TRENTON, N.J., April 10 – Legislation has been introduced to ban the use of step-down clauses in commercial automobile insurance policies for employees in response to a court decision declaring that these clauses are now valid.

The bill, S.1666, was introduced by State Senator Nicholas Sculari (D-Linden) and is now before the Senates Commerce Committee.

Sculari said the law must be changed to expand protection for employees injured in motor vehicle accidents while working.

His bill would require that commercial policies provide the maximum uninsured and underinsured motorist coverage available under the policy to all employees of the covered business.

Currently, he said, employees not specifically named in a commercial policy are only entitled to coverage equivalent to that provided for in their personal automobile liability policies.

Sculari said of the step-down clause, This is a classic bait and switch and it is leaving working New Jerseyans out in the cold. The pervasive use of step-down clauses allows insurers to dodge responsibility for the well being of workers. If you are injured on the job you should be entitled to the maximum protection that your employers insurance offers.

He said, generally, a commercial policy pays higher underinsured or uninsured coverage than the private passenger policy. In a typical case, a private automobile insurance policy offers coverage of $15,000/$30,000, while the commercial policy generally offers coverage of $300,000 and up in liability protection.

Sculari contended that two employees with the same job, working for the same employer traveling in the same vehicle and with identical injuries can be treated completely different with arbitrary levels of protection differing from employee to employee because of the step-down clause.

The bill would also provide that a policy which names a corporate or business entity as a named insured shall be deemed to provide the maximum uninsured or underinsured motorist coverage available under the policy to any individual employed by the business regardless of whether the individual is an additional named insured under that policy or is covered under any other policy with uninsured or underinsured motorist coverage.

The explanatory statement to the bill reads in part:

This is in response to the New Jersey Supreme courts decision in Pinto v. New Jersey Manufacturers Insurance Co. 183 NJ 205 (2005).

In Pinto, the court held that as to a motor vehicle liability policy that names a corporate or business entity as a named insured, step-down provisions which limit uninsured or underinsured motorist coverage for employees of that entity that are not individually named on the policy are valid and enforceable.

Thus the courts ruling allows an employees coverage under an employers business motor vehicle insurance policy to be limited to the lower limits of uninsured or underinsured motorist coverage contained in the employees individual motor vehicle liability policy, even in situations in which the employee is injured in a covered vehicle in a work-related accident, if the employers policy so provides.