N.J. bans business auto ‘step-downs’

New Jersey insurance agents praised Gov. Jon Corzine for signing into law a bill that bans so-called step-down provisions in businesses’ motor vehicle liability policies and frees agents from a having to advise something that their insurers will not allow.

The Professional Insurance Agents of New Jersey Inc. supported the bill, S-1666/A-3038, which reverses an effect of the New Jersey Supreme Court’s decision in Pinto v. New Jersey Manufacturers Insurance Co.

In the Pinto case, the court decided that step-down provisions, which allow insurers to reduce the coverage available to employees not individually named on their employer’s policy, are enforceable. Instead of receiving the uninsured and underinsured motorist limits stated on their employer’s policy, an employee who is injured receives the lesser coverage limits of his own personal auto policy.

The decision placed agents in an impossible situation, according to PIANJ President Jack Lynn. The ruling held that agents have a duty to tell employers that if they want to avoid imposition of the step-down provision, they have to name their employees on their auto policy. However, most insurance companies will not allow employers to include employees as named insureds.

“The impractical duty created by the Pinto decision had substantially increased the risk of litigation against insurance producers and placed them in an untenable position with their customers,” said Lynn.

The new law eliminates the need to name employees on a business auto policy and also protects employees who are injured in work-related accidents by offering the full protections afforded under their employer’s insurance policy.

Topics Auto Agencies Commercial Lines Business Insurance New Jersey