The Non-Existent Clause: A Policyholder’s Nightmare

by Chasidy Rae Sisk

One bright afternoon in August, Ashley*, a 19-year-old college student, drove down the Parkway on her way home from a shopping expedition with her mother, who was a passenger in her car. When the traffic in front of her slowed down, Ashley slowly engaged her brakes – but the person behind her did not. CRASH!

Pulling to the side of the road, Ashley exchanged information with the other driver, but when she attempted to file a claim with the at-fault party’s insurance company, she learned that they had not paid their insurance bill and their card was invalid; they were uninsured. 

Fortunately, Ashley’s parents had elected to add Uninsured Motorist Property Damage (UMPD) coverage to their policy through Travelers Insurance, which she was still covered under since she still lived at home. She submitted a claim, requesting to use her UMPD. She was shocked when the claim handler rejected her request, informing her that would not be possible.

“Per Travelers’ guidelines, collision coverage is always primary over UMPD,” according to the email Ashley received. “However, the benefit which can be applied is the lowering of your collision deductible to assist with the unfortunate matter that the other party does not have insurance. That reduced deductible being $500 instead of $1,000 has already been reflected and applied to the estimates and paperwork of the ongoing claim as I completely understood you the first time we spoke and made sure from a repair perspective the lesser amount of the deductible would be reflected.”

At this point, an entire month had passed since she had been rear-ended. Since this was her first accident and her first experience in interacting with a claim representative, Ashley wasn’t sure how to respond, but something about the refusal to let her use the UMPD coverage that was clearly designated for exactly the type of situation she found herself in just didn’t sit right. So she engaged the owner of the collision repair shop where her car was being fixed. 

The shop owner reached out to Travelers to ask why collision coverage must be applied instead of the UMPD endorsement. The claim representative justified her position on the matter by explaining, “The ruling that collision coverage is used [as] primary over uninsured motorist [coverage] is based on a NJ Statute from 2020.” She also provided a screenshot of the supposed statute, N.J. Stat. § 17:28-1.1, 39:6-78 (2020), which indicated the following:

“All standard motor vehicle policies must include UMPD coverage. UMPD Coverage is not available for basic auto policies.

•  $500 deductible

•  $5,000 UMPD minimum limit

•  If collision coverage is available, collision is primary over UMPD. If collision deductible exceeds $500, the difference is paid under UMPD. 

•  Example: Collision $1,000; payment for damages is paid under collision and $500 under UMPD.”

Upon review of the provided information, the shop owner found that N.J. Stat. § 17:28-1.1 did not “include any of the cited language in any past or current revisions,” as he indicated in his response, noting, “Several revisions have been made since 2020; the most recent revision is 2023. I find no reference to anything pertaining to this issue.” He also questioned why title 39:6-78 was listed since it has no relevance to the issue in question. 

Further, the shop owner read through Ashley’s policy and found no reference to the listed language in any part of the collision or uninsured motorists coverages; nothing related to the claim could be found listed under exclusions, either. His research on the website for New Jersey Division of Banking and Insurance (NJ DOBI) yielded no indication that collision coverage would be primary over UMPD. Essentially, the justification for Travelers’ ruling on the claim didn’t exist at all!

Travelers’ claim representative did not reply for a week. When she finally did, she apologized for the delay, which was caused by “following-up with, not only my supervisor, but the department itself to provide answers and research to the questions you are asking. 

“They are valid questions,” she acknowledged, indicating that her rejection was based on “the information I was trained on” and promising that the carrier was looking into the situation. “We are leaving no stone unturned with providing that information to you. At this time, it is being looked into, and I have been made assurances that results of that should be provided to me soon, so I can reach out to you and provide the information.”

The following week, Ashley received an email from the claim representative’s supervisor, informing her that her UMPD coverage would be applied to the claim instead of her collision coverage. He also assured her that “Travelers has placed the sole liability on the other party for rear-ending you.”

All’s well that ends well, right? Well, not exactly. While waiting for this matter to be cleared up, Ashley moved out of her parents’ house and applied for her own insurance policy; however, she received astronomically high quotes due to having an accident on her driving record! Yet, the only accident she had ever been in was this one, where she was struck from behind and in which she was clearly not at fault. But because Travelers processed the claim under her collision coverage, she was negatively impacted almost immediately. 

Sadly, Ashley’s story is not an anomaly. 

Insurers commonly insist on policyholders using collision coverage as primary over UMPD, according to AASP/NJ Executive Director Charles Bryant, though he confirms that, to the best of his knowledge and understanding, “Nothing in N.J. Stat. § 17:28-1.1, 39:6-78 or any other New Jersey statute allows this practice.”

Consumer advocate and diminished value expert Robert McDorman (Auto Claim Specialists) agrees that he has also seen this practice many times and is unaware of any laws permitting the requirement for claims to be filed under collision as primary to their UMPD endorsement, but he expresses concerns with how this type of guideline could harm consumers:

“Placing the claim on the collision side of the policy when, in fact, it was a UMPD claim would preclude the insured from collecting loss of use and diminished value (which could be substantial), plus it would be counted against the insured’s loss run and most likely adversely affect their premium rate at renewal or if they shop for coverage with other carriers. In contrast, when a claim is handled under the UMPD side of the policy, it does not count against the insured’s loss run and should have no impact on their future premiums.”

Bryant pointed out that in either instance, the claim would be reported on the policyholder’s driving record. “However, a collision claim would be a chargeable accident and might raise the insured’s premium, while an uninsured motorist claim would not, at least not nearly as much as a collision claim.”

New Jersey Automotive reached out to Travelers Insurance to determine if their guidelines require policyholders to use collision coverage (if available) as primary over UMPD. We also asked what statute such a requirement might be based on or why a claim representative would be trained in this manner if no such guideline exists. Additionally, an email was sent to NJ DOBI with questions related to the legality of such a practice and for comment on how this might harm consumers. As of the time of writing, neither Travelers Insurance nor NJ DOBI have responded to our request.

AASP/NJ believes it’s important for shops to be informed about insurer practices that may harm vehicle owners in the Garden State. “Many customers of collision shops depend on the shop to advise them of their rights and on the best route to take when considering filing an auto insurance claim,” Bryant points out. “We need to be aware of the many ways that insurers attempt to advise customers improperly and also understand what options the vehicle owner has. That knowledge can be extremely helpful to a shop’s customers when they are not sure how to best deal with an insurance claim for damages to their vehicle.”

The desire to protect consumers from insurer misconduct is exactly why the association launched its Collision Repair Consumer Protection Initiative (CRCPI) this past summer (information available online at grecopublishing.com/nja1024coverstory), and AASP/NJ President Ken Miller sees Ashley’s story as another example of how insurers are harming New Jersey consumers.

“This situation raises two concerns in my opinion. First, it seems like insurer fraud since these carriers are coercing policyholders to use collision coverage as a systemic process where the accident may count against the insured for future premium adjustments. Second, I wonder if they are using this tactic in response to the New Jersey Insurance Fair Conduct Act, passed in 2022, which allows for a private right of action against insurers for uninsured motorist claims. It appears that pressuring insureds into using collision coverage would allow them to avoid potential lawsuits related to mishandling UMPD claims, thereby obviating them from that liability.”

Policyholders and collision shops alike can rest assured that AASP/NJ will continue to monitor this type of behavior and never stop fighting to protect consumers, even from clauses and guidelines that don’t technically exist.

*Name changed to protect consumer’s identity

Want more? Check out the November 2024 issue of New Jersey Automotive!