The NJ Lawsuit Option, in Plain English: Limitation on Lawsuit vs. No Limitation

There is a line on every New Jersey auto policy that has nothing to do with your premium, your deductible or your coverage limits, and everything to do with what happens if another driver hurts you. It is called the lawsuit option, and sometimes the tort option. It was chosen when the policy was first written, and it is an easy thing to have forgotten.

Here is what it actually means.

New Jersey is a "no-fault" state, but only for part of the claim

No-fault does not mean nobody is at fault. It means that after a crash, your own Personal Injury Protection coverage pays for your medical treatment first, regardless of who caused it. We walked through how PIP works and how to choose your limit in a separate article.

The lawsuit option answers a different question. If another driver causes the crash and injures you, under what circumstances can you sue that driver for pain and suffering, as opposed to the bills? New Jersey gives drivers two answers and asks you to pick one.

Limitation on Lawsuit (the "verbal threshold")

This is the lower-cost election. If you have it, you keep the right to sue an at-fault driver for pain and suffering only when your injury falls into one of the serious-injury categories New Jersey law defines. The statute names specific categories, including death, dismemberment, significant disfigurement, and certain fractures and permanent injuries.

That summary is deliberately general, and it should stay that way. The exact wording of those categories is set in New Jersey law and repeated in your policy, and in a real claim it is the precise language that controls, not a blog post's paraphrase. The New Jersey Department of Banking and Insurance is the authoritative source on how the election works. If you are already dealing with an injury claim, a personal injury attorney, not an insurance agent, is the right person to read that language with you.

No Limitation on Lawsuit (the "zero threshold")

This is the more expensive election. It preserves your right to sue an at-fault driver for pain and suffering without having to clear that injury threshold first. You are paying for a legal right you may well never use, which is true of most insurance and is not by itself a reason to skip it.

What the lawsuit option does not change

• It does not decide who was at fault. That is settled separately.

• It does not pay your medical bills. Your PIP coverage does that first, whoever caused the crash.

• It does not affect the claim for damage to your vehicle.

• It does not change your uninsured or underinsured motorist limits, which decide what you can recover when the at-fault driver has little or no coverage.

It governs one specific thing: your ability to bring a claim for non-economic damages, meaning pain and suffering, against the person who hurt you. How economic losses such as lost income or medical costs beyond your PIP limit are handled is a separate analysis that depends on your coverage and the facts of the claim.

It usually applies to your whole household

On most New Jersey policies the election extends to family members living in your household who are covered by the policy. That is worth sitting with for a moment. A choice made years ago, on a policy that covered two adults, may now also apply to the seventeen-year-old who was added as a driver last spring. Your policy language determines exactly who is covered, so read it rather than assuming.

So which one should you have?

Neither election is the right answer for everyone. Limitation on Lawsuit is an honest trade: a narrower right to sue in exchange for a lower premium, and for plenty of New Jersey households that is a perfectly sensible trade to make. Households that would rather not narrow that right, and that can absorb the higher premium, choose the other.

The situation worth fixing is neither of those. It is the driver carrying an election nobody in the house remembers choosing, on a policy whose facts have changed since it was written: new drivers, new jobs, a different financial picture entirely. That is not a bad decision. It is a decision that was never really made.

Three minutes with your declarations page

• Find the line labeled Lawsuit Option, Tort Option, or Limitation on Lawsuit. It usually sits near the personal injury protection section.

• Note which one is selected, and ask yourself whether it is what you would choose today.

• While you are there, check your PIP medical limit and your uninsured and underinsured motorist limits.

• Check who is listed as a driver on the policy, because the election likely applies to them too.

• Note the last time anyone actually reviewed the page with you.

Want a second set of eyes on it?

IgoQuote is the online home of Christopher Dean & Associates, PC, an independent agency in Brielle, New Jersey (NJ Producer License 9954304). Independent means we are not tied to a single carrier, so a review can be an actual review: here is what you are carrying, here is what it would cost elsewhere, and sometimes, here is why you are in good shape and should leave it alone.

You can start a free comparison quote at igoquote.com or call 844-446-4628. Bring your declarations page. It turns a twenty-minute conversation into a five-minute one.