On June 14, 2005 the New Jersey Supreme Court handed down two decisions which abolished the “serious life impact” requirement historically imposed on automobile plaintiffs bringing lawsuits under the “lawsuit threshold” of the Automobile Insurance Cost Reduction Act (AICRA) in DiProspero v. Penn, 2005 WL 1388402 and Serrano v. Serrano, 2005 1388483.
The decision has been hailed by plaintiffs’ attorneys as a return of New Jersey auto consumers’ rights. Conversely, these decisions are unwelcome news for auto insurers. The Supreme Court has now clearly abolished the precedent it had previously set in the seminal 1992 case of Oswin v. Shaw, 129 N.J. 290 (1992).
In 1984 and 1988 the legislature enacted a framework of laws known as the “New Jersey Automobile Insurance Freedom of Choice and Cost Containment Act.” N.J.S.A. 39:6A-8(a) et seq. The laws established “tort options” that insurance carriers had to offer to each insured on the auto polices they issued. Under the laws, an insured could choose an option that restricted his/her ability to recover, as a plaintiff, for non-economic damages. In return for the more restricted coverage, the insured would receive a substantial reduction in premium.
The option restricting coverage did not absolutely bar coverage but instead established a “threshold” that had to be met by a plaintiff in order to recover for non-economic damages. This became known as the “verbal threshold”. The legislature enumerated nine categories of injuries that, if proven, would allow a verbal threshold plaintiff to recover for non-economic injuries. Three of these categories gave rise to a great deal of litigation due to a lack of clarity in the statutory language. Those three categories (Type 6: permanent loss of a use of a body organ, member, function or system; Type 7: permanent consequential limitation of use of a body organ or member; and Type 8: significant limitation of use of a body function or system) encompass what are commonly referred to as “soft tissue injuries” such as herniated or bulging discs, torn tendons and the like.
The Oswin Court held that when a verbal threshold plaintiff alleged a type six, seven or eight injury, the plaintiff had to provide objective medical evidence that the injury was in fact of that type and had to provide evidence that the injury had a “serous life impact.” The Oswin Court concluded the serious life impact criteria was necessary to fulfill the objectives of the legislation.
The “serious life impact” criteria became a useful tool for defense counsel and motions for summary judgment became the standard approach in many soft injury cases. Plaintiffs’ attorneys argued that Oswin added a factor not provided in the statute and the court was “legislating.”
New Jersey overhauled the 1984-88 laws with the enactment of 1998's Automobile Insurance Cost Reduction Act (AICRA). While the “tort options” were kept, the number of categories was reduced from nine to six, with the new category six essentially subsuming the former six, seven and eight. Under AICRA a type six injury is “a permanent injury within a reasonable degree of medical probability, other than scarring or disfigurement.”
The enactment of AICRA had the effect of renewing the question about the “serious life impact” criteria imposed by the Oswin court because AICRA does not specifically require, as part of category six, that the permanent injury have a “serious life impact”.
In Serrano and DiProspero, the appellate courts were faced with the issue of whether or not a verbal or “lawsuit threshold” plaintiff still had to prove a serious life impact when alleging soft tissue injuries. This question ultimately found its way to the New Jersey Supreme Court. The result was the abolishment of the serious impact requirement.
The Supreme Court reasoned that the absence in AICRA of a serious life impact criteria, in light of Oswin’s long standing history, was proof that the legislature intended to exclude the requirement. The Court so found despite the fact that AICRA was enacted with the provision that it would not repeal otherwise applicable case law.
Whether the Supreme Court is legislating now or was doing so back in 1992, Serrano and DiProspero have dealt a significant blow to the ability of insurers to defend and limit exposures on soft tissue injuries.
By: David D. Blake, Esq. |
