would have triggered twice the coverage limits. Instead, the Court upheld the contractual language and found all actions arising out of the death of one person to be one action for purposes of triggering insurance coverage.”

“The first case (Caviglia) involved fundamental constitutional principles and is important nationally for that reason,” Snyder stated. “The second case (Vassiliu) involved important national issues of contractual language application that adopted the obvious meaning and intent of the language. Both decisions exhibited good sense, fairness and a keen focus on cost saving for the benefit of the public.”

He explained that the “cost of automobile insurance in New Jersey has been a major public policy issue in the state for more than a decade. The Caviglia decision is an eminently sensible application of constitutional principles and bodes well for similar ‘no-pay/no-play’ legislation in other states.”

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