FYI- "New Jersey "Step down" provision"

What an Employer needs to know about the New Jersey "step down" provision

Your business auto policy includes something called uninsured and underinsured motorists coverage.
This coverage protects insured persons for injuries caused by motorists who do not have suf •cient liability coverage to compensate for all damages the insured persons may have incurred. This could happen when a motorist:
1) leaves the scene of the accident without identification;
2) when the motorist does not have insurance;or
3) when the motorist does not have enough insurance.

What is "the step down" provision?
There was a time when every insured person had access to the full limit stated on the policy purchased by the employer. But, as a result of a string of Supreme Court decisions,this is no longer true.Insurance companies are permitted to “step down ” (reduce) the employer ’s policy limit for certain insured persons.
For a business auto policy,the insured persons likely to be affected would be principals of the business and employees. Although these persons are covered while occupying business vehicles,the full policy limit may not be available to them under the following conditions:
1) if the insured person has his own auto policy,the limit chosen for his policy will serve as the maximum limit payable, regardless of the limit stated on the business auto policy;or
2) if the insured person does not have her own auto policy,but lives in a household where a family member does have a policy,the family member ’s limit will serve as the maximum limit payable.

Does this really matter to an employer?
Since employers already provide workers ’ compensation benefits and other fringe benefits for their employees,employers may not be motivated to neutralize the “step down ” provision and ensure payment of the full limit on the business auto policy. In fact,some employers may even question the practice of purchasing a higher than minimum uninsured/underinsured motorists limit ($35,000)in the first place,since payments made under this coverage may ultimately affect the premiums paid by
the employer.

Can the "step down" provision be eliminated?
In order to neutralize the “step down ” provision,it will be necessary to elevate the status of an employee to become a named insured on the business auto policy. Most insurance companies do not have an approved form to do this,even if they were inclined to offer it. So,the chances of giving your employees access to the full limit of the business auto policy is improbable at this time.
Of course,if the insured employee is a principal of the business,there may be greater motivation to obtain the best possible protection.In this case,you should contact our agency for assistance in determining whether this can be accomplished. There may be some options available to principals that are not generally available to other employees.Know that it ’s our desire to be there for you when light is needed to help navigate the “step down.”

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