On September 10, 2007, in response to the New Jersey Supreme Court's decision in Pinto v. New Jersey Manufacturers Insurance Company, New Jersey enacted legislation prohibiting step-down insurance clauses in situations involving uninsured or underinsured motorist benefits and commercial automobile insurance policies. Specifically, N.J.S.A. 17:28-1.1(f) provides that:

A policy that names a corporate or business entity as a named insured shall be deemed to provide the maximum uninsured or underinsured motorist coverage available under the policy to an individual employed by the corporate or business entity, regardless of whether the individual is an additional named insured under that policy or is a named insured or is covered under any other policy providing uninsured or underinsured motorist coverage.

Recently, the Appellate Division has decided a series of cases addressing the issue of whether N.J.S.A. 17:28-1.1(f) applies retroactively. Based on the Appellate Division’s recent rulings, the consensus is that N.J.S.A. 17:28-1.1(f) does not apply retroactively, although the reasoning behind this conclusion is varied.
On March 23, 2010, the Appellate Division decided DiGirolamo v. Geico General Insurance Company, Docket No. A-2962-08T32962-08T3. In DiGirolamo, Plaintiffs Daniel and Angela DiGirolamo appealed from an order enforcing a step-down clause relevant to uninsured motorist coverage in a policy of commercial automobile insurance issued by Mr. DiGirolamo’s employer. Plaintiff’s argued that N.J.S.A. 17:28-1.1(f) had a retroactive effect, prohibiting the step-down clause. The Appellate Division affirmed the lower court’s ruling, rationalizing that the case involved a policy that expired in 2006 and an accident which occurred in 2005.
Mr. DiGirolamo was injured in a hit and run accident on May 5, 2005, while driving a truck leased by his employer, and insured under a Commercial Automobile policy issued by Defendant Zurich American Insurance Company. In attempting to access uninsured motorist coverage under his employer’s policy, Mr. DiGirolamo encountered a step-down clause that limited coverage available to an insured, other than a named insured, with similar coverage under another policy as a named insured. Specifically, the step-down clause limited Mr. DiGirolamo to the highest applicable limit of insurance under any policy providing coverage to him as an individual named insured. Mr. DiGirolamo was a named insured under a policy issued by Defendant Geico General Insurance Company, which provided for a $25,000 UM/UIM limit. The trial judge determined that the limit applied and ordered both insurance company defendants to pay $12,500.
On appeal, the Appellate Division found that step-down clauses were clearly valid and enforceable prior to N.J.S.A. 17:28-1.1(f). Thus, the Appellate Division addressed the sole remaining issue: whether N.J.S.A. 17:28-1.1(f) retroactively applied to invalidate an insurance policy clause requiring greater coverage for an accident that occurred approximately two years prior to the change in law.
In reaching its decision, the Appellate Division reviewed the statement accompanying the bill leading to legislative reform, and reviewed two previous cases that reversed orders allowing N.J.S.A. 17:28-1.1(f) to have retroactive effect. Specifically, one Appellate Division panel found that the Legislature failed to express an intention to retroactively apply the Statute, while another found that the Legislature implicitly intended for retroactive application, but under the circumstances of that particular case, it was unfair and unjust to apply the law retroactively. The Appellate Division in DiGirolamo acknowledged the distinctive rationale behind the two earlier decisions, and, concurring with those conclusions, ultimately declined to give N.J.S.A. 17:28-1.1(f) retroactive effect, without resolving the underlying discrepancies.
The Appellate Division’s decision in DiGirolamo reaffirmed its earlier decision of October 5, 2009, in Selective Insurance Company of America v. Capoferri, Docket Number A-1591-08T21591-08T2. In Selective, Ms. Capoferri sought to relitigate her claim involving a step-down clause previously decided in 2005, based on the enactment of N.J.S.A. 17:28-1.1(f). In addition to the application of traditional claim preclusion principles, such as res judicata, the Appellate Division found that the provisions of the Statute are not retroactive.
These decisions reinforce the Appellate Division’s earlier rulings which declined to retroactively apply N.J.S.A. 17:28-1.1(f). Due to the fairly recent change in the law (September 2007), it is important to recognize the distinction between applying the revisions to current policies and recent accidents, but not to insurance policies expiring or accidents occurring prior to its enactment.

Lauren M. Adornetto, Esq.