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Emmer v. Merin

Decided: June 7, 1989.


On appeal from a Final Decision of the Commissioner, New Jersey Department of Insurance.

Michels, Long and Muir, Jr. The opinion of the court was delivered by Muir, Jr., J.A.D.


[233 NJSuper Page 571] This appeal challenges the validity of regulations promulgated by the Commissioner of Insurance to implement recent

legislative revisions to New Jersey's no-fault automobile insurance law, L. 1988 c. 119. In particular, plaintiff challenges the model buyer's guide and coverage selection form the regulations authorize insurance companies to provide with all new and renewal policy applications. Essentially, plaintiff seeks to invalidate the regulations on grounds that the model forms countervail the language of the revised no-fault law and are confusing, misleading and improperly biased in the information required to be given to insurance consumers. We disagree and affirm the regulations as a valid exercise of the Commissioner's rule-making authority.


No-fault insurance came to New Jersey with the goal of compensating a larger class of citizens than the traditional tort-based system and doing so with greater efficiency and at a lower cost. See Iavicoli, No Fault and Comparative Negligence in New Jersey, at 20 (1973). As originally enacted in the New Jersey Automobile Reparation Reform Act, L. 1972, c. 70, however, it did so without providing an effective way to materially reduce the number of automobile-related personal injury cases litigated in the courts. As a result, insurance premiums rose dramatically.

The 1972 legislation provided that an insured could sue only when medical expenses exceeded a threshold amount of $200. L. 1972, c. 70, § 8. This limitation was clearly intended to counter the increased premium costs which would result from no-fault insurance. Iavicoli, supra, at 123-25. However, because premiums continued to rise, the Legislature enacted the New Jersey Automobile Insurance Freedom of Choice and Cost Containment Act of 1984, L. 1983, c. 362, which, among other things, introduced tort options as a means of reducing premiums. See Introductory Statement, Assembly Bill 3981, L. 1983, c. 362. The tort option provisions in that legislation required insurers to permit consumers to choose between a $200 or a $1500 tort limitation option. See L. 1983, c. 362, [233 NJSuper Page 573] § 14.1 (eff. Oct. 4, 1983). In this form, the options permitted an insured to sue only if medical expenses exceeded the dollar threshold selected, with a reduction in bodily injury liability premiums for those who selected the $1500 threshold option. See Introductory Statement, Assembly Bill 3981, L. 1983, c. 362. Costs continued to spiral, however, resulting in New Jersey's near lead position in the unenviable category of having the highest automobile insurance premiums in the country. This unenviable position led to consumer outrage and legislative efforts to enact legislation with significant premium reducing provisions. The legislative efforts encountered significant divisiveness on how to resolve the problem. Ultimately a compromise was reached.*fn1

On September 8, 1988, Governor Thomas Kean signed into law an act containing a series of amendments to the no-fault automobile insurance law entitled "An Act concerning private passenger automobile insurance and revising parts of statutory law" (Act), which reflected the compromise. That Act made significant changes to the existing law. The primary change required insurance consumers to elect between two types of coverage (tort options) for automobile-accident-related bodily injury. N.J.S.A. 39:6A-8. The election placed in the consumer's hands the decision to pay a lower premium for a policy which restricted recovery for non-economic loss (defined in the law as pain, suffering and inconvenience), N.J.S.A. 39:6A-8a, or a higher premium for a policy with unrestricted right of recovery for non-economic loss. N.J.S.A. 39:6A-8b. The Act described the lower premium option as the basic tort option. N.J.S.A. 39:6A-8b. That option has also been variously characterized as a verbal or lawsuit threshold. The higher premium option has been variously characterized as the zero dollar or no threshold option. For purposes of this opinion, we will utilize the term basic tort option to refer to the lower cost option, and no threshold option to refer to the higher cost option.

The Act prescribed the manner in which consumers would make their election between the two options and the manner in which they would be informed of the premium costs related to that election. It required consumers to make the election in writing by signing a coverage selection form, N.J.S.A. 39:6A-8.1a. The Act also provided that the form "shall state the

percentage difference in premium rates or dollar savings between the two tort options." Id. In another section, it stated "the coverage selection form shall identify the range of premium rate credit or dollar savings, or both, and shall provide such other information required by the Commissioner by regulation." N.J.S.A. 39:6A-23a. In the event the consumer failed to make an election, the basic tort option applied. N.J.S.A. 39:6A-8.1b. The tort options provisions applied to all new or renewal policies effective after January 1, 1989. N.J.S.A. 39:6A-8.1c.

The Act also proscribed the issuance of any new automobile insurance policy or renewals unless a buyer's guide and coverage selection form accompanied the application. N.J.S.A. 39:6A-23a and c. The Act mandated the buyer's guide "shall contain a brief description of all available policy coverages and benefit limits, and shall identify which coverages are mandatory and which are optional under State law, as well as all options offered by the insurer." N.J.S.A. 39:6A-23a.*fn2 It further directed, "The Commissioner of Insurance shall, within 45 days following the effective date of this act, promulgate standards for the written notice and buyers guide required to be provided." N.J.S.A. 39:6A-23c.

Initially, the Commissioner took two steps in the process of providing guidelines for the form and content of the buyer's guide and coverage selection form. First, on November 3, 1988, he issued an Interim Order so the insurance companies could provide consumers with the required buyer's guide and coverage selection form for policies that issued or renewed January 1, 1989 or shortly thereafter. The Interim Order required insurers to provide consumers with a buyer's guide and coverage selection form that at least met the content and form set out in the published proposed regulations. Then, on December 5, 1988, consonant with the requirements of the

Administrative Procedure Act, N.J.S.A. 52:14B-1 et seq., he published proposed regulations, and waited the required 30 days, to January 4, 1989, for public comment. 20 N.J.R. 2984.

Subsequently, the Commissioner modified the proposed regulations. He did so in part as the result of comments by members of the public (who included trial attorneys, counsel and representatives of insurance companies) and on his own initiative. Before the Commissioner could publish the modified regulations, plaintiff filed a notice of appeal under R. 2:2-3(a)(2) challenging the proposed regulations.*fn3

The pertinent aspects of those proposed regulations read as follows:

A. N.J.A.C. 11:3-15.6(m).

The text of the New Jersey Auto Insurance Buyers Guide [shall read as] follows:

Buying auto insurance can be both expensive and confusing. One important way to keep costs down is to read your policy and consider whether you are buying the coverages which are appropriate for you and your family.

This Buyer's Guide can help you do that. It explains the purpose of each type of coverage. It tells you what the law requires you to buy and what options are available to you.

It will help you fill out the Coverage Selection Form.

For more details, read your policy. The policy, not this Buyer's Guide, is the legal contract between you and your insurance company.


Your auto insurance policy is actually several kinds of policies, or coverages, rolled into one.

For each coverage, you are charged a separate price, which is known as the premium.

You pay only one price for auto insurance, but that price is determined by adding the premiums for all the coverages you buy.

Use your Coverage Selection Form to indicate what coverages you will buy in accordance with New Jersey law.

The coverages are:






Use these explanations to help you complete the Coverage ...

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