Ambulance at car crash scene. Photo: Lopolo/Shutterstock.com

An overhaul of auto insurance regulations that was recently signed into law creates "haves and have-nots" with regard to coverage for medical expenses, and could prompt new litigation over the law's effective date, an industry group said.

The new laws are seen by some as spurring a wave of litigation over which driver is at fault in auto accidents. But others welcomed the new laws for aiding lower-income motorists with recovery of unreimbursed medical costs from automobile injuries, while still containing costs by subjecting medical expenses in excess of a driver's PIP policy limits to the state's established medical fee schedules.

Gov. Phil Murphy signed into law on Aug. 15 two bills aimed at helping injured motorists recover medical costs. The bills were introduced in response to a March ruling from the state Supreme Court in Haines v. Taft, which said an injured party may not sue the other driver for unpaid medical bills in excess of their PIP coverage limits. The Supreme Court case focused attention on consumers who buy low-cost auto policies with PIP limits at low levels such as $15,000, instead of the standard $250,000.

Sponsors of the legislation said relief from Haines was needed because the limits upheld by the court have the effect of leaving people of modest means who suffer automobile injuries saddled with medical bills.

The first bill, S-2432, which overturns the Haines decision, allows injured crash victims to seek payment for medical expenses due to the negligent or reckless actions of another driver when those expenses exceed their PIP coverage. The second, S-3963, was enacted in response to concerns that the first bill would result in an increase in auto insurance rates. That bill permits the injured person to recover all unreimbursed medical expenses not covered by his or her own PIP limits. It also subjects unreimbursed medical expenses in excess of a driver's PIP limits to the automobile medical fee schedules.

The Insurance Council of New Jersey, a Trenton-based advocacy group for auto insurance companies, is concerned that S-2432 goes into effect immediately, while S-3963 had an Aug. 1 effective date.

The discrepancy "created a two-tiered class of claimants," said Christine O'Brien, president of the group.

"The ICNJ does not believe that it is this legislature's intent to create a two-tiered class of plaintiffs, where one group will have access to a jury's determination of the reasonableness of medical expenses and the other will have those expenses above the PIP limits subject to the Automobile Medical Fee Schedule," O'Brien said in an email.

She called the legislation "pro-consumer, pro-policy holder" but also expressed concern that the new laws would take away the incentive for drivers to buy policies with full PIP coverage.

The Haines ruling said there was no evidence the Legislature, when it allowed motorists to elect smaller amounts of medical coverage, intended to depart from the first-party PIP system. To rule otherwise would be a return to fault-based suits consisting solely of economic damage claims for medical expenses in excess of an elected, lesser level of PIP coverage, which is not what lawmakers intended, the court said. The court invited legislators, if they disagreed with that assessment, to make their intentions to "introduce fault-based suits into the no-fault medical reimbursement scheme more explicit."

The response of legislators to the Supreme Court's 3-2 ruling last March 26 was "nice and quick," said Nicholas Leonardis, a personal injury attorney with Stathis & Leonardis in Edison.

Before the Haines decision, some courts allowed policyholders with reduced PIP coverage to seek to recover for medical expenses in excess of that limit, Leonardis said. But after the court issued its decision, individuals in that situation were not allowed to bring such claims, he said. As a result, injured parties were left with medical bills they could not afford to pay, or sometimes encountered doctors who withhold treatment because of their inability to pay, Leonardis said. The new law "allows those people to have their day in court," Leonardis said. "It allows them to present provable expenses and get compensated."

But others see the new legislation as a rollback of the no-fault approach to insurance that was first enacted in 1972 as a way to reduce premiums and cut the volume of litigation relating to car crashes.

"The reason this is so significant is it's contrary to the way a no-fault automobile insurance system works. I think the great risks that we are facing, and time will tell, is insurance premiums could increase significantly, and we are certainly going to see more trials," said Michael Marone of McElroy, Deutsch, Mulvaney & Carpenter, who represented defendants Jacob Taft and Jayne Nishimura in the Haines case.

Because the new law allows claims against tortfeasors, some cases will land in court to resolve disputes over which driver is at fault, Marone said.

"The big takeaway from the legislation is that stand-alone claims for medical expenses are now permitted to be brought in court. And the additional new aspect of this legislation is that a party that brings a lawsuit for medical expenses, if that party prevails, the plaintiff's attorney who brings that case will be awarded reasonable attorney's fees, another expense being potentially brought back into the system," Marone said.

He said that means that a case in which a driver sues for $1,000 in medical expenses could lead to a $15,000 fee award to the plaintiff's lawyer.

Read more:

Supreme Court Bars Injured Motorists From Claiming Benefits Beyond PIP Limits