Fast Car Loans?

Corrections or additions?

New Car Insurance — What’s Up?

This article by David R. Cohen, Esq. was published in U.S. 1 Newspaper


November 25, 1998.

As nearly all New Jersey drivers are likely aware,

the 1997 elections brought to light many problems with auto insurance

coverage and rates in the State of New Jersey. Unfortunately, the

1998 legislation that arose as a result contains many opportunities

for unsuspecting consumers to be greatly harmed by the choices they

make when purchasing insurance under the new law.

To understand the impact of the new laws, it is necessary to take

a step back into the history of New Jersey’s complex and ever evolving

automobile insurance law. The type of coverage commonly known as


fault" came into being in New Jersey in 1971 as a result of


conducted by a number of professors in Wisconsin. Unlike prior


the new no-fault law allowed drivers in an accident to obtain benefits

from their own insurance company without regard to negligence issues.

In other words, certain benefits could be obtained by the driver even

if he or she caused the accident. The original intent behind this

legislation was to allow drivers access to quality medical care before

potentially complicated liability issues were resolved. This system

of no-fault benefits also included lost wage benefits, funeral


essential service benefits, and a host of other coverages, which


led to the most comprehensive and complete automobile insurance


in the nation.

As might be expected, the gold standard of coverage

in New Jersey also came with a price. Since New Jersey drivers were

provided with the best form of no-fault coverage in the nation, it

was determined in 1985 that New Jersey residents were only permitted

to make claims for pain and suffering against other drivers if they

had incurred a certain amount of medical expense. This floor began

at $200 and eventually was adjusted to $2,000 in the later years of

what was called the monetary threshold. The intended concept was to

reduce the smaller claims, while still allowing more significantly

injured individuals to make claims against negligent drivers.

Put simply, that system did not work. People who were coming close

to reaching that monetary threshold were motivated to seek more


treatment to simply attain the right to make a claim. In 1989, the

legislature again attempted to refine the system. In that year,


Thomas Kean enacted what was commonly known as the verbal threshold

(a.k.a. lawsuit threshold). That system replaced the old monetary

threshold system with a series of words which, in effect, were


to describe various injuries that would satisfy the threshold.

At the time of its enactment, various critics of the new law predicted

that courts would become clogged with judges, attorneys and litigants

attempting to understand the nearly indecipherable language contained

within that law.

It was also predicted that injured parties who were required to prove

various forms of injury would seek out various diagnostic tests


to preserve their rights — thus actually increasing medical costs

on auto accident cases.

Finally, critics predicted that the verbal threshold would do nothing

but increase the cost of automobile insurance in New Jersey.


in 1998 we all know that each of these dire predictions came to


Nine years after the much touted lawsuit/verbal threshold was enacted,

New Jersey’s automobile insurance rates are the highest in the nation.

One factor which didn’t seem to gain much attention in political


during the 1997 Gubernatorial campaign or elsewhere was the simple

fact that New Jersey is the most densely populated state in the


The New Jersey Turnpike is literally the most highly traveled toll

road in the world. New Jersey is also a fairly affluent state, with

many people operating expensive automobiles on its roads. All of these

factors put together lead to an inevitably high incidence of motor

vehicle accidents involving very significant property damage. Much

of the debate ignored the fact that often 40-50% of the premium paid

by Now Jersey motorists covers damage to property and to vehicles,

rather than injuries to people. Instead, the insurance lobby and the

governor focused on the time tested tactic of attacking


At present, there is little in the new legislation to address the

problem of property damage premiums.

Nonetheless, in response to the rising political importance of


insurance and the skyrocketing rates, the legislature has again


to remedy the situation.

As was the case in 1989, it has been predicted by many that the new

legislation will not reduce insurance rates, and more importantly,

will severely diminish the rights of motorists in New Jersey. It is

disappointing that the new legislation attacks middle class and lower

class citizens of New Jersey, while preserving the rights of the


What is also disappointing is that the new legislation has been


without altering the required insurance law of New Jersey, which


that anyone caught driving without insurance is subject to a one year

loss of license and various other penalties. Thus, New Jersey


are compelled to spend their hard earned money on insurance which

arguably provides little or nothing in return for their premium


The 1998 law essentially provides for two types of automobile


policies. These are labeled as the "basic policy" and the

"standard policy." While the standard policy has many


to the insurance that New Jersey motorists have maintained in the

past, the basic policy robs the motorist of even the most basic of

coverages and is one which should be greatly scrutinized before it

is purchased.

The best way to understand the basic policy is to


what it does not cover. Most importantly, unless optional coverage

is separately purchased, the basic policy literally provides no


coverage. This means that the driver of a motor vehicle covered by

a basic policy will have absolutely no coverage if that person is

named as a defendant in a lawsuit for bodily injury or economic


Further, the insurance company has no obligation to defend such an

individual if he or she is named as a defendant. This could result

in significant judgments against these drivers and can permanently

damage one’s credit. A driver with no liability coverage can


financial devastation. Also important to understand is that the basic

policy provides only minimal medical coverage in the amount of


absent catastrophic injury. Unfortunately, this means that there will

be no coverage for the vast majority of those soft tissue injuries

which often require well in excess of $15,000 in medical expenses.

These policies also carry only $5,000 in property damage.

Thus, the driver of a car covered by the basic policy who causes any

other vehicle to sustain in excess of $5,000 in property damage would

be personally liable for the balance. Also important is the fact that

the basic policy does not provide uninsured or underinsured motorist

coverage. Thus, the basic policy does not protect the owner of the

vehicle or the owner’s family from the negligent actions of other

drivers — who may have little or no insurance. This can leave

families penniless after a catastrophic injury.

Particularly onerous with the basic policies is the fact that they

do not even allow the driver access to his or her own health insurance

company to obtain quality medical care in the case of an automobile

accident, but instead limit that person to very restrictive medical

protocols which were actually devised by an accounting firm, rather

than a medical association. No longer does New Jersey carry the gold

standard of no-fault coverage in the United States.

In the alternative, the standard policy affords New Jersey motorists

many (but not all) of the rights that they enjoyed prior to the 1998

legislation. This type of policy allows individuals to opt out of

having any type of threshold on their policy and further affords them

the opportunity to potentially obtain quality medical care-with a

policy maximum of $250,000 in coverage. Most importantly, it allows

drivers the opportunity to purchase uninsured and underinsured


protection in order to protect themselves and their families from

the predicted legions of drivers who will either be uninsured or who

will purchase the basic policy-which provides absolutely no liability

coverage in most instances.

At the time of this writing, much of the regulatory schemes


this new law is still being debated at the State House. However, it

is certainly clear at present that drivers should carefully examine

their options before making decisions under the new law. It is very

important for drivers to recognize the rights that they will give

up if they purchase the basic policy.

David R. Cohen, a shareholder in the law firm of Stark

and Stark, is a member of the Personal Injury Group. A member of the

New Jersey bar, he practices in the U.S. District Court, District

of New Jersey, and the U.S. Court of Appeals, Third Circuit. He a

member of the Mercer County Bar Association, the New Jersey State

Bar Association, the Association of Trial Lawyers of America, the

Association of Trial Lawyers of America — New Jersey, and is a

member of the Minority Concerns Committee of Mercer County Vicinage.

Additionally, he is alternate outside counsel for Princeton University

Cohen is a co-host and moderator of the show "In the Public


which airs on radio station WINIG AM1300 and on television station

WZBN, Channel 25.

After attending the University of Delaware, Cohen received a B.A.

in Economics and Philosophy from George Washington University in 1986.

He earned his J.D. from the Rutgers University School of Law-Camden

in 1989. Cohen lives with his wife in Princeton.

Stark & Stark provides free legal consultation to all consumers


automobile insurance law and the difficult choices surrounding the

purchase of automobile insurance. Call 609-896-9060.

Top Of Page
Fast Car Loans?

Try 15 Seconds

Could it be faster? Probably not. Get a car loan through

AAA Financial Services in "as little as 15 seconds," says

Richard Sherman, vice president of finance at AAA Central-West

Jersey. At the auto club’s national website


users can apply for an auto loan and get credit approval on their

home PCs through a software program provided by PNC Bank.

"This is one of the first sites on the Internet that gives


fast approval online," says Sherman. Most on-line applications

are E-mailed to a financial institution and then re-keyed into their

computer system. Instead, this service feeds user information directly

into a decision model.

If the loan is approved, users are notified on their computer screens.

A follow-up E-mail with the loan reference number usually follows

within the hour. Then the AAA members can elect to receive the loan

documents and check by overnight mail, or that very day they can go

to the AAA branch office in Hamilton and get a print-out of the loan

documents and a check. (An identity check accompanies the handing

over of the money.)

PNC’s system is protected by 128-bit encryption. Because so many AAA

members have sophisticated home computer systems, this system will

enable 90 percent of them to access and complete the application


going through a browser upgrade.

About 15 or 20 percent of the submitted applications are approved

within 15 seconds now. Sherman believes online approvals could be

as high as 70 percent by next year. Next up: AAA will team with PNC

to provide online ways to apply for credit cards and consumer loans.

Call 609-890-2816 for information.

— Barbara Fox

Corrections or additions?

This page is published by

— the web site for U.S. 1 Newspaper in Princeton, New Jersey.

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