S1666 amends N.J.S.A. 17:28-1.1 to add subsection (f) which states as follows:

The threshold question this court must decide is whether Pinto or S1666 governs Plaintiff’s claim. In so doing: “[w]hen considering whether a statute should be applied prospectively or retroactively, our quest is to ascertain the intention of the Legislature.” State, Dep't of Envtl. Protection v. Ventron Corp., 94 N.J. 473, 498 (1983). Our courts have recognized that fundamental fairness suggests that prospective application of statues be favored. Gibbons v. Gibbons, 86 N.J. 515, 522 (1981). Nonetheless, this ‘rule of thumb’ is not dispositive of the issue. The rule favoring prospective application, however, is one only of statutory interpretation. Its purpose is to aid the court in the search for legislative intent. Rothman v. Rothman, 65 N.J. 219, 224 (1974). Courts should not apply the rule mechanistically. Id.Rather, where supervening considerations clearly compel a contrary determination, this, like all other rules of statutory construction, must give way. Twiss v. State, 124 N.J. 461, 467 (N.J. 1991).

In order to apply retroactive application to S1666 under the first part of the Twiss test, the court must find that one of three exceptions is met: (1) legislature has expressed that the statute be applied retroactively; (2) the statute is ameliorative or curative; or (3) there is an absence of clear expression of legislative intent of prospective application and equitable considerations, such as expectations of the parties, warrant retroactive application. Gibbons v. Gibbons, 86 N.J. 515, 523 (N.J. 1981).

Retroactive application of the statute to pending UM and UIM cases is also necessary to achieve the three remedial purposes of S1666: prohibition, reformation, and reversal. S1666 prohibits the use of UM and UIM step-down clauses in employer motor vehicle policies, reforms all such employer policies to eliminate such step-down clauses, and declares a reversal of the common law established by the New Jersey Supreme Court in Pinto. “An amendment which falls within the curative exception can be retroactively applied consistent with the general rule of prospectivity because its purpose is to remedy a perceived imperfection in or misapplication of a statute and not to alter the intended scope or purposes of the original act.” Kendall v. Snedeker, 219 N.J. Super. 283, 287 (App. Div. 1987). Based upon the above reasons, S1666 falls within the curative exception and is a supervening consideration that compels this court to apply retroactive application to S1666 since it meets the first prong of the Twiss test.

Since this court has found that Olkusz and Atlantic have met their burden of proving the first part of the Twiss test, the second question this court must resolve is whether retroactive application is an unconstitutional interference with ‘vested rights’ or will result in a ‘manifest injustice.’ Id. All statutes with retroactive elements are subject to scrutiny under the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution and the parallel provision of the New Jersey Constitution. U.S. Const. amend. XIV, § 1; N.J. Const. art. 1, P 1. “The essence of this inquiry is whether the affected party relied, to his or her prejudice, on the law that is now to be changed as a result of the retroactive application of the statute, and whether the consequences of this reliance are so deleterious and irrevocable that it would be unfair to apply the statute retroactively.” Gibbons, 86 N.J. at 523-24. “Retroactive civil litigation, however, generally does not violate due process unless it results in ‘particularly harsh and oppressive’ consequences.” Twiss, 124 N.J. at 469-70. The test to determine whether applying S1666 retroactively will survive a due process challenge is if the legislation “is supported by a legitimate legislative purpose furthered by rational means.” Nobrega v. Edison Glen Assoc., 167 N.J. 520, 543 (N.J. 2001). Our Supreme Court has recognized the use of this rational basis standard: “in place of the “vested rights” inquiry”. Id. at 544. The burden rests on Defendant, Federal, to establish that the legislature “has acted in an arbitrary and irrational way.” Id. In this instance, Federal argues that insurers, in reliance on the Pinto decision, have negotiated policies which include step-down provisions. These provisions were factored into the premium paid and risk bargained for by the insured and insurer.

In regard to the manifest injustice prong of the retroactivity inquiry, the test “does not flow from constitutional requirements, but instead is based on equitable concerns”. Id. at 545 (N.J. 2001). The manifest injustice analysis requires “a weighing of the public interest in the retroactive application of the statute against the affected party’s reliance on previous law, and the consequences of that reliance.” Id. at 547. The court perceives no unfairness in applying S1666 retroactively to Plaintiff’s claims.

In addition, in April 2003 when Federal’s policy was issued to HUMC for the period August 1, 2003 to August 1, 2004, the law regarding step-down provisions was at best unsettled. At that time, the New Jersey trial court in Pinto declared step-down provisions to be invalid. In 2004, the Appellate Division then reversed the trial court’s decision holding step-down provisions to be valid. After granting certification, the New Jersey Supreme Court in 2005 affirmed the Appellate Division’s decision. Since the law on the validity of a step-down provision was unclear at the time Federal issued its policy in April 2003, Federal had no reason to rely on its contractual right to enforce a step-down provision in its policy. Furthermore, Plaintiff was injured on April 13, 2004 prior to the June 6, 2004 Supreme Court Pinto decision declaring step-down provisions valid. Therefore, Federal’s claims of private contractual rights do not trump the overriding public interests remedied by S1666. Thus, retroactive application of S1666 would not be a manifest injustice to Federal, the insurer.

The Court therefore reconsiders and vacates its March 12, 2007 Order enforcing the step-down clause and declares Federal’s applicable UM coverage is $1,000,000.