CITATION: Olkusz v. Brown, Docket No. Ber-L-2771-06 (Law Div. 2007), Toskos (UNPUBLISHED)

DIGEST: Legislation declaring stepdown clauses in commercial motor vehicle policies invalid is retroactive to all cases in the judicial pipeline.

CASE NOTE: Plaintiff, Susan Olkusz, was injured in a motor vehicle accident while a passenger on a shuttle bus owned and operated by her employer, Hackensack University Medical Center. Olkusz was insured by Atlantic Mutual with UM limits of $100,000. HUMC was insured by Federal Insurance with UM limits of $1,000,000.

The plaintiff filed a UM claim against both Atlantic and Federal. Initially, the trial court granted Federal’s motion for partial summary judgment declaring that its obligation to provide UM coverage was limited to $100,000 due to a stepdown clause in the employer’s policy. Both the plaintiff and Atlantic filed a motion for reconsideration on the grounds that stepdown clauses in business auto policies were invalidated by a recent amendment to the insurance statutes. P.L. 2007, c. 163 (S1666) which amends N.J.S.A.17:28-1.1.

At the outset, the court noted that statutes are generally applied prospectively; however, the rule should not be applied "mechanistically" but only to aid in the search for legislative intent. In addition, the language in the statute that it is to take effect "immediately" does not state explicitly whether the prohibition is to be applied prospectively or retroactively. Nonetheless, stepdown clauses are "irrational and inequitable because access to such benefits is determined solely by an employee’s private motor vehicle policy."

The court found that the purpose of S1666 was to provide "uniform and non-discriminatory" access to UM/UIM benefits to all employees. In addition, the statute was amended in "direct response" to the Supreme Court opinion in Pinto v. NJM, 183 N.J. 405 (2005) which held that stepdown clauses were valid. As such, the amendment was "curative" because it reflected an attempt by the Legislature to improve the existing statute by reversing the effect of Pinto.

Likewise, the retroactive application of S1666 would achieve three remedial purposes: prohibition, reformation and reversal. Thus, "an insurer’s private contractual right can not trump the overriding public interests in the remedies provided in S1666."

Finally, the court found that stepdown clauses were "capricious and inequitable" since access to UM/UIM benefits is determined by the employee’s private insurance policy. In contrast, S1666 provides "uniform and non-discriminatory access" to all employees without regard to "an employee’s car ownership, income for insurance payments, or living arrangements." Thus, the amendment is supported by "a legitimate legislative purpose furthered by rational means."

In conclusion, the court held that S1666 declaring stepdown clauses invalid in commercial motor vehicle policies would be applied retroactively to all cases within the pipeline.

COMMENT: S1666 provides that all motor vehicle liability policies issued to a corporate or business entity shall not provide less UM/UIM coverage for an employee than the coverage provided to the employer, the named insured under the policy. In addition, a policy that names a corporate or business entity as a named insured shall be "deemed" to provide the maximum UM/UIM coverage to any employee, regardless of whether the employee is the named insured or an additional insured under any other policy.

LINK: http://www.judiciary.state.nj.us/decisions/Olkusz_v_Brown071130.pdf