When it comes to American business, New Jersey has a legacy as one of the original hubs for innovation and creation.
The Garden State is the birthplace of iconic American companies such as the Campbell Soup Co. Trenton’s motto, as seen on the south side of the Lower Trenton Bridge, is “Trenton Makes, the World Takes.”
But state legislators seem intent on jeopardizing that legacy and driving out even more job creators by allowing the state’s trial bar to push through harmful legislation that creates a financial windfall for lawyers at the expense of regular citizens. There are two bills before the state Legislature that will drive up insurance costs and encourage frivolous litigation.
The first, Senate bill 2144/Assembly Bill 3850/4293, expands the grounds for “bad faith” lawsuits. The bill allows for simple mistakes made by an insurance company to spiral into time-consuming and expensive lawsuits that force companies to pay big settlements. More time fighting frivolous claims in court means less resources for a company to properly investigate legitimate claims —increasing the chance for fraud to go undetected.
The only thing this bill will do is increase costs for New Jerseyans. A study by Milliman Research Associates found that the bill could increase auto insurance premiums by 20 percent to 40 percent, and increase homeowners insurance by 17 percent.
S2144/A3850/A4293 will have the same effect on New Jersey insurance consumers as Florida’s infamous “assignment of benefits” system. There, consumers are persuaded to sign over their insurance benefits to contractors and lawyers who threaten lawsuits to extract excessive payments for property damage.
The Florida Office of Insurance Regulation estimates that the assignment of benefits system forces South Floridians to pay double the national average for home insurance. There is no good reason why New Jersey homeowners should bear the same burden.
The second bill, Senate Bill 1766, would expand the range of damages under the state’s Wrongful Death Act, allowing unlimited recovery for emotional damages.
Under the current law, the family of someone who passes away because of the wrongful conduct of another person is entitled to the financial value of the person’s earnings, services and companionship. S1766 would profoundly expand upon the definition by allowing for damages to be awarded based on things that are harder to put a dollar amount on, like mental anguish and pain and suffering.
Of course no amount of money could ever replace the loss of a loved one, but giving trial lawyers free rein to sue will have an impact not just on consumers and businesses, but on state and local budgets. In fact, former Gov. Jon Corzine pocket-vetoed a similar bill 10 years ago for that reason.
The state’s wrongful death statute already has a fair process in place, where damages are based upon tangible criteria like lifetime earnings capacity and the cost of child care. By expanding the definition to include “pain and suffering,” lawsuits can turn into an unpredictable and speculative mess, hindering settlement decisions and forcing premium increases on all consumers.
New Jersey has made great progress since the time when its insurance rates were far higher than those in neighboring states. Now the Garden State is drifting in the other direction, with higher taxes and growing regulations on businesses.
New Jersey lawmakers should fight against that current, rather than pass two new laws that will do nothing more than line the pockets of trial lawyers, with consumers paying higher insurance premiums.
The Legislature should do the right thing for their state and its great legacy of fostering innovation, and say no to S2144/A3850/A4293 and S1766.
Harold Kim is the executive vice president for the U.S. Chamber Institute for Legal Reform.