Buyer Beware When It Comes To Auto Insurance Coverage

By: Kevin S. Riechelson, Partner

For the past 20 years, I have represented clients in personal injury lawsuits in both Pennsylvania and New Jersey. One of the first questions I ask them is the type of auto insurance they have. The two most frequent answers I get are: “Why does it matter? The other person hit me” or “I have full coverage.” My experience has led me to conclude that people who buy automobile insurance normally do not know what they have purchased until it is too late.

In addressing the first answer, “Why does it matter? The other person hit me,” You need to know that the type of insurance you purchase can have an affect on the amount of coverage you have for medical bills, your right to make a claim for excess medical bills, your right to recover for non-economic damages (i.e. pain and suffering), and whether you can bring a claim if you are hit by an uninsured or under insured driver.

In Pennsylvania, the typical policy carrier has $5,000 of medical coverage. After this is exhausted, your health insurance can be used for excess medical bills. In addition, a claim for excess medical bills can be made against the person who caused the accident. However, if you have limited health insurance or would like to insure that you have NO out of pocket expenses in the event of an accident, you might inquire the cost of more coverage for medical bills on your auto policy. It may be less than you think and more economical than better health insurance!

In New Jersey, the majority of insurance policies carry $250,000 of medical coverage, but there is a co-pay and deductible of $1,200 on the first $5,000. You can opt for less coverage to save money, but the law is still unsettled as to whether a policyholder who purchases less than $250,000 of coverage can make a claim for their excess medical bills. It pays to ask your broker or insurance carrier to give you all your options and the costs involved. A few dollars more may give you quite a bit more coverage which would be very valuable in the event of an injury accident.

With regards to the right to sue for non-economic damages, Pennsylvania has what is known as “limited tort,” while New Jersey has the “verbal threshold.” What these terms mean in layman’s language is that each state has a “threshold of permanency” that the injured party’s injuries must exceed (which is not an easy standard to meet!) in order to make a claim for non-economic damages (pain & suffering). More often than not , insurance companies, agents or brokers will offer policy holders a cheaper alternative on their insurance policy without explaining to them the rights they are giving up. Application of limited tort (in Pa.) or the verbal threshold (in NJ) is not affected by which driver caused the accident. An injured driver who is not at fault for an accident may still be barred from recovering for non-economic damages because their injuries are not considered to be permanent. Selecting a “no limitation on lawsuit” option on your policy (also known as “no threshold” or “zero threshold” in NJ and “full tort” in PA) will allow you to file a lawsuit against a careless driver for any and all damages including pain & suffering regardless of whether or not your injuries meet the state’s standards of “permanency.”

Two addition things of which you should be aware: (1) your tort selection (as described in the paragraph above) can have an affect on your right to recover damages from your own insurance company if you are hit by an uninsured driver or an underinsured driver (someone who does not carry adequate coverage to cover your damages); (2) your tort selection also may bind other members of your household including your spouse and children even if they are not licensed drivers. Be sure to ask those questions of your agent or insurance provider!

As for the second answer “I have full coverage”, there is really no such thing. A person may have no threshold on their policy, and no limitation on the right to sue, but there is no such thing as “full coverage”.

When I have discussed these issues with friends and acquaintances, I often hear people say: “I got the limited right to sue option because I’m not the type of person who would sue unless something really bad happens.” However, there is no bright line test as to what qualifies as a “permanent injury.” Although the laws in PA and NJ do describe some types of injuries as exceptions to the lawsuit limitation, most times, the decision is made by a jury at the time of trial. In addition from hearing your doctors testify about your injuries, treatment and prognosis, they will hear testimony from a defense medical doctor who is hired by the insurance company to examine you and to provide an opinion. The jury then has to weigh the credibility of the experts to make their decision on permanency. Although you may continue to have pain and limitations from your injury, if a jury concludes your injury is not permanent, you cannot make a recovery.

The point of this article is to warn you as a consumer to educate yourself and know what it is you are buying. Weigh the added costs of better coverage against what rights you give up by having inferior coverage. If you would like to have a free personal consultation from a lawyer fully acquainted with the realities of NJ and PA auto insurance in the event of an accident, call Kamensky Cohen & Riechelson. We have lawyers ready and willing to discuss your options either over the phone or in person and either review your current policy or help you in the selection of a new policy. (609) 394-8585. There is no charge for this service.