TRENTON, N.J., February 3 – An insured is still responsible for any awards over $300,000, even though they had coverage up to $1 million that became void when his insurance company went insolvent, the state supreme court reluctantly ruled in an automobile injury case.

The ruling, the court said, has a potentially catastrophic effect on responsible citizens buying insurance, and the court added that it hoped the Legislature could correct the issue.

The case resulted from a 1999 truck accident in Jersey City, when Frederick Johnson lost part of his left leg after his tow truck was struck by another truck driven by Willie Braddy, an owner/operator driving for Walsh Trucking of North Bergen.

The Walsh company had a $1 million liability policy with Reliance Insurance Company at the time. Reliance however became insolvent in October 2001. Walsh was sued by the injured Johnson.

Walsh contended that the $1 million be paid by the New Jersey Property-Liability Insurance Guaranty Association (PLIGA). But according to law, PLIGA is responsible for awards up to $300,000. The Walsh lawyers said the law was silent about policyholders being personally liable for judgments above $300,000.

The Supreme Court held that PLIGA was responsible for payment up to $300,000, but the policyholder was responsible for any amount over that because the policyholders insurance company went insolvent.

The court ruling declared, We recognize the potential catastrophic effect that this ruling may have on responsible citizens who have purchased insurance to protect themselves and the victims of accidents in which they are involved.

In this matter, for example, the insured may be exposed to up to a $700,000 payment. Such payments could wipe out a party that acted in good faith to procure insurance.

Leonard C. Leicht of Livingston, attorney for Walsh Trucking and Braddy said the ruling will have a terrible adverse effect on the trucking company and driver as well as on all businesses and individuals.

The Supreme Court said the $300,000 limit set by the Legislature for PLIGA is legally unassailable. It opined the Legislature could consider having PLIGA pay for all the coverage a policyholder lost because of the insolvency or grant immunity to a policyholder for any amount over the coverage they purchased.

Johnson v. Braddy, No. A-5 September Term 2005 on remand from appellate division Superior Court