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NJ Law Review Update

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NJ Law Review Update

Statute Regulating Step-Down Provisions Does Not Apply Retroactively

In Pinto v. New Jersey Manufacturers Insurance Co., the New Jersey Supreme Court enforced a “step-down” provision in a commercial motor vehicle liability policy. The “step-down” provision capped UM/UIM motorist coverage provided to an injured employee through the employer’s policy to the limits available through the employee’s personal automobile policy. However, in September 2007, the New Jersey legislature signed into law N.J.S.A. 17:28-1.1(f). This new statute prohibited corporate motor vehicle insurance policies to use “step-down” provisions to provide less UM/UIM coverage to employees than is provided to the named insureds under the commercial auto policy. The legislature specified the statute was effective immediately.

James v. New Jersey Manufacturers Insurance Co. addressed the issue of whether N.J.S.A. 17:28-1.1(f) applied retroactively to accidents which occurred prior to September 2007. In James, the plaintiff was injured in an accident prior to the statute’s enactment. The trial court granted NJM’s motion for summary judgment on that grounds that N.J.S.A. 17:28-1.1(f) did not retroactively apply to motor vehicle insurance policies in existence at the time of enactment. On appeal, the Appellate Division reversed the trial court’s decision ruling that N.J.S.A. 17:28-1.1(f) rendered any “step-down” provisions unenforceable, thereby amending all motor vehicle insurance policies in effect at the time of signing. The Appellate Division held that all insurance policies were deemed unenforceable regardless of when the accident actually occurred.

On appeal, the New Jersey Supreme Court reversed the Appellate Division ruling that N.J.S.A. 17:28-1.1(f) did not apply retroactively. The Supreme Court stated that the statute was void of any language indicating the statute was intended to apply retroactively. The Court further held that the statute did not entirely prohibit “step-down” provisions, rather it directs how employees are to be treated if a “step-down” provision is applicable. Thus, only employees seeking coverage for accidents occurring after the effective date would be covered under the reformed principles.

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