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Lawsuit/Verbal Threshold: What You Need To Know
By: Andrew S. Prince, Esq.
136 Central Avenue Clark, New Jersey 07066 (732)396-8900

In June, the New Jersey Supreme Court published a unanimous decision drastically changing how lower courts analyzed claims for personal injuries under the automobile Insurance Cost Reduction Act (AICRA) of 1998. In DiProspero v. Penn, 183 N.J. 477 (2005) and Serrano v. Serrano, 183 N.J. 508 (2005), the court overruled lower court decisions which held that plaintiff seeking compensation for bodily injury under AICRA had to prove he’d sustained permanent injury and that the injury caused a serious impact on his life. The NJ Supreme Court ruled plaintiffs subject to the verbal threshold only have to prove permanent injury in order to recover compensation for non- economic loss. Proof of serious life impact is not required.

The road to the DiProspero decision was long and difficult. Beginning in the early 1980’s, the New Jersey legislature had attempted to reduce the amount of automobile accident claims by requiring purchasers of automobile insurance to choose between an unlimited right to sure, and a limited right to sue in exchange for a reduction in the amount of the insurance premium. After several monetary thresholds failed to achieve the desired result, in 1988 the legislature enacted the first “verbal threshold law,” which allowed insureds to choose between an unlimited right to sue- which concomitantly higher premiums- and the verbal threshold under which the nature of the injuries had o meet a worldly description set forth in the statute, NJSA 39:6A-8. The 1988 verbal threshold, patterned nearly verbatim after the New York statute, provided for nine categories of injuries permitted a plaintiff to sue for non-economic damaged:

1. Death
2. Dismemberment
3. Significant disfigurement
4. Fractures
5. Loss of a fetus
6. Permanent loss of use of a body organ, member, function or system
7. Permanent consequential limitation of use of a body organ or member
8. Significant limitation of use of a body organ or member
9. A medically determined injury or impairment of a non-permanent nature, which prevents the injured person from performing substantially all of the material acts which constitute that person’s usual and customary daily activities for not les than 90 days during the 180 days immediately following the occurrence of the injury or impairment.

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The 1988 statute had a conflict at its core: intended to reduce the volume of litigation seeking compensation for non-economic loss its use of terms such as “significant” and “consequential” created largely subjective heavily fact-sensitive categories, almost requiring jury determination. To solve that problem, in 1992 the NJ Supreme Court in Oswin v. Shaw, 129 NJ 290, introduced a new set of standards into the traditional summary judgment model. In Oswin, the court held that to defeat a motion for summary judgment based on the verbal threshold, a plaintiff had to submit

• Objective, credible evidence of injury;
• Prove a nexus between the injury suffered and a consequent disability or limitation; and more problematically
• Demonstrate that an injury “had serious impact on the plaintiff and her life.”

Ten years later, New Jersey passed AICRA, a comprehensive legislative package with a multi-faceted approach aimed at achieving the goals of containing costs, rooting out fraud within the system, and ensuring a fair rate of return for insurers. The verbal threshold was revised, reducing the nine categories to six, eliminating and the most subjective categories (six, seven an eight) and requiring fractured to be displaced in order to qualify. Patterned after Florida law, the AICRA categories of injuries are:

1. Death
2. Dismemberment
3. Significant disfigurement or significant scarring.
4. Displaced fractures
5. Loss of a fetus
6. A permanent injury which within a reasonable degree of medical probability other than scarring of disfigurement. An injury shall be considered permanent when the body part or organ, or both, has not healed to function normally and will not heal to function normally with further medical treatment.

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AICRA further required claims for injuries be supported by a certification from the treating physician signed under penalty of perjury. AICRA also transformed the Personal Injury Protection (PIP) system into an HMO-type with treatment protocols, fees schedules and pre-certification requirements, created the Office of the Fraud Prosecutor, established a new dispute resolution procedure, and introduced a “basic insurance policy” with limited medical benefits and no liability coverage.

Despite the significant and obvious differences between AICRA and the 1988 version of statute construed by Oswin, trial level opinions were divided as to whether the Oswin requirement of serious impact survived AICRA. The trial court in Compere v. Collins, 352 N.J. Super. 200 (Law Div 2002) examined the legislative history of AICRA and discerned a legislative attempt to eliminate the old verbal threshold law completely, along with the subjective “serious impact” prong of the Oswin test. The Compere court also relied on the fact the legislature had provided a “clear and unambiguous” definition of “permanent” in the new statute. In contract, the court in Rogozinski v. Turs, 351 N.J. Super. 536 (Law Div 2002) reviewed the same legislative history and came up with the opposite conclusion, deciding that since AICRA’s purpose was to make the verbal threshold more restrictive, the legislature must have intended to retain the “serious impact” requirement of Oswin. In James v. Torres, 34 N.J. Super 586 (App. Div 2002), certif. den 175 N.J. 547 (2003), the Appellate Division disapproved followed the Rogzinski reasoning. He court noted the statute omitted any mention of “serious impact” but concluded that the omission was not determinative. Being the highest court decision on the question, the James decision resulted in hundreds of summary judgment dismissals over the next several years for failure to meet the “serious impact test” of Oswin. Another panel of the Appellate Division also followed James in an unpublished decision handed down in early 2004. However, the panel was divided. The matter was then appealed to the New Jersey Supreme Court, which had not previously addressed the issue, and had denied certification in James. In Diprospero v. Penn, 183 N.J. 477 (205), the Supreme Court reversed the decision in a 6-0 opinion. The court flatly rejected the holding of James v. Torres that the Oswin requirement of serious life impact survived AICRA, stating the plain language if the statute, a comparative analysis of the 1988 threshold, and a survive of AICRA’s legislative history showed the legislature did not intend to engraft the Oswin language into the limitation on the lawsuit threshold. The court held:

“An automobile accident victim who is subject to the threshold and sues for non economic damages has to satisfy only one of the AICRA’s six threshold categories and does not have the additional requirement of proving a serious life impact.”

In Justin Albin’s opinion, the court looked at the statute’s plain language, which requires a plaintiff subject to threshold prove the defendant caused a “bodily injury which results in death, dismemberment, significant disfigurement or significant scarring, displaced fractures, loss of a fetus, or a permanent injury within a reasonable degree of medical probability, other than scarring of disfigurement.” Further, the statute provides that “[a]n injury shall be considered permanent when the body part or organ, or both, has not healed to function normally and will not heal to function normally with further medical treatment.”

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The court noted the statutory language places no burden on plaintiff other than proving the injury meets one of the threshold categories. In addition, the court noted the legislature did not include a serious life impact requirement in the text of NJSA 39:6A-8.

The court also examined relevant canons of statutory construction, AICRA’s preamble, the sponsors’ statement to the bill, the governor’s conditional veto of AICRA and the policy consideration under girding the legislation. Nowhere did the court find support for Jamess’ holding that AICRA requires the proof of serious life impact.

The court found the legislature, in enacting AICRA, had explicitly incorporated one prong of the Oswin test- the requirement for the objective, credible, evidence of the injury- which strongly implies it chose not to incorporate the other prong (serious life impact). The preamble to the statute speaks in the disjunctive of non- serious or non-permanent injuries- merely descriptive of the six statutorily defined categories of NJS 39:6A-8. As to the Sponsor’s statement which ended with “No provision in this bill is intended to repeal otherwise applicable case law,” the court found that single sentence part of a larger paragraph, which, viewed as a whole, makes clear the sponsor intended to replace the verbal threshold as it had existed at the time of Oswin with a completely new threshold.

Further the “textual difference” between the New Jersey’s old and new statute renders questionable any supposition the legislature intended Oswin’s serious life impact requirement to be otherwise “applicable case law.” The previous verbal threshold statute had nine categories of injuries; one eliminated categories was highly subjective and likely a significant spur for the conception of the serious life impact requirement. There were other significant differences between the two statutes: AICRA requires fractures to be displaced in order to qualify, whereas the previous statute permitted recovery for simple fracture, AICRA requires scarring to be significant and its threshold categories have fewer subjective components that the previous version. To vault the threshold, the specifically require the injury be proven by “objective clinical evidence.”

The previous version of the statute was patterned after New York law; AICRA was patterned after Florida law. Florida law did not require a claimant to prove serious life impact.

As to the governor’s conditional veto, other than passing reference to Oswin in a reference to Florida law, nowhere did the message express the view that Oswin’s serious life impact standard applied to AICRA. In fact, the court concluded that since the governor had referred to Oswin but failed to mention the serious life impact requirement, the logical inference is she did not expect that Oswin’s “extra-statutory standard” would apply.

The court found the Appellate Division in James had looked at the statute with too narrow a view. The James court held:

“[i]f courts were to permit claims to go forward even in the absence of proof of a serious impact on a plaintiff’s life, it would run counter to the legislative purpose because of the entire thrust behind AICRA was to reduce the number of litigated claims and, thus, to bring stability to automobile insurance premiums.”

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The New Jersey Supreme Court disagreed, observing AICRA is a detailed and comprehensive statute seeking to contain costs in multiple ways: through the prosecution of fraud, introduction of a more limited (and cheaper) coverage options, implementing a dispute resolution procedure and tightening the threshold. The new verbal threshold was just one facet of a multi-faceted overhaul of a complicated statute. Further, the court criticized the opinion in James for failing to recognize AICRA was the product lobbying, negotiating, and legislative compromise. The Joint Committee on Automobile Insurance Reform reviewed a number of options and developed a threshold comparable to Florida, but with unique features. Considering the amount of research and revision that went into the final enactment, the court said it could not conclude the legislature established a clearly defined statutory categories of injuries to be proved by objective clinical evidence, and then expected the courts to impose a higher burden of proof on accident victims. The court declined to rewrite the law:

“In conclusion, we hold that the plain language of JSA 39:6A-8(a) does not contain a serious life impact standard. Noting in AICRA’s preamble, its legislative history, or its policy objectives suggest the legislature intended this court to write that standard. We will not torture the legislative history in this case to create and ambiguity in an otherwise clear statute.”

DiProspero was consolidated with Serrano for argument and decision. In the Appellate Division in Serrano, the court neither followed James nor Compere but instead crafted an entirely new serious injury standard. The N.J, Supreme Court rejected this new test and held in order to recover non-economic damages, an accident victim has to prove only an injury defined in NJSA 39:6A-8(a), not “serious injury.”

Summarizing its lengthy opinion in DiProspero, the court repeated “we cannot conclude that the legislature intended this court to create a new subjective standard of serious injury and to transpose it into the statutorily defined threshold categories.”

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