Jul 21, 2017
Signing of ride-hailing law headlines legislative session
Major changes have taken place for ride hailing, transfers from the Surplus Lines Insurance Guaranty Fund; and the regulation of automobile guaranteed asset protection contracts. While the Legislature has considered bills regarding paid family leave; compensation disclosure; snowplow liability; auto liability insurance requirements; and auto fraud.
Ride-hailing law went into effect May 1. Gov. Chris Christie signed into law P.L.2017.CHAPTER 26, "Transportation Network Company Safety and Regulatory Act," on Feb. 10, 2017. This law went into effect May 1, 2017. The legislation is comprehensive in its treatment of the practice of ride-hailing covering everything from background checks for transportation network company drivers and vehicle inspections to insurance requirements.
Under the provisions of the law, when a TNC driver is logged on to a TNC app and is available to receive a prearranged ride request, but is not providing a prearranged ride coverage must be offered in the amount of $50,000 for death or bodily injury per person, $100,000 for death or bodily injury per incident, and $25,000 for property damage. In addition, personal injury protection benefits also must be provided in amounts that conform to current law and uninsured/underinsured motorist coverage must be provided to the extent required under current law.
When a TNC driver is providing a prearranged ride the coverage requirements increase to $1.5 million for death bodily injury and property damage. Insurance for medical payments benefits in the amount of $10,000 must be provided but this is only for the benefit of the TNC driver. In addition UM/UIM coverage must be provided in the sum of $1.5 million.
The law prohibits a TNC or TNC driver from asserting the so-called "verbal threshold" in any action arising from a prearranged ride. The verbal threshold, limits recovery for non-economic damages, unless the person has sustained at least one of the types of injury recognized by statute.
Under the law, coverage can be provided by either the TNC driver’s policy or by the TNC itself. If the TNC’s driver policy does not cover ride-hailing then the TNC is required to provide coverage beginning with the first dollar of the claim and they will have a duty to defend. Coverage under a TNC policy is not dependent upon the private policy first denying a claim.
$8M transferred from NJSLIGF to general fund. Legislation (P.L.2017.CHAPTER 97) that transfers $8 million from the Surplus Lines Insurance Guaranty Fund to the state’s general fund was signed by the governor on July 4. The legislation was sponsored by Sen. Paul Sarlo, D-36, and Assemblyman John Burzichelli, D-3, respectively.
The NJSLIGF was established to provide a safety net for policyholders and claimants of insolvent surplus-lines insurance companies by ensuring the payment of claims. All surplus-lines companies in New Jersey are required to be members of the fund and to contribute funds for its operation. Each member insurer is responsible for making an initial one-time payment of $25,000 into the fund. Additionally, a surcharge, in an amount determined by the Department of Banking and Insurance, is collected on any surplus-lines coverage policy issued in New Jersey.
However, the surcharge has not been collected since 1993 and the DOBI ceased to collect the initial $25,000 payment as of July 21, 2011, due to limits imposed by the federal "Dodd-Frank Wall Street Reform and Consumer Protection Act." In neither case has the DOBI found a need to reinstatement of the fees to be necessary to meet the current and projected obligations and expenses of the fund. Instead the fund has generated revenue from net investment and
interest income; and distributions collected in connection with insolvency proceedings.
Since its inception the NJSLIGF has paid benefits due to the insolvency of 14 surplus-lines insurers. However, only three of the these insolvencies have occurred in this millennium. Due to the lack of claims, $100 million in resources have been diverted from the fund since 2000.
At the end of 2015, the fund carried a balance of $12.2 million with a combined indemnity and loss adjustment expenses reserves of $1.3 million. The governor’s $8 million transfer from the NJSLIGF to the general fund leaves the NJSLIGF with a balance of approximately $4.2 million.
Automobile guaranteed asset protection contracts now regulated. P.L.2017, CHAPTER 82 provides a regulatory framework within which guaranteed asset protection waivers may be offered in the state was signed by the governor on May 11.
"GAP waivers" are contractual agreements entered into directly between a borrower and a finance company, and commonly used in the motor vehicle industry. GAP waivers are classified as addenda to traditional finance contracts, and are meant to protect borrowers from having to make a large lump-sum payment to the lender if their vehicles are deemed a total loss and there is a gap between the amount of money owed to the lender and the amount of money at which the insurance adjuster values the "totaled" vehicle. In the event of a total loss, insurance companies only compensate the insured for the market value of the vehicle.
The new law makes clear that the "GAP waivers" are not considered insurance policies and that they are exempt from the insurance laws of New Jersey. Under the law, GAP wavier agreements must disclose the name and address of the initial creditor and borrower; the purchase price and terms of the GAP waiver; that the borrower may cancel the GAP waiver during the "free-look" period; the procedure for receiving GAP waiver benefits; whether the GAP waiver is cancellable after the "free-look" period ends; that in order to receive a refund for a canceled GAP waiver, the borrower must submit a written request to the lender within 90 days of the event terminating the finance agreement; the methodology for calculating any refund of the unearned purchase price of the waiver; and that the extension of credit, finance, sale or lease may not be conditioned upon the purchase of the GAP waiver. The goal of the bill is provide the framework for which GAP waivers can be offered in the state and it specifically differentiates waivers from the "GAP insurance" offered by insurance carriers. To that end, the law specifically states that the act does not apply to an insurance policy offered by an insurer under the insurance laws of New Jersey.
This act takes effect immediately and applies to all GAP waivers executed on or after Nov. 7, 2017.
Paid family leave bill. The Senate passed a bill, A-4927/S-3085, which would revise the law concerning family leave, family temporary disability leave and domestic or sexual violence safety leave on June 26 (22-15).
Sponsored by Assemblyman Vincent Prieto, D-32, the bill would expand the family members for whom individuals covered under the family temporary disability law may receive paid benefits during periods of leave from employment to care for to include siblings, grandparents, grandchildren and parents-in-law. The bill also would expand the "Family Leave Act" and the "NJ SAFE Act" to include siblings, grandparents, grandchildren and parents-in-law. Additionally, it would provide that family temporary disability leave may be taken by a covered individual from work with an employer to participate in the providing of care for a family member of the individual who has been a victim of an incident of domestic violence or a sexually violent offense.
The bill would increase the maximum number of weeks of family temporary disability leave benefits for a period of family temporary disability leave, or for any given 12-month period, to 12 weeks from the current six weeks. And, it would expand the amount that covered individuals would collect in benefits. Under the bill, an individual’s weekly benefit rate, subject to a maximum of 78 percent of the statewide average weekly remuneration paid to workers by employers would be:
1. for an individual with a household income at or below 200 percent of the federal poverty level for a family of four, 90 percent of the individual’s average weekly wage; or
2. for an individual with a household income above 200 percent of the federal poverty level for a family of four, 80 percent of the individual’s average weekly wage.
There is no employer contribution. Instead, this time off would be funded by employee contributions to the state disability benefits fund. The bill also would provide that an employer may not discharge, harass, threaten or otherwise discriminate or retaliate against an employee with respect to the compensation, terms, conditions or privileges of employment on the basis that the employee took or requested any family temporary disability leave to which the employee was entitled.
The bill also would amend the Family Leave Act to make its provision of unpaid leave apply to employers with 20 or more employees, instead of the current threshold of 50 or more employees.
The bill previously passed the Assembly (49-23-3) on June 22. It now will go to the governor for his consideration.
Compensation disclosure bill. A-4798/S-2459, which would require health insurance consultants and carriers to provide certain health insurance information to local municipalities and counties, passed the Assembly (75-0-0) on June 22.
The bill, sponsored by Assemblywoman Blonnie R. Watson, D-29, would require a health insurance consultant that contracts with a municipality or county would be required to annually disclose the amount of compensation received in the prior year from a carrier for any insurance consultant services provided in connection with a contract awarded to the carrier by the municipality or county. The bill would make the compensation disclosure requirement a part of the contract between the municipality or county and the health insurance consultant. If a health insurance consultant fails to make a required annual disclosure, the local unit would be permitted to terminate any contract with the consultant.
This bill passed the Senate, 36-0, in November. However, it was amended in the Assembly and must go back to the Senate for its concurrence with the amended legislation before it can be considered by Gov. Christie.
Snowplow liability bill. A bill, A-3656/S-181, that would reduce the liability on snowplow operators passed the Senate (35-0) Jan. 23. It would prevent indemnity and hold-harmless provisions in certain snowplow contracts. Specifically, it would prohibit property owners from passing their liability onto the snow and ice management company. This would not relieve the snowplow companies of liability for the work for which they are contracted, but would shield them from liability outside of their own work. A similar bill was introduced last session, but it failed to move out of committee. This bill was sent to the Assembly and referred to the Assembly Consumer Affairs Committee for consideration.
Proposal to increase minimum auto liability insurance requirements introduced. A bill, A-4730/S-2163 that would increase the minimum auto liability insurance requirements was introduced into the Assembly on March 20. The bill increases the amount of liability insurance coverage that every owner of a motor vehicle registered or principally garaged in New Jersey must maintain. Under the bill, insureds would be required to have coverage in the amount of at least $35,000, up from $15,000, for liability on account of injury to, or death of, one person, in any one accident; $75,000, up from $30,000, on account of injury to or death of, more than one person, in any one accident; and $10,000, up from $5,000, for damage to property in any one accident. A similar bill was introduced in the Senate in May of 2016. A-4730 has been referred to the Assembly Financial Institutions and Insurance Committee for consideration.
Auto insurance fraud bill. A bill, A-4896, that would clarify when coverage exists for innocent third parties when an insurance policy was procured through fraud was reported out of the Assembly Financial Institutions and Insurance Committee, 11-0 with two members not voting, on June 12.
Sponsored by Assemblyman Joseph A. Lagana, D-38, it provides that whenever a person violates any provision of the "New Jersey Insurance Fraud Prevention Act," the carrier whose motor vehicle liability policy would otherwise provide coverage for that person or any innocent person that was injured, would not be responsible for any loss or damage claimed by that person or by the innocent person.
The bill also provides that an innocent person injured by a vehicle for which the applicable policy was voided will have primary recourse from the uninsured portion of any private passenger automobile insurance policy for which the innocent person is eligible for coverage or, if that policy was voided or if no such coverage exists, then from the Unsatisfied Claim and Judgment Fund.
Similar legislation was introduced into the Assembly in June of 2016, but it has not advanced since introduction. This bill now goes to the full Assembly for consideration.