New Jersey drivers are facing a projected 10% increase in auto insurance premiums by the end of 2024, with critics pointing to the state's legal system as a key factor driving the rise.
As insurance rates climb and the legal environment remains unchanged, some are calling for legislative action to address the growing financial strain caused by excessive litigation.
“Legislators in New Jersey must focus on reforming the civil justice system to help remove its current Heat Watch status in the future,” said the American Tort Reform Association (ATRA) on X. “Learn how New Jersey landed its Heat Watch spot on our Legislative HeatCheck report.”
An ATRA analysis highlights the increasing influence of trial lawyers in New Jersey, warning that their role in the state’s civil justice system is contributing to higher premiums and legal costs. The group describes New Jersey as being in "Heat Watch" status, a designation for states with an overactive legal environment, underscoring the need for tort reform to protect consumers from rising costs.
The increase in premiums aligns with a national trend. Nationwide, full-coverage auto premiums rose by 15% in the first half of 2024, with a projected 22% increase by year’s end.
In New Jersey, drivers saw average premiums climb from $2,303 in December 2023 to $2,372 in June 2024, with projections estimating a final increase to $2,520 by December.
Legal factors, such as a 2022 law that allows policyholders to sue auto insurers for "bad faith" over delayed or denied claims, are expected to drive more lawsuits and higher premiums. The law permits plaintiffs to seek triple damages, attorney fees, and other costs, which insurers argue will contribute to a surge in litigation.
Legal experts predict courts will face challenges in defining "unreasonable delay" or "unreasonable denial" in insurance claims, adding uncertainty and potentially leading to years of litigation. ATRA argues that the rising volume of legal challenges will increase insurers' operational costs, which will ultimately be passed on to consumers.
In addition to legal factors, rising vehicle repair costs, severe weather events, and higher traffic accident rates are compounding financial strain on both drivers and insurers.
The broader cost of car ownership in New Jersey has also increased. The average driver now spends $6,802 annually, surpassing the national average of $6,684. Inflation, higher car prices, rising interest rates on loans, and geopolitical risks are expected to keep costs elevated, particularly for gas, which is projected to remain expensive.
ATRA also highlights the growing political influence of trial lawyers in the state. In 2023, they spent over $105 million on advertising, including increased radio and outdoor ads. Political contributions from top plaintiffs' firms have totaled more than $2 million since 2017.
ATRA argues that this heavy investment in advertising and political influence has skewed the legal system in favor of trial lawyers, ultimately driving up costs for consumers.
As New Jersey’s legislature remains under Democratic control, with pro-plaintiff figures like Senate President Nicholas Scutari shaping policy, calls for tort reform are intensifying. One proposed change is the Consumer Legal Funding Act (S.B. 1475/A.B. 1931), which seeks to regulate third-party litigation funding by capping interest rates and limiting funders' influence. The proposal faces opposition from plaintiffs' attorneys who argue it would limit access to justice.
Additionally, the Green Amendment — a proposed constitutional right to a "clean and healthy environment" — has raised concerns that it could lead to widespread litigation, further burdening New Jersey’s legal and business environment.
