The Article listed below was written by Anthony Murgatroyd and published in The Legal Times, for the Hunterdon County Bar Association and its members. Following its publication, Anthony Murgatroyd also spoke before the Hunterdon County Bar on handling Automobile injury cases under the new laws.


By Anthony J. Murgatroyd, Esq.

On May 18, 1998, Governor Whitman signed the Automobile Insurance Cost Reduction Act. In response, the Commissioner of Insurance created rules and regulations designed to carry out the legislation. The impact of this response is what will be of great concern to attorneys who handle automobile injury cases. The three main areas of concern are as follows: (1) The new "basic" automobile policy; (2) Changes to the state's personal injury protection (PIP) benefits; and (3) The new Limitation on Lawsuit Threshold. This article will discuss all three areas.

I. The Basic Policy:

The basic policy was designed to reach individuals suffering cash flow problems and who are currently uninsured, however the addition of collision and comprehensive coverage make it dangerously appealing to the average consumer. The basic policy does not provide insurance coverage if the policy holder injures someone else, unless the policyholder elects the option to purchase $10,000.00 in bodily injury coverage. For the policyholder with no bodily injury option, any auto injury claim against them will be their financial burden, and they will be required to hire their own attorney to represent them. What's worse is that the basic policy holder does not have Uninsured (UM), or Underinsured (UIM) motorist coverage. Therefore, if a basic policyholder does not have success in collecting on a personal judgment against another basic policy holder, which will most often be the case, there is no other avenue of recovery. As you can see, careful review of the client's available coverage is important. For the basic policy holder injured in an automobile accident, payment plans and personal judgments, may be the only avenue for recovery.

Other important considerations include the following: The basic policy has a $ 15,000.00 PIP limit, and does not allow other PIP benefits such as income continuation, death, and funeral benefits. There is also a limit of $ 5,000.00, for property damage.

II. New PIP Rules:

Among the new regulations are a list of medical treatments which insurers will no longer pay for because the treatments have been "determined to yield no data of any significant value in the development, evaluation, and implementation ... of treatment for injuries sustained in motor vehicle accidents". Some of the treatments, or procedures, which insurance companies will no longer have to pay for are reflexology, surface electromyography (EMGs), iridology, surrogate arm mentoring, and brain mapping.

Other tests or procedures, such as needle electromyography (EMG), electroencephalograms, and magnetic resonance imaging (MRI s) among others, will be paid but only if they are deemed "medically necessary and consistent with clinically supported findings." The regulations also limit how often tests could be performed and detail what kind of injuries they could be used to diagnose. They also detail the frequency and duration of treatment for those injuries. This is accomplished through the use of flow charts which establish so-called "care paths". At the present time, the care paths only set forth parameters for treatment of certain neck and back injuries, however the proposal sets forth that "additional care paths for other diagnosed injuries will be added by amendments to these rules as they are developed."

In addition, insurers are now allowed to establish programs for pre-certification of medical care for the treatment of automobile accident injuries. With the exception of the first 10 days following an accident, if the injured person fails to obtain advance approval as required, they are subject to a 50% co-payment.

In addition, insurers are now allowed to establish programs for pre-certification of medical care for the treatment of accident injuries. With the exception of the first 10 days following an accident, if the injured person fails to provide advance notice as required, they are subject to a 50% co-payment.

It is important to note that, at this time, the Department of Banking and Insurance guidelines permit pre-certification of almost all non-emergency treatment outside the care paths. In other words, almost all non-spinal treatment is potentially within the control of the insurance carriers. As to care path treatment, pre-certification is still required for diagnostic tests, and non-emergency surgery.

The Commissioner has permitted individualized policies covering different rights and procedures to obtain benefits. It remains to be seen whether the provisions will comply with the enabling statutes. Policy provisions which have emerged at this time, include, among other things:

(1) A 30 % deductible on all diagnostic testing, which is waived when the patient agrees to utilize the carrier's network;

(2) Requirements that all PIP disputes first are given to Alternative Dispute Resolution before utilizing the Courts. (It is this author's opinion that this requirement is subject to legal challenge since the enabling legislation still permits the option to choose civil litigation or binding arbitration); and

(3) Significant limitations on granting assignments of PIP benefit payments to physicians, which virtually eliminate the viability of assignment; and

(4) Requirements that arbitration of UM/UIM cases cannot take place without mutual agreement by the claimant and carrier. Even if mutually agreed, one carrier requires that the UM/UIM arbitration be before the American Arbitration Association.

Finally, dispute resolution or arbitration of PIP claims has also undergone significant change. Unlike the past where claims were simply resolved before an arbitrator, the regulations provide that the dispute resolution professional "shall" at the request of either party to a dispute, refer the matter to a medical review organization panel (MRO) for a determination. The MRO is to be made up of undisclosed doctors, who will review the medical records, and whose decision is presumed to be correct.

III. New Limitation on Lawsuit Threshold:

Designed to reduce the cost of auto insurance, in exchange for certain limitations on the right to sue for pain and suffering, the new Limitation on Lawsuit threshold has been changed to eliminate the two previous non-permanent exceptions - the "significant limitation of use of a bodily function" exception, and the "90 day impairment" exception. In addition, where in the past any fracture would have qualified to pierce the threshold, now only a "displaced" fracture qualifies.

In an effort to simulate recent malpractice procedures, the plaintiff will now be required to serve the defendant with a medical certification documenting the presence of a permanent injury, as defined in the statute. The certification must be submitted with 60 days from the time that the Answer is filed, but the Court may grant an additional 60 days to file the certification if good cause is shown. The certification must be based on objective clinical evidence, which may include testing, except that the testing must be done in accordance with the medical protocols. This means that testing performed without, or contrary to, pre-certification approval, could subject the certification to exclusion, particularly if the certifying doctor relies on test results in reaching an opinion on permanency.


Because each policy has different provisions, particularly with respect to pre-certification and UM/UIM, it is absolutely necessary that lawyers be aware of the specific provisions of the policy covering their client. Lawyers must also make certain that treating physicians understand the new laws, not only to avoid penalty, but also to make certain that their client's proofs are not limited under the Limitation on Lawsuit threshold.

If there is a wrongful denial of PIP benefits, attorneys should weigh the option of filing suit, as opposed to arbitration. In certain situations, a lawsuit may be preferable. Finally, given the new hurdles of the Limitation on Lawsuit threshold, both substantive and procedural, the attorney accepting the case would be wise to obtain the required certification in advance of filing suit. Clients should be advised of the statutory changes and the rights they may be giving up by choosing the Limitation on Lawsuit threshold or the basic policy in exchange for a reduction in their insurance premium. Due to changes in the new PIP laws, it may for the first time, be advisable to point out to clients their ability (subject to certain exceptions) to choose their own private health insurer to cover automobile related injuries, so that clients can compare the pros and cons of this option.

The new laws took effect on March 22, 1999, and apply to all polices issued on or after that date.