PIANJ Supports Bill To Prohibit Step-Down Provisions

Trenton, NJ - Professional Insurance Agents of New Jersey Inc. President Andrew Anderson, CIC, recently provided testimony to the New Jersey Assembly Financial Institutions and Insurance Committee in support of bill numbers S-1666/A-3038.

The bills would prohibit the use of step-down provisions in businesses' motor vehicle liability insurance policies and would reverse the effect of the Supreme Court of New Jersey's decision in Pinto v. New Jersey Manufacturers Insurance Co. In the case, the court decided that step-down provisions in business auto policies are enforceable. Step-down provisions allow insurance companies to reduce the coverage available to employees not individually named on their employer's business auto policy.

"New Jersey is the only state that uses these types of provisions to limit coverage," said Anderson. "Instead of receiving the uninsured and underinsured motorist limits stated on their employer's policy, an employee who is injured while occupying a business vehicle receives the lesser coverage limits of his own personal auto policy or that of a family member if he does not have his own policy."

The court also held that insurance producers have a duty to tell employers that if they want to avoid imposition of the step-down provision, they have to name their employees on their auto policy. However, most insurance companies will not allow employers to include employees as named insureds on a business auto policy.

"The Pinto decision was particularly troublesome for insurance producers because the court also imposed upon insurance agents and brokers in our state a new duty that is impossible to achieve," said Anderson. "This impractical duty has substantially increased the risk of litigation against insurance producers and placed them in an untenable position with their customers."

Additionally, the bills would protect employees who are injured in work-related accidents by offering the full protections afforded under their employer's insurance policy.

The Committee unanimously approved the bill on Thursday, May 10, 2007, and now it will be voted on by the New Jersey State Assembly. The bill already has passed in the Senate.

SOURCE: PIANJ