Automobile insurance rates are a sore subject for New Jersey drivers.  Several different reforms have been enacted over the past decades, and in 2003 Governor James McGreevey signed into law a reform package that helped to increase competition in the insurance market and reduce insurance plan prices.  Auto insurance has been once again been in the news recently, as Governor Chris Christie has announced plans to try to deal with the rising costs associated with personal injury protection ("PIP").  This post is not about the history of automobile insurance in New Jersey or what will happen with potential PIP reform; rather, it is about a Third Circuit decision in which the court rejected the plaintiff's argument that one part of New Jersey's automobile insurance law, N.J.S.A. § 17:28-1.3, was unconstitutional.  Avicolli v. Government Employees Insurance Co., No. 10-4345 (3d Cir. July 29, 2011).

The plaintiff, a citizen and resident of Pennsylvania, sustained serious injuries in an accident that took place in Pennsylvania.  She was a pedestrian and was struck by a vehicle owned by defendant Charles Carter and operated by his son.  Carter had an insurance policy that was issued in New Jersey by the Government Employees Insurance Co. ("GEICO").  The plaintiff sued the Carters for negligence and asserted bad faith and breach of contract claims against GEICO because it did not pay plaintiff's PIP benefits under the policy.

The plaintiff received $15,000 to settle her claims with the Carters, which was the full amount of the liability coverage under the policy.  She also reserved her right to pursue her claims against GEICO for PIP benefits.  The policy had PIP coverage of $250,000, but it excluded non-residents of New Jersey who were injured outside the State.  GEICO moved to dismiss the complaint for failure to state a claim, relying on N.J.S.A. § 17:28-1.3, which required that PIP benefits be available to pedestrians injured in New Jersey but did not have a similar requirement for injuries suffered by pedestrians outside of New Jersey.  The plaintiff argued that the statutory provision was unconstitutional but the District Court for the Eastern District of Pennsylvania granted GEICO’s motion.

N.J.S.A. § 17:28-1.3 provides in pertinent part as follows:  "Every liability insurance policy issued in this State on a motor vehicle . . . insuring against loss resulting from liability imposed by law for bodily injury, death, and property damage sustained by any person arising out of the ownership, operation, maintenance, or use of a motor vehicle . . . shall provide personal injury protection coverage benefits . . . to pedestrians who sustain bodily injury in the State caused by the named insured's motor vehicle . . . or by being struck by an object propelled by or from the motor vehicle . . . ."  The plaintiff asserted that N.J.S.A. § 17:28-1.3 was unconstitutional because it deprived a pedestrian injured outside of New Jersey of the equal protection of law by denying that person PIP benefits.

The Third Circuit reviewed Equal Protection Clause precedent and explained that the plaintiff's challenge was subject to rational basis review.  The court then reasoned that plaintiff was wrong in arguing that N.J.S.A. § 17:28-1.3 barred insurers from offering PIP coverage to pedestrians injured outside of New Jersey.  Instead, the provision required insurance policies to offer such coverage for pedestrians injured in the State while allowing insurers to decide whether to offer similar coverage for non-New Jersey injured pedestrians.

After recounting the many conceivable legitimate State interests that the District Court identified that could support such a distinction in the coverage required for injured pedestrians within and outside New Jersey's borders, the Third Circuit agreed with the lower court’s reasoning.  The court proceeded to reject other arguments advanced by the plaintiff and concluded that "it is plain that the District Court correctly concluded that, although Section 17:28-1.3 draws a distinction between in-state and out-of-state collisions, that classification is rationally related to a legitimate state interest."