Every NJ auto insurance policy allows the insured to choose between Limitation on Lawsuit Threshold hereinafter referred to as “Lawsuit Threshold” and No Limitation on Lawsuit Threshold, hereinafter referred to as “No Threshold”
I would estimate that over 90% of the auto policies in NJ are written with “Lawsuit Threshold”. If you don’t know what it is, don’t feel badly, you are not alone. But if you don’t know what it is you can be sure that you were assigned “Lawsuit Threshold” when you purchased your auto policy because under NJ law that is the option that every purchaser of auto insurance gets by default if they do not affirmatively choose to have “No Threshold”.
You might ask: Why is that the default option in NJ? The answer is that the insurance lobby is powerful in NJ and they persuaded the legislature to make Lawsuit Threshold the default choice. That is the option the insurance industry wants you to have (Lawsuit Threshold) because it limits your right to sue for personal injuries sustained in a motor vehicles accident. And, if your right to sue is limited, well…that’s better for the insurance companies…but definitely NOT better for you.
When you purchase an auto insurance policy No Threshold costs more than Lawsuit Threshold. However, most if not all insurance companies in NJ do not pay a commission to an insurance agent for selling a No Threshold policy, which is a bit more expensive. Why? Because they simply want to remove any financial incentive for the insurance agent to sell a “No Threshold” policy. They would prefer that everyone have “Lawsuit Threshold”. I am not aware of any other policy enhancement that costs more, for which a commission-based insurance agent cannot earn a higher commission. Think about it.
So, what is Lawsuit Threshold? Lawsuit Threshold is a limitation in an auto insurance policy which sets forth certain criteria that must be established before the owner of the policy and the family members of the policy owner’s household can pursue a claim for non-economic damages (pain and suffering, disability, permanency)
The injured person must meet at least one of the following criteria to be permitted to prevail in a claim for pain and suffering, disability and/or permanency (non-economic damages).
Here’s the criteria:
- Death;
- Dismemberment;
- Significant disfigurement;
- Displaced Fracture;
- Loss of a Fetus; or
- Permanent injury that can be shown by objective medical evidence.
Somone who sustained an injury to their neck or back with only strained/sprained muscles or ligaments would not satisfy the Lawsuit Threshold, although such an injury can be quite painful and may persist for an extended period of time. By contrast, somehow who suffered a herniated or bulging disc would likely satisfy the Lawsuit Threshold.
Previously in NJ to meet the Lawsuit Threshold an injured person could satisfy the Lawsuit Threshold if they had a fracture… say a broken nose or a fractured rib. Now, under the current law, only a displaced fracture satisfies the Lawsuit Threshold. A non-displaced fracture does not.
On some auto insurance policies if may be difficult to tell which Threshold you have. Sometimes the Threshold is not indicated in an obvious manner with your other coverage choices.
If you don’t know which Threshold you have, or if you know you have Limitation on Lawsuit Threshold you may wish to contact your insurance carrier to find out how much more your policy would cost if you modified the Threshold to “No Limitation on Lawsuit Threshold” which provides much better protection to you and your family. Then, if you can afford it, I’d advise you to modify your policy to have “No Limitation on Lawsuit Threshold” …the better coverage for you and your loved ones.
If you’ve already suffered an injury whether from an auto accident, a work injury, a slip and fall, of simply an injury that occurred at home, it is even more important to have “No Limitation on Lawsuit Threshold” because to satisfy the “Lawsuit Threshold” you will have to establish a new injury that can be shown by objective medical evidence or a clear worsening of your prior injury that can be shown by objective medical evidence (such as an MRI, CT Scan, Nerve Conduction Study or Xray) to satisfy the Lawsuit Threshold.
For example, if you have already suffered a herniated disc in your lower back from a work-related injury, and then a few years later you are in an auto accident and your back flares up. You will not have a case, unless there is objective evidence of a new injury or a worsening or your prior herniated disc.
For all of the foregoing reasons I always encourage my clients to purchase “No Limitation on Lawsuit Threshold” if they can afford to do so.
