NJ Supreme Court upholds ruling on deemer statute
In Felix v. Richards, No. A-27-18, __ N.J. __ (2020), the New Jersey Supreme Court addressed the viability of the so called “deemer statute” in the wake of the New Jersey Legislature creating two alternate forms of lesser insurance coverage that do not automatically include bodily injury (BI) coverage: the basic policy and the special policy.
In September 2013, Guerline Felix’s vehicle collided with Brian Richards’ vehicle in Newark, New Jersey. At the time, Richards was insured under a New Jersey automobile insurance policy issued by AAA Mid-Atlantic Insurance Company (AAA, which provided BI liability coverage, as well as uninsured and underinsured motorist (UM/UIM) coverage in the amount of $15,000 per person and $30,000 per accident. Felix was insured by GEICO under a policy written in Florida, which provided up to $10,000 in property liability and personal injury protection (PIP) benefits, but it did not provide any BI liability.
Felix sued Richards for personal injuries, and, in a separate action, Richards sued Felix and AAA for personal injuries. GEICO declined to defend Felix in the suit filed by Richards because its policy did not provide BI coverage. AAA then filed a third-party complaint against GEICO. AAA claimed that it had no obligation to provide UM or UIM coverage to Richards because, pursuant to the deemer statute, GEICO’s policy was automatically deemed to include $15,000/$30,000 in BI coverage and that payment would eliminate the claim for UM/UIM coverage by AAA.
The trial court determined that the deemer statute applied to GEICO’s policy and held that GEICO was “required to conform to the statutorily mandated minimum of $15,000 per person, $30,000 per accident in [BI] coverage” and, further, granted AAA’s summary judgment motion, concluding that because the deemer statute applied, AAA’s “UM/UIM coverage . . . is equal to the [BI] liability coverage under the reformed GEICO policy and, accordingly, plaintiff is not entitled to receive the UM/UIM [coverage] from AAA.”
The Appellate Division affirmed and rejected GEICO’s argument that, by enacting AICRA and, among other things, creating for New Jersey insureds the option to select a basic policy option with no BI coverage, the Legislature intended to modify the deemer statute “to require no BI coverage for automobiles to which the statute would otherwise apply.” Both Courts also rejected GEICO’s constitutional equal protection challenge.
Justice LaVecchia writing for the majority, affirmed explicitly finding that the New Jersey State Legislature “knew how to, and did elsewhere, make an explicit reference to basic policy standards” in other relevant statutes such as the Automobile Insurance Cost Reduction Act (AICRA). “It did not do so here for BI, and importing the basic policy’s requirement into the deemer statute would subvert the legislature’s carefully crafted insurance scheme.”
The majority also rejected GEICO’s argument that, by treating insurers writing in-state and out-of-state policies differently, the deemer statute violates the equal protection clause of the U.S. Constitution. Justice LaVecchia found that every insurer that writes in New Jersey accepts the law of New Jersey and are treated the same. “Through the deemer statute, in-state insurers writing policies in New Jersey and insurers that write in New Jersey and in other states must both offer insureds the minimum compulsory level of BI liability coverage of $15,000/$30,000 per person/per accident.”
The Court found that the fact that the Legislature gives all New Jersey resident insureds a choice to purchase a lesser amount of liability “does not alter the compulsory obligation of both categories of insurers to offer and provide the same default minimum level of coverage” and thus, treats the insurers uniformly.
The majority did note that through its application of our deemer statute in this case, the out-of-state insured is receiving more liability protection than would have if the accident occurred in Florida where the policy was written.
In his dissent, Justice Faustino Fernandez-Vina disagreed on both points, arguing that due to the 1998 amendment, the deemer statute can be satisfied by policies that do not carry BI coverage. The dissent found that the majority’s interpretation puts “New Jersey drivers in a better position if injured by an out-of-state driver with the out-of-state equivalent of a basic or special policy than they would be if they were injured by a New Jersey driver who had an actual basic or special policy.”
Justice Fernandez-Vina also found that the majority’s interpretation violates the Equal Protection Clause of the Constitution because “it requires out-of-state insurance companies who do business in New Jersey or are affiliated with those who do business in New Jersey to provide higher coverage limits for its out-of-state insureds than is required for in-state drivers.”
He wrote that, “New Jersey insureds are not required to have BI coverage themselves, and requiring out-of-state insurers to provide more coverage when their insureds enter the state distinguishes unconstitutionally between in-state and out-of-state drivers.”
- Insurance companies that write policies in New Jersey may have to provide higher coverage limits for their out-of-state insureds driving in New Jersey than is required for in-state drivers.
- The Majority in Felix noted that the possibility that its application of the deemer statute could be challenged on constitutional equal protections grounds by an insured.
- Currently, an out-of-state insured can receive more liability protection if an accident happens in New Jersey than would have if the accident occurred in the state where the policy was written, such as Florida.
- A New Jersey driver could have more coverage provided in injured by an out-of-state driver with the out-of-state equivalent of a basic or special policy than if they were injured by a New Jersey driver who had an actual basic or special policy.