Published in New Jersey Lawyer, 12/26/05:

DIPROSPERO V. PENN: A REVOLUTION IN AUTO INSURANCE LAW
Cynthia M. Craig, Esq.

	In June of this year, the Supreme Court of New Jersey published a unanimous decision which drastically changed the way the lower courts were analyzing 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 a plaintiff seeking compensation for bodily injury under AICRA had to prove that he had sustained a permanent injury, and that the injury caused a serious impact on his life. The Supreme Court ruled that under AICRA, 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 sue, 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, with concomitantly higher premiums, and the so-called “verbal threshold” under which the nature of the injuries had to meet a wordy description set forth in the statute, N.J.S.A. 39:6A-8.  The 1988 verbal threshold, patterned nearly verbatim after a New York statute, provided for 9 categories of injuries that permitted a plaintiff to sue for non-economic damages (pain and suffering, permanent injury, and disability, etc.):

1. Death
2. Dismemberment
3.  Significant disfigurement
4. A fracture
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 less than 90 days during the 180 days immediately following the occurrence of the injury or impairment.

	The 1988 statute had a conflict at its core. The statute was supposedly intended to reduce the volume of litigation seeking compensation for non-economic losses (personal injuries), see Oswin v. Shaw, 129 N.J. 290 (1992), but by using terms such as “significant” and “consequential” to describe injury types 6, 7, & 8, the Legislature created largely subjective, heavily fact-sensitive categories which seemed almost to require determination by a jury. To solve that problem, in 1992 the Supreme Court in Oswin v. Shaw, 129 N.J. 290, introduced a new set of standards into the traditional summary judgment model. In Oswin, the Supreme Court held that in order to defeat a motion for summary judgment based on the verbal threshold, a plaintiff had to submit objective, credible evidence of injury, a nexus between the injury suffered and a consequent disability or limitation, and, more problematically, that the injury “had a serious impact on the plaintiff and her life.” Id @ 318.

	Ten years later, the New Jersey again changed the law with 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. One part of the approach was a revised verbal threshold  which reduced 9 categories to 6, eliminated category 9, required that fractures be displaced in order to qualify, and eliminated the most subjective categories (6, 7 & 8). 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 or 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.

	 AICRA further required that claims for injuries by supported by a certification from the treating physician signed under penalty of perjury.  AICRA also transformed the PIP system into an HMO-type system with treatment protocols, fee schedules, pre-certification requirements, etc., 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 which was construed by Oswin, at the trial level initial published 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 the fact that the legislature had provided a “clear and unambiguous” definition of “permanent” in the new statute. In contrast, 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 the purpose of AICRA 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, 354 N.J. Super. 586 (App. Div 2002), certif. den. 175 N.J. 547 (2003), the Appellate Division disapproved of the Compere and instead followed the reasoning of Rogozinski. The court noted that the statute omitted any mention of “serious impact” but concluded that the omission was not determinative. Being the highest court decision on this question, the James decision resulted in hundreds of plaintiff’s cases being dismissed on summary judgment 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 because Judge Weissbard dissented, stating that he agreed with Judge Lyons’ analysis in Compere. 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 (2005), the Supreme Court reversed in a 6-0 opinion which agreed with Judge Weissbard’s dissent. Expanding on Judge Lyons’ analysis in Compere, the Supreme Court flatly rejected the holding of James v. Torres  that the Oswin requirement of serious life impact survived AICRA. The court said that the plain language of the statute, a comparative analysis of the 1988 threshold and the 1998 threshold, and a survey of AICRA’s legislative history showed that the legislature did not intend to engraft the Oswin language onto the limitation on lawsuit threshold. The court held: “an automobile accident victim who is subject to the threshold and sues for noneconomic damages has to satisfy only one of AICRA’s six threshold categories and does not have the additional requirement of proving a serious_life_impact.”
	
	In a unanimous opinion by Justice Albin, the court began its analysis by looking at the statute’s plain language, which requires a plaintiff subject to the threshold to prove that 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 or 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.” The court noted that the statutory language places no burden on plaintiff other than to prove that the injury meets one of the threshold categories. In addition, the court noted that 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 considerations undergirding the legislation. Nowhere did the Supreme Court find support for the holding in James  that proof of serious life impact is required by AICRA.			
	
	The court found that the legislature in enacting AICRA had explicitly incorporated one prong of the Oswin test—the requirement for objective, credible, evidence of injury–which strongly implies that 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 is merely descriptive of the six statutorily defined categories of NJS 39:6A-8, and could not support a conclusion that the preamble intended to insert a serious life impact standard that had been omitted from the statutory language. As to the Sponsors’ statement which ended with the statement that “No provision in this bill is intended to repeal otherwise applicable caselaw,”, that single sentence was part of a larger paragraph which must be viewed as a whole, and which makes it clear that 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 New Jersey’s old and new statute renders questionable any supposition that the Legislature intended Oswin’s serious life impact requirement to be “otherwise applicable caselaw.” 
The previous verbal threshold statute had nine categories of injuries, of which four were eliminated and replaced by just one category addressing permanent injuries. 

One of the eliminated categories was highly subjective and likely was 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 the simplest fracture.  AICRA requires that scarring be significant to be grounds for compensation. AICRA’s threshold categories have fewer subjective components than the previous version of the statute, and specifically requires that in order to vault the threshold, an injury must be proven by “objective clinical evidence.”
	
	The previous version of the statute was patterned after New York law. However, 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 a 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 that she did not expect that Oswin’s “extra-statutory standard” would apply.
	
	The Supreme Court found that the appellate division in James had looked at the statute with too narrow a view.  In James, the court held that: “[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 the entire thrust behind AICRA was to reduce the number of litigated claims and, thus, to bring stability to automobile insurance premiums.” 354 N.J. Super @ 594. The Supreme Court disagreed, observing that AICRA is a detailed and comprehensive statute that seeks to contain costs in multiple ways: through the prosecution of fraud, introduction of 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 Supreme Court criticize the opinion in  James for failing ro recognize the reality that AICRA was the product of lobbying, negotiation, and legislative compromise. The Joint Committee on Automobile Insurance Reform reviewed a number of options and developed a threshold that is comparable to Florida, but with unique features. Considering the amount of research and revision that went into the final enactment, the Court said that it could not conclude that the Legislature established 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 re-write the law:

In conclusion, we hold that the plain language of NJSA 39:6A-8(a) does not contain a serious life impact standard. Nothing in AICRA’s preamble, its legislative history, or its policy objectives suggest that the Legislature intended this court to write in that standard. We will not torture the legislative history in this case to create an ambiguity in an otherwise clear statute.” N.J.(2005)

	DiProspero was consolidated for argument and decision with Serrano v. Serrano. In the Appellate Division decision in Serrano, the court had not followed either  James or Compere but instead had crafted an entirely new serious injury standard. The Supreme Court rejected the new test created by the Serrano panel and held that in order to recover non-economic damages, an accident victim has to prove only an injury defined in NJSA 39:6A-8(a) and does not have to clear the additional hurdle of proving “serious injury.”  N.J (2005). Summarizing its lengthy opinion in DiProspero, the court repeated that “we cannot conclude that the Legislature intended this Court to create a new subjective standard of serious injury and to transpose it onto the statutorily defined threshold categories.”