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Olkusz v. Brown

July 22, 2008


On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2771-06.

The opinion of the court was delivered by: Fuentes, J.A.D.



Argued April 15, 2008

Before Judges Coburn, Fuentes and Chambers.

A "step-down" clause is a contractual device inserted in an auto insurance policy. Here, it limits the UM/UIM coverage available to the employee of the insured business entity to the lower coverage amount provided in that employee's personal auto policy, when available. This practice was expressly sanctioned by the Supreme Court in Pinto v. New Jersey Manufacturers Insurance Co., 183 N.J. 405 (2005). In this appeal, we are required to determine whether an amendment to N.J.S.A. 17:28-1.1, adopted by the Legislature on September 10, 2007, reversing the Supreme Court's holding in Pinto, and prohibiting the use of step-down clauses, should be applied retroactively.

The question first arose in the Law Division in the context of a declaratory judgment action filed by Federal Insurance Company (Federal), the issuer of a business auto policy to defendant Hackensack University Medical Center. In denying Federal's motion for summary judgment, the trial court held that the Legislature intended to apply this amendment retroactively. By leave granted, we now reverse.

Absent a clear indication from the Legislature as to the effect of this statute, we hold that well-established principles of statutory interpretation require that we construe the statute's restriction on the common law right of freedom to contract prospectively. The statutory prohibition at issue cannot be viewed as "curative," because the holding in Pinto was not predicated on a misapprehension of established legislative policy.


At all times relevant to this case, plaintiff Susan Olkusz was employed by defendant Hackensack University Medical Center as a registered nurse. The Medical Center provided a shuttle service to its employees, transporting them from the area where they parked their cars to their job-specific sites within the medical complex. On April 13, 2004, plaintiff was injured when the shuttle she was riding in came to a sudden stop in order to avoid colliding with an unidentified vehicle that illegally proceeded through an intersection governed by a traffic stop sign.

Plaintiff received workers' compensation benefits in connection with this incident. She also filed a claim for UM benefits with defendant Atlantic Insurance Company, the carrier that had issued her personal auto insurance policy providing $100,000 in UM/UIM coverage. In addition to her personal policy, plaintiff was also entitled to UM benefits under her employer's business auto policy issued by Federal, which provided $1,000,000 in UM/UIM coverage. The Federal policy, however, contained a step-down clause contractually denying plaintiff access to her employer's UM coverage by limiting the maximum amount of UM benefits to the coverage limit contained in her personal auto policy.

On March 12, 2007, the trial court granted partial summary judgment in favor of Federal, holding that plaintiff was bound by the step-down provisions in her employer's business auto policy. The court relied on the Supreme Court's holding in Pinto, supra, which expressly upheld the enforceability of a step-down clause, noting that "[o]ur case law recognizes the legitimacy of step-down provisions even though they may result in differential treatment of similar plaintiffs based on the existence of other available insurance." 183 N.J. at 412.

On September 10, 2007, the Legislature adopted S-1666, amending N.J.S.A. 17:28-1.1 as follows:

(f) Notwithstanding the provisions of this section or any other law to the contrary, a motor vehicle liability policy or renewal of such policy of insurance, insuring against loss resulting from liability imposed by law for bodily injury or death, sustained by any person arising out of the ownership, maintenance or use of a motor vehicle, issued in this State to a corporate or business entity with respect to any motor vehicle registered or principally garaged in this State, shall not provide less uninsured or underinsured motorist coverage for an individual employed by the corporate or business entity than the coverage provided to the named insured under the policy. A policy that names a corporate or business entity as a named insured shall be deemed to provide the maximum uninsured or underinsured motorist coverage available under the policy to an individual employed by the ...

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