The two "step downs" in UM/UIM coverages available in New Jersey are:

1. Individuals seeking UM/UIM coverage under a "household “policy as "resident family members" of the named insured. But if claimant is also entitled to UM/UIM coverage as a named insured on a policy covering a vehicle they own, UM/UIM coverage is limited to coverage available under that policy even if the household UM/UIM limit is higher.

2. Individuals who are permissive occupants of the vehicle with the UM/UIM coverage being sought but if the claimant is entitled to UM/UIM coverage either as a named insured or as a resident family member under another policy, the limit of coverage available under either of those policies becomes the maximum limit even if the host vehicle UM/UIM limit is higher.

In both cases all applicable coverages are modified to "step down" to the UM/UIM claimants own individual choice.

  But you have to first determine  whether your client is entitled to UM/UIM Coverage under a policy before you can ascertain whether a stepdown is applicable.  You have to look to the No Fault Act, N.J.S.A 39:6A-1 et seq., to PIP to determine the meaning of the terms "named insured," "family member" and "resident in the household".  These definitions and supporting caselaw defining them are applied the same in PIP and UM/UIM in New Jersey and should be consulted with reference to similar questions under the UM/UIM provisions of the policy.

A step-down will not apply when the other policy is a "special policy". See N.J.S. 39:6A-3.3c as special policies are prohibited from including either UM or UIM coverage.

In Rivera v. McCray, 445 N.J. Super. 315, 319-323 (App. Div. 2016), The plaintiff' had a  "special policy" and was in her mother’s vehicle at the time of the motor vehicle accident.  She made a claim for UIM under her mother’s policy which NJM denied.  The Court held the step-down provision limiting UIM coverage did not apply because she was not a named insured under another policy providing similar coverage.

Step-down  provisions in motor vehicle liability policies issued to corporate or business entities to lower uninsured or underinsured motorist coverage for employees to the limits of coverage available to the employees under their personal policies are prohibited under N.J.S. 17:28-1.1(f).

Senator Nicohlas Scutari has sponsored a bill, Bill S2293 for Session 2024-2025, to require automobile insurance policies to provide uninsured and underinsured motorist coverage equal to policy liability limits of insured motorists.

Hopefully this Bill can get passed and put into law so Auto insurance carriers can stop selling their Automobile policies with $500K liability policy limits and then $25K UM/UIM limits.  This would drastically stop the effectiveness of the step-down language automobile carriers are inserting into their policies and the ensuing litigation that results thereafter. 

While not applicable to Step downs, I feel this is important. Please be careful when settling UM/UIM cases especially with UM/UIM releases when there are outstanding medical bills and health liens.

I have arbitrated 2 PIP cases now for other attorneys to have the PIP carrier reimburse their client’s healthcare liens.  In both cases the clients signed UIM releases agreeing to pay and fully satisfy out of their settlement proceeds all liens.  Two different PIP carriers and 2 different DRPs and they both held the client agreed to pay for it out of their settlement proceeds since of course the UIM carrier and the PIP carrier are one and the same.   

The argument we made in both cases is the carrier only settled the UIM/UM but nothing in relation to the PIP claims and the Releases did not explicitly mention PIP claims.  However, the description of the claims released was extremely broad. 

The releases explicitly indicated that Patient agreed to pay from the settlement proceeds for any and all liens, explicitly including those by insurers, for any medical expenses. 

One case had a Erisa Lien of over $60,000.  Sadly, the attorney had to go back and explain to his client what happened and probably his malpractice carrier as well.

Please add language to the UM/UIM release about having the right to arbitrate to have the health care lien reimbursed or any other medical expenses by the PIP carrier.
 

David Karbasian has been practicing for 32 years. His practice focuses primarily on Personal Injury and Personal Injury Protection (PIP) arbitration. He is on the Board of Governors for the New Jersey Association for Justice and Co-Chair of the PIP committee. He can be reached at dkarbasian@karbasianlaw.com or 856-600-HURT.