PIP Coverage - Some Things to Know

Posted on December 13, 2011 by Richard Schnoll, Esq.

New Jersey is one of many states that have a Personal Injury Protection (PIP) system in place as part of your automobile insurance coverage. The purpose of PIP as part of comprehensive reform was to lower auto insurance premiums, although it has not necessarily worked out that way.

When you purchase a policy of auto insurance, you must choose whether your health insurance carrier (assuming that you have one) or your automobile carrier will be primarily responsible for your medical coverage if you are injured in a car accident.

Do not make this decision lightly.  There are pros and cons to both selections. If you choose your car carrier, you will be offered several levels of coverage from $15,000 per person per accident to $250,000. This coverage comes with a deductible of $250 and a co-pay of 20% on the first $5,000 of bills. This may be better or worse than your health insurance coverage.

While choosing your health insurance carrier as primary will reduce your PIP premium, the trade off is that your health insurance carrier may have a lien on any subsequent lawsuit that you bring against a third party for the injuries that you sustained if your health plan is a self-funded ERISA plan. That means that you would have to pay back your health insurance plan out of any settlement that you might receive. Generally, there is no re-payment obligation to your auto carrier.

Therefore, as the knight said to Indiana Jones in the last of the trilogy when Indiana had to choose the goblet - Choose Wisely!!

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New Jersey's Initial Permission Rule

Posted on November 4, 2009 by Richard Schnoll, Esq.

Over the next few weeks, I will be discussing an interesting aspect of New Jersey insurance coverage called the intial permission rule.

Scenario 1 - Husband loans his wife’s car to next door  neighbor so that neighbor can visit her ill mother. After a short visit with her mother, neighbor drives to a tavern in search of her sister. She had a few drinks at the tavern and then drove to another bar. She went back and forth between the two establishments over several hours before heading home. On the way home, she is involved in a collision with another car. Insurance carrier denies coverage stating that the neighbor used the vehicle outside the scope of the permission granted.

New Jersey follows the “initial permission” rule in determining coverage issues under these circumstances. The rule, adopted by the New Jersey Supreme Court in Matits v. Nationwide Mutual Insurance Co., 33 N.J. 488, 497 (1960) (scenario 1) provides that “if a person is given permission to use a motor vehicle in the first instance, any subsequent use short of theft or the like while it remains in his possession, though not within the contemplation of the parties, is a permissive use within the terms of a standard omnibus clause in an automobile liability insurance policy.”  Therefore, the carrier was required to provide liability coverage for the vehicle.

To be continued ...

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