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Senate Commerce Committee releases Singer-backed bill to bar 'step-down' auto-insurance clauses
Summary
The Senate Commerce Committee voted to release S-3187, which would prohibit so-called "step-down" provisions that reduce coverage for certain passengers or listed drivers; insurers warned it could raise premiums while consumer advocates said the clauses are hidden and unfair.
The Senate Commerce Committee voted May 18 to release S-3187, a bill sponsored by Senate President and Sen. Wayne Singer that would bar motor vehicle liability policies from using "step-down" clauses to reduce recoverable limits for permissive users, listed drivers, resident relatives or passengers.
Supporters — including independent agents and plaintiff-side advocates — told the committee the clauses are often buried in policy language and frustrate consumer expectations. Brad Latchit, Director of Government and Industry Affairs for the Professional Insurance Agents of New Jersey, said step-downs are "a hidden trap" and cited court decisions in which consumers were surprised to learn limits bought were reduced by fine print. "Most purchasers ... would assume an injured family member or passenger in an insured auto would have the benefit of the full policy limits purchased," Latchit said.
Opponents, led by Gary Laspiza of the Insurance Council of New Jersey, urged caution. "We cannot support this bill, as it is presented to you today," Laspiza told the committee, arguing that expanding recoverable limits for anyone with access to a vehicle "is a step too far" and would increase insurers' losses and therefore premiums. Laspiza said the industry is open to improved disclosure on the declarations ("deck") page but not a blanket ban on step-downs.
Committee members pressed witnesses for data on how the prohibition would affect premiums. Laspiza said the industry is preparing a study and could share results later but could not provide a precise dollar estimate today. Supporters said many consumers buy policies online and may not see or understand buried clauses; some industry witnesses said producers who work face-to-face do inform clients about step-downs.
After testimony and questioning, the committee moved to release S-3187. Recorded remarks during roll call show recorded affirmative votes from Senator Bramnick, Senator Singer and Senator Johnson; Vice Chair Kryon registered a no vote; Chairman Lagana voted yes. The committee's release forwards the bill to the full Senate for further consideration.
The committee also heard suggestions to narrow the bill — for example, to exclude clearly enumerated categories such as short-term permissive lending among non-household friends — and to add transparency requirements on the declarations page. Sponsors and several members signaled interest in refining the bill's language as it moves forward.
