Actuary Calculates High Cost of N.J. ‘Serious Impact’ Auto Ruling

A New Jersey Supreme Court decision handed down June 14 that eliminates a “serious impact” test under the auto insurance verbal threshold will dramatically increase automobile insurance losses and rates in that state, according to an actuarial firm that has studied the matter.

According to an analysis by Pinnacle Actuarial Resources that was published last fall, the increases in bodily injury and UM/UIM costs for drivers selecting the verbal no fault threshold option are between 34 percent and 57 percent, or approximately $98 to $163 annually per car.

The decision, Octavio Serrano v. Jacqueline Serrano, et al. (A-99-03) and its companion case – DiProspero v. Penn, et al., (A-66-03) concluded that the New Jersey Auto Cost Reduction Act does not imply a “serious impact” requirement for those seeking damages for non-economic losses. As a result, claimants maintain the opportunity to seek recompense for losses such as pain and suffering.

When N.J.S.A. 36:6A-8(a) – the Automobile Insurance Cost Reduction Act (AICRA)– was implemented in New Jersey, its language did not specifically include a “serious impact on one’s life standard,” which had previously been applied as a matter of case law as determined in Oswin v. Shaw. However, the courts continued to apply this standard in conjunction with the requirements set forth in AICRA.

The Supreme Court in essence ruled that the language, as enumerated in AICRA, is sufficient and that this additional requirement should not have been imposed by the courts since the legislature did not specifically include it.

The Pinnacle analysis, conducted on behalf of the Save Choices for New Jersey Drivers group, was published in the NAIC’s Fall 2004 Journal of Insurance Regulation. The survey was based on claims closed during the period May 1 through June 30, 2003.