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Out-Of-State Auto Policy Required To Provide Minimum Liability Limits For New Jersey Auto Accident

By on February 28, 2020 in Coverage with 0 Comments

In the Supreme Court case of Felix v. Richards, 2020 N.J. LEXIS 293 (Feb. 26, 2020), the New Jersey Supreme Court was asked to decide whether an insurer who sold policies in both New Jersey and out-of-state was entitled to rely on the lesser coverage provided under its Florida policy for a vehicle involved in a collision in New Jersey.  The question was whether the deemer statute, N.J.S.A. 17:28-1.4, required that the insurer’s policy provide the minimum bodily injury limits of $15,000 per person/$30,000 per accident as required under New Jersey’s standard policy.

The Felix case involved an automobile accident between Guerline Felix and Brian Richards.  Richards was insured under a New Jersey automobile insurance policy from AAA Mid-Atlantic Insurance Company (AAA).  The Richards’ policy provided bodily injury liability coverage, as well as uninsured and underinsured motorists (UM/UIM) coverage.  The Felix policy was written in Florida by GEICO.  The GEICO policy provided up to $10,000 in property liability and personal injury protection benefits but did not provide any bodily injury liability coverage.

Felix was injured in the accident and sued Richards for personal injuries.  Richards also sued Felix and AAA for personal injuries.  Thereafter, AAA filed a third-party complaint against GEICO, claiming that GEICO’s policy was automatically “deemed” to include $15,000/$30,000 in bodily injury coverage.  That payment would then eliminate the claim for UM/UIM coverage against AAA being asserted by Richards. 

The trial court judge determined that the deemer statute, N.J.S.A. 17:28-1.4, applied to GEICO’s policy, rejecting GEICO’s claim that the statute created a carve out for bodily injury coverage under the basic policy.  GEICO made a constitutional challenge as well, which the court also rejected.  The Appellate Division affirmed the trial court’s decision and the Supreme Court granted GEICO’s petition for certification.

Under New Jersey’s deemer statute, out-of-state motor vehicle insurance policies are “deemed” to guaranty the same $15,000 per person/$30,000 per accident bodily injury liability coverage, which is the required amount under New Jersey’s standard policy.  Since the enactment of the deemer statute, the Legislature created two alternate forms of lesser insurance coverage.  One is the basic policy created in 1998 as part of the Automobile Insurance Cost Reduction Act (AICRA), which carries no bodily injury coverage unless an optional $10,000 amount is selected. 

The deemer statute was enacted back in 1998.  Essentially, the Supreme Court found that the enactment of AICRA did not change the requirement under the deemer statute for an out-of-state insurer (who writes in NJ) to provide the minimum amount of bodily injury coverage under the standard policy.

The Supreme Court noted that automobile insurance is compulsory in New Jersey and that “all owners of automobiles registered or principally garaged in New Jersey are required to insure their motor vehicles for minimum amounts of liability insurance coverage and personal injury protection.”

Further, the Supreme Court noted that “insurers authorized to do business in New Jersey and writing policies for such vehicles must comply with compulsory insurance coverage limits.”  Under the standard policy, the Legislature set minimum compulsory coverages that an insurer must offer and provide insurance in New Jersey, which would be at least $15,000 per person/$30,000 per accident for liability coverage. 

The Supreme Court stated that no insurer is forced to write in New Jersey, but for the privilege of doing so, the insurer is bound by New Jersey law.  One of the demands placed on insurers that choose to write insurance in New Jersey concerns the policies written by such insurers for insureds in other states.   By the enactment of the deemer statute, New Jersey residents injured as a result of an accident with an out-of-state vehicle “will have recourse to policies of insurance that are at least as broad as the presumptive minimum limits of the New Jersey policy.”  Thus, the Supreme Court found that regardless of the actual terms of the out of state policy, those policies “have been deemed to guaranty the same $15,000 per person/$30,000 per accident that New Jersey policies have had to offer.” 

In reaching its decision, the Supreme Court looked at the history of the deemer statute and the history of the amendments.  It rejected GEICO’s argument that the AICRA amendments were intended to relieve insurers with out-of-state policies from the obligation to provide at least the minimum bodily injury liability limits for a New Jersey accident.  Although the Legislature now permits New Jersey insureds to accept something less in bodily injury coverage (namely zero bodily injury coverage), that “does not alter what remains a compulsory minimum BI liability coverage amounts that insurers writing in New Jersey must provide.”  The required compulsory insurance liability limits remain at $15,000/$30,000.            

Additionally, the Supreme Court rejected GEICO’s equal protection argument and found no violation of equal protection in the operation of the deemer statute as construed in this case.  Thus, the Supreme Court found that GEICO was required to provide liability coverage of $15,000/$30,000 policy limits for this accident.

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Betsy G. Ramos

About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 25 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

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