The State of New Jersey enacted new legislation that raises the minimum amount of liability coverage required for automobile insurance policies effective as of January 1, 2023. The new law has generated significant discussion among insurance providers, policyholders, and legal practitioners. In this article, we will delve into the background of PIP coverage, the changes brought forth by the new legislation, and the potential consequences for insurance defense litigation.
Personal Injury Protection (PIP) coverage, commonly known as “no-fault” coverage, is a form of auto insurance that covers medical expenses, and in some instances, lost wages and other damages, regardless of who is at fault in an accident. PIP coverage is mandated in several states, including New Jersey, and is intended to expedite the claims process, reduce litigation, and ensure injured parties are promptly compensated for their losses.
Effective January 1, 2023, the new law raised the State’s minimum automobile insurance limits, for the first time since 1972, in two (2) phases: January 2023 and January 2026.
The new law increases the minimum amount of liability and uninsured/underinsured motorist coverage for bodily injury or death as to one person from $15,000.00 to $25,000.00 on insurance policies purchased or renewed as of January 1, 2023. N.J.S.A. § 17:28-1.1. For plans purchased or renewed on or after January 1, 2026, the law will further increase minimum liability coverage to $35,000.00. Id.
Also, effective January 1, 2023, insurance plans must raise minimum coverage from $30,000.00 to $50,000.00 for accidents involving more than one person resulting in either bodily injury or death. N.J.S.A. § 17:28-1.1. Thereafter, the law provides that plans issued or renewed on or after January 1, 2026, require minimum coverage in the amount of $70,000.00. Id.
The recently enacted legislation raises the minimum coverage levels and premiums for PIP policies. This change impacts both insurance providers and policyholders.
Advocates of the new law argue that increasing the minimum coverage levels and premiums will bolster financial stability within the insurance industry and ultimately benefit consumers by ensuring that insurers can continue to provide adequate coverage. However, opponents argue that the higher premiums may lead to financial strain for policyholders due to a likely rise in insurance premiums, particularly those with limited incomes or driving records that already result in elevated premium rates.
The new law’s effects on insurance defense litigation can be varied. Some potential implications include:
Increased Coverage Disputes: With higher PIP coverage levels and premiums, policyholders may be more inclined to dispute coverage decisions or seek to reduce their out-of-pocket expenses. This will likely yield an increase in coverage disputes.
Shift in Claimant Strategies: The rise in PIP coverage levels and premiums could lead claimants to explore alternative compensation routes, such as filing claims against other drivers or their insurers. This shift may result in an increase in third-party liability claims.
Greater Potential for Bad Faith Claims: Insurers that fail to adequately inform policyholders of the changes to their coverage levels or premium rates may face allegations of bad faith.
Monitoring Legislative and Regulatory Developments: As the new law is implemented, insurance defense practitioners must remain informed of any legal challenges, regulatory guidance, or additional legislative developments that could impact PIP coverage and litigation. This knowledge will be crucial in advising clients on best practices and developing effective defense strategies.
The recent legislation increasing minimum PIP coverage levels and premiums presents both challenges and opportunities for insurance defense. By understanding the potential implications of the new law on litigation and staying current on developments in the legal landscape, insurance defense attorneys can effectively represent their clients and navigate the evolving dynamics of PIP coverage disputes. Our firm is dedicated to assisting clients in navigating these changes and providing expert advice on insurance matters. If you have any questions about how this new law may affect you or your business, please do not hesitate to contact us.