In Ruoff v. American Asphalt Company, the plaintiff was driving an automobile owned by his employer, defendant American Asphalt Company, Inc. (American Asphalt). Penn National insured the vehicle. Plaintiff filed a claim for UM/UIM coverage with Penn National. The insurer “stepped down” the amount recoverable by plaintiff from $1,000,000 to $100,000, the maximum amount of coverage available under plaintiff’s wife’s auto insurance policy. Having exercised the step-down provision, Penn National denied the claim.
The plaintiff subsequently filed a complaint against his employer and Penn National alleging that the step-down provision was vague and ambiguous, that the broker
and Penn National owed a duty to disclose to his employer the consequences of the step-down provision to its employees and deprived the employer of exercising an informed choice, and that enforcement of the step-down provision by insurers, such as Penn National, was against public policy
The trial court denied plaintiff’s motion and dismissed all claims against defendant Penn National. Soon thereafter, the Legislature passed and the Governor signed an amendment to N.J.S.A. 17:28- 1.1 (f), which provides: …” a motor vehicle liability policy or renewal of such policy of insurance insuring against loss sustained by any person arising out of the ownership, maintenance or use of motor vehicle issued to a corporate or business entity shall not provide less uninsured or underinsured motorist coverage for an individual employed by the corporate or business entity…”
The Appellate Division was asked to determine whether the subsequent amendment to the statute should be applied prospectively or retroactively. The court held that the amendment is to be applied prospectively. The Appellate Division reasoned that at the time of his accident, neither plaintiff nor Penn National had any reasonable expectation that the step-down provision was unenforceable. Retroactive application of the amendment to plaintiff would amount to a windfall for him and a dramatic alteration of expectations founded in contract for Penn National. Thus, retroactive application of the amendment would defeat the insurer’s reasonable reliance on settled legal principles and its reasonable expectations. Furthermore, plaintiff had no reasonable expectation of the greater benefit.
Thanks to Sheila Osei for her contribution to this post.