January 1, 1900

By Lance S. Forbes

Over the last thirty years, New Jersey’s no-fault insurance system has been marked by continual legislative efforts to reduce the escalating costs of automobile insurance by restricting an accident victim’s ability to sue for non­economic or “pain and suffering” damages.

In 1972, the legislature enacted the “New Jersey Automobile Reparation Reform Act,” commonly referred to as the “No-Fault Act,” with the intention of containing the high costs of auto­mobile insurance. Unfortunately, the No-Fault Act did not achieve its goal. As a result, in 1984 the legislature passed the New Jersey Automobile Insurance Freedom of Choice and Cost Containment Act, which introduced two “tort options” that made available to an insured a $200 threshold or a new $1,500 monetary threshold (initially fixed at $1,500 and tied for later years to rise with the consumer price index). Under the new statute, an insured could choose between the two thresholds and receive a corresponding reduction in their premium rate; however, the insured was restricted from suing for pain and suffering unless his/her medical expenses exceeded either the $200 or $1,500 “threshold” as appropriate.

To further deal with rising insurance costs, eliminate insurance fraud, and ensure a fair rate of return for insurers while striking a balance between insurer’s rights and those of auto-PIP benefits are required by statute mobile victims, in 1998 the legislature again enacted a new group of statutes by passing the Automobile Insurance Cost Reduction Act (AICRA). Under the new multi-pronged approach of AICRA, an insured could select to be subject to a new “verbal threshold” and benefit from a lower premium. The “verbal threshold” limits an accident victim to suing for pain and suffering only if his/her injury falls into one of six statutorily-defined categories.

The History of the PIP Statute

PIP benefits are required by statute to be provided in every insurance policy issued to cover a vehicle registered in New Jersey. The legislation, originally enacted in 1972, had the goal of providing a prompt source of recovery for losses sustained by automobile accident victims. Prior to the enact­ment of the PIP legislation in 1972, a tort victim had to wait many years for his/her claims to be litigated in the court system while he/she continued to accrue potentially enormous medical bills and lost wages that could only be recovered as an element of damages in the eventual court action.

In response to this situation, the legislature passed the PIP statute with four goals in mind: (1) the prompt and efficient provision of benefits for all accident injury victims; (2) the reduction or stabilization of the prices charged for automobile insurance; (3) the ready availability of insurance coverage necessary to the provision of accident benefits; and (4) the stream­lining of the judicial procedures involved in third-party claims.

The Definition of “Immediate Family Member” Under The Tort Option

Under the Tort Option statute, the option selected applies to “the named insured and any immediate family member residing in the named insured’s household.” An “immediate family member” is defined as “the spouse of the named insured and any child of the named insured or spouse residing in the named insured’s household, who is not a named insured under another automobile insurance policy.” This is obviously a rather limited, circumscribed group of individuals entitled to insurance coverage.

The PIP statute states that benefits shall be made payable “to the named insured and members of his family residing in his household who sustain bodily injury as a result of an accident.” Unfortunately, the statute does not define what constitutes “members of” the named insured’s family.

Our courts have defined the term “family,” when used in the context of providing for essential services under the PIP statute, to include the injured insured’s spouse, children, and parents regardless of whether they resided with the insured or elsewhere. Moreover, the courts have determined that this category also includes members of the family residing in the household, including brothers, sisters, cousins, grandparents, and grandchildren. This expansive approach characterizes the definition of “family member” or “resident relative” under the PIP statute.

In fact, in keeping with the intended broad scope of the PIP statute, the courts have typically extended the definition of what constitutes “family” beyond those who stand in a legal or blood relationship to the named insured. Indeed, courts have found foster children eligible for PIP benefits on the basis that “the definition of family is not confined to those who stand in a legal or blood relationship;” therefore, the term includes “those who live within the domestic circle of, and are economically dependent on, the named insured.”

Based upon the histories of both legislative schemes and case law, it appears that New Jersey courts are willing to extend the definition of family member for the purposes of PIP benefits beyond the traditional legal and blood relationships that are included within the confines of the term “immediate family member” under the New Jersey Tort Option.

Hill Wallack LLP’s Trial & Insurance Practice Group stands ready and willing to assist any clients facing legal issues dealing with PIP/ No-Fault insurance matters, or the New Jersey Tort Option, in an efficient and professional manner.

Lance S. Forbes is an associate of Hill Wallack LLP where he is a member of the Litigation Division and Trial & Insurance Practice Group.