Representatives of PIANJ gave testimony before the New Jersey state Assembly Financial Institutions and Insurance Committee on Monday in support of legislation (A-1761) that would prohibit the use of most “step-down” provisions in personal automobile insurance policies.
Step-down provisions can be found in some personal auto policies. They act to reduce the amount of coverage to which an insured would be entitled to recover in the event of an accident. Step-downs reduce the amount of coverage—from what the insured purchased, and what is listed on the declaration page—to the state minimum limits. Under the terms of the legislation, insurers would be prohibited from utilizing step-downs against a named insured, resident relative or listed driver on a policy.
Practically speaking, this would prohibit the use of intra-family step-downs, which can impact insureds who are injured while riding as passengers in their own vehicles. The bill also would prohibit the use of uninsured/underinsured motorist coverage step-downs, which can reduce the amount of UM/UIM coverage is available to a listed driver on the policy. Step downs still would be permitted in limited situations, most commonly when a vehicle is being used by a permissive user. However, in those situations, the legislation requires clear disclosure of the step down on the declarations page.
Testifying on behalf of PIANJ were Director Casey Yager, CIC, CRM, vice-chair of the PIANJ Legislative & Regulatory Committee, Bradford J. Lachut, Esq, director of Government & Industry Affairs, and Carol Katz of Katz Government Affairs; PIANJ’s legislative liaison. The group explained step downs and how they worked as well as answered questions from the committee members.
Following PIANJ’s testimony, A-1761 was unanimously passed by the Assembly Financial Institutions and Insurance Committee.
A history of PIANJ action
PIANJ has advocated for the elimination of these types of provisions for a long time. In 2007, the association was successful in getting step-down provisions banned in commercial auto policies. The change was a response to a 2005 New Jersey Supreme Court decision that, in part, imposed a duty on producers to inform policyholders about the existence of step-down provisions in their policies.
Even though the case dealt with commercial auto policies, there is a serious question as to whether the duty imposed extends to personal automobile, step-down provisions, too.
You can monitor the status of this and other bills with the PIAdvocacy bill tracker.
Bradford J. Lachut, Esq.
Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.