In Felix v. Richards, (A-27-18/081799) (Decided February 26, 2020), the Supreme Court of New Jersey held that the creation of the basic automobile insurance policy option, without bodily injury liability coverage, did not modify the state’s deemer statute (N.J.S.A. 17:28-1.4). The divided court further rejected the Government Employee Insurance Company’s (GEICO) equal protection claim, holding that the obligation of in-state insurers to offer and provide that minimum is the same as the obligation imposed under the deemer statute’s second sentence on authorized insurers writing an out-of-state policy.
New Jersey’s Deemer Statute
New Jersey mandates that all vehicle owners insure their vehicles for minimum amounts of liability insurance coverage and personal injury protection. The state has also established a standard policy setting the minimal compulsory coverages that an insurer must offer and provide to insureds in New Jersey. Under the standard policy, the insurer must provide the insured with, in pertinent part, at least $15,000 per person/$30,000 per accident in bodily injury liability insurance coverage (BI).
New Jersey’s so-called “deemer” statute, N.J.S.A. 17:28- 1.4, ensures that New Jersey residents injured as a result of an accident with an out-of-state vehicle will have recourse to policies of insurance that are at least as broad as the presumptive minimal limits of a New Jersey insurance policy. In other words, regardless of the actual terms of out-of-state policies, those policies have been deemed to guarantee the same $15,000 per person/$30,000 per accident BI that New Jersey policies have had to offer.
Since the enactment of the deemer statute, the Legislature has created two alternate forms of lesser insurance coverage, both of which do not automatically include BI. The basic policy, established in 1998 as part of the Automobile Insurance Cost Reduction Act (AICRA), carries no BI unless an optional $10,000 amount is selected. The special policy, created in 2003, has an income eligibility requirement for participation and no optional BI. Eligible insureds may satisfy New Jersey’s insurance law requirements by purchasing basic or special policies. The question before the New Jersey Supreme Court in Felix v. Richards is whether the later enactment of the basic policy has fundamentally altered the requirements of the deemer statute and eliminated the need to provide any BI coverage.
Facts of Felix v. Richards
Guerline Felix’s vehicle collided with Brian Richards’ vehicle in New Jersey. Richards was insured under a New Jersey automobile insurance policy issued by AAA Mid-Atlantic Insurance Company (AAA). The policy provided BI liability coverage, as well as uninsured and underinsured motorist (UM/UIM) coverage. Felix was insured by GEICO under a policy written in Florida. That policy provided up to $10,000 in property liability and personal injury protection (PIP) benefits, but it did not provide any BI liability.
Felix sued Richards for personal injuries, and, in a separate action, Richards sued Felix and AAA for personal injuries. AAA then filed a third-party complaint against GEICO, claiming that GEICO’s policy was automatically deemed to include $15,000/$30,000 in BI coverage and that payment would eliminate the claim for UM/UIM coverage by AAA. The motion court determined that the deemer statute applied to GEICO’s policy, rejecting the argument that the statute creates a carve-out for BI coverage based upon the basic policy, as well as GEICO’s constitutional equal protection challenge under the Equal Protection Clause of the Fourteenth Amendment. The Appellate Division affirmed, and GEICO appealed.
Court’s Decision in Felix v. Richards
The New Jersey Supreme Court affirmed the Appellate Division’s decision. It held that the deemer statute does not incorporate by reference the basic policy’s BI level for insurers. Accordingly, the required compulsory insurance liability limits remain $15,000/$30,000.
“The plain language of the deemer statute does not support the interpretation being advanced; in fact, amendments to the deemer statute reveal a distinct legislative effort to avoid that result,” Justice Jaynee LaVecchia explained. “The Legislature knew how to, and did elsewhere, make an explicit reference to basic policy standards. It did not do so here for BI, and importing the basic policy’s requirement into the deemer statute would subvert the Legislature’s carefully crafted insurance scheme.”
The New Jersey Supreme Court next turned to GEICO’s equal protection challenge, concluding that it “falls flat.” In support, the court noted that New Jersey insureds are the ones who have a choice to purchase less than the presumptive minimum BI amount. Meanwhile, the obligation of in-state insurers to offer and provide that minimum is the same as the obligation imposed on authorized insurers writing an out-of-state policy.
“Every insurer that writes in New Jersey accepts the law of New Jersey. And all such insurers are treated equally under our law’s obligation to provide the minimal amount of BI coverage that our compulsory insurance law requires,” Justice LaVecchia wrote. “Through the deemer statute, in-state insurers writing policies in New Jersey and insurers that write in New Jersey and in other states must both offer insureds the minimum compulsory level of BI liability coverage of $15,000/$30,000 per person/per accident.” She further wrote:
The fact that the Legislature now gives New Jersey resident insureds a choice to purchase a lesser amount of liability coverage to drive lawfully on the roadways of this state does not alter the compulsory obligation of both categories of insurers to offer and provide the same default minimum level of coverage. The insurers are treated uniformly. From the perspective of an insurer, this appeal presents no viable equal protection violation caused by the deemer statute.
Dissent in Felix v. Richards Justice Fernandez-Vina authored a dissent, which was joined by Justice Solomon. She argued that requiring GEICO to reform its policy would constitute a violation of the Equal Protection Clause of the Fourteenth Amendment because New Jersey insureds are not required to have BI coverage themselves and requiring out-of-state insurers to provide more coverage when their insureds enter the state distinguishes unconstitutionally between in-state and out-of-state drivers.