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NEW JERSEY 11:3-36.2
AUTOMOBILE PHYSICAL DAMAGE INSURANCE
INSPECTION PROCEDURES SUBCHAPTER 36.
Authority
N.J.S.A.
17:33B‑33.
Source
and Effective Date
R.1991,
d.95, effective January 25, 1991
(original
operative. date of March 1, 1991 rescinded; new date
to be determined.)
See:
22 NJR 3861(a), 23 NJR 579(a), 23 N.J.R. 1132(c)).
Subchapter Historical Note
Subchapter 36, Automobile Physical Damage Insurance Inspection Procedures,
was filed as emergency new rule R‑1990 d.622, effective
November 26, 1990, with an expiration date of January 25,
1991. See: 22 N.J.R. 3861 (a). Subchapter 36 was readopted
as R.1991 d.95, with changes effective February 19, 1991.
See: Source and Effective Date.
11:3‑36.1 Purpose and scope
(a) The purpose of this subchapter is to provide rules for
the inspection of automobiles in connection with the
issuance of physical damage insurance coverage by insurers
pursuant to N.J.S.A. 17338‑33 through 17:33B‑40.
(b) The provisions of this subchapter apply to all insurers
which write private passenger automobile insurance in this
State.
11:3‑36.2 Definitions
The following words and terms, as used in this subchapter,
shall have the following meanings, unless the context clearly
indicates otherwise. "Authorised representative" means
any person which is authorized by the insurer to conduct
insurance inspections pursuant to this subchapter, an authorized
representative may be an employee of the insurer, a producer
or an inspection service other than the insured, whether
located inside or outside of this State.
"Automobile physical damage Insurance" means a
policy providing one or more of the following insurance
coverages:
1. Collision;
2. Comprehensive; and
3. Fire and theft.
"Automobile physical damage insurance inspection" means
a physical examination of an automobile by an authorized
representative of the insurer, in accordance with the standards
set forth in N.J.A.C. 11:3‑36.6.
"Book of business" means all private passenger
automobile insurance written by one producer with one insurer.
"Certificate of mailing" means a receipt from the
United States Postal Service 'that the item was received
by it with the proper postage affixed for delivery.
"Commissioner" means the Commissioner of Insurance
of the State of New Jersey.
"Inspection service" means any person or legal
entity other than the insurer, established and operated
to perform the inspections required by this subchapter.
"Insured" means the named insured (as defined in
the policy) or an applicant for automobile physical damage
insurance.
"Insurer" means any person authorized to write
automobile insurance in New Jersey, including any residual
market mechanism, and includes a group of affiliated companies.
"New automobile" means an automobile not previously
titled with not more than 1,000 miles recorded on the odometer.
"Nonowned automobile" means a private passenger
automobile in the possession of the insured or being operated
by the insured which is neither owned by nor furnished
for the regular use of either the named insured or any
relative (as defined in the policy), other than a temporary
substitute automobile
"Private passenger automobile" or "automobile" means
a private passenger automobile of a private passenger or
station wagon type that is owned or hired and is neither
used as a public or livery conveyance for passengers nor
rented to others with a driver, and a motor vehicle with
a pickup body, a delivery sedan, a van, or a panel truck
or a camper type vehicle used for recreational purposes
owned by an individual or by husband and wife who are residents of the same household, not customarily used in the occupation, profession or business of the insured other than farming or ranching. An automobile
owned by a farm family copartnership or corporation, which
is principally garaged on a farm or ranch and otherwise
meets the definitions contained in this section, shall
be considered a private passenger automobile owned
by two or more relatives resident in the same household.
"Renewal" means the issuance and delivery by an
insurer, at the end of the policy period, of a policy superseding
a policy previously issued and delivered by the same insurer,
or the issuance and delivery of a certificate or notice
extending the term of a policy beyond its policy period
or term. "Replacement automobile" is a vehicle
acquired to replace one shown in the declarations.
"Temporary substitute automobile" means any private
passenger automobile not owned by the insured, while
temporarily used with the permission of the owner as a
substitute for an owned automobile, when the latter is
withdrawn from normal use because of breakdown, repair,
servicing, loss or, destruction.
Amended by R.1992 d.142, effective March
16, 1992.
See: 23 NJ.R 1262(a), 24 N.J.R. 953(b)
Definition for authorized representative
amended; nowowned and temporary substitute automobile definitions
added..
11:3‑36.3 Mandatory inspection requirements
(a) No insurer shall provide automobile physical damage insurance
coverage prior to conducting an insurance inspection in
accordance with this subchapter, under the following circumstances:
1. When a new policy or endorsement adding physical damage coverage
insuring a private passenger automobile is effected; and
2. When coverage is effected for an additional or replacement
pnvate passenger automobile.
(b) An insurer may require, prior to continuing physical
damage coverage on an automobile, that the insured present
the automobile for inspection, under the following circumstances:
1. When the automobile insured for physical damage coverage
has been in an accident or otherwise damaged; or
2. As a condition of renewal
11:3‑36.4 Waivers of mandatory inspection
(a) An insurer shall waive a mandatory inspection when a
new automobile is purchased from a franchised automobile
dealership and the insurer is provided with the following
documents in accordance with N.J.A.C. 11:3‑36.7(e):
1. A copy of the bill of sale which contains a full description
of the automobile, including all options and accessories;
2. A copy of the window sticker or advanced dealer shipping
notice (invoice) showing the itemized options and equipment,
the total retail price of the automobile, and any dealer installed
option purchased by the customer, or
3. Vehicle buyer's order (contract) and/or the dealership
invoice to the buyer, including all options and accessories.
(b) An insurer may waive a mandatory inspection under any
of the following circumstances:
1. When the automobile is more than seven model years old.
For example: in 1991 an insurer shall inspect 1984 and
newer model year vehicles and in 1992 an insurer shall
inspect 1985 and newer model year vehicles;
2. When a policy is being renewed or issued by a different
individual insurance company :within a group of affiliated
companies;
3. When the insured automobile is insured under a commercially
rated policy which insures five or more automobiles;
4. When an insurance producer or insurer is transferring
a book of business from one insurer to another insurer(s);
5. When the automobile is a temporary substitute automobile;
or
6. When the automobile is leased for less than six months.
7. When the named insured has been continuously Insured for
automobile insurance with the same insurer, or an affiliate
of the insurer, for four or more policy years.
8. Where an individual insured's coverage is being transferred
by an independent insurance agent to a new insurer and
the previous insurer provides the new insurer with a copy
of the inspection report
i. If the now insurer does not receive a copy of the inspection
report 60 days prior to the first annual renewal date,
the insurer, upon renewal of the automobile physical damage
insurance, shall require a physical inspection in accordance
with N.J.A.C. 11:3‑365(e).
(c) Insurers shall maintain a record of the waiver in the
insurer's file on the insured.
(d) Insurers shall decide whether to waive an inspection
based solely on underwriting criteria uniformly applied
and not based on the age, race, sex or marital status of
the insured, the principal place of garaging or the fact
that the automobile is insured in the residual market.
Amended by 8.1992 (.142, effective March
16, 1992.
See: 23 NJ.R 1262(a), 24 NJ.R. 953(b).
Text on out of State garaging deleted; (a)8
and 9 added.
11:3‑36.5 Deferral of inspections
(a) An insurer, by itself or through its authorized producers,
may defer the mandatory inspection required by N.J.A.C.
11:3‑363 for seven calendar days following the effective
date of coverage, upon an insured's requests for coverage
for automobile physical damage insurance on an additional
or replacement automobile.
(b) An insurer may defer the mandatory inspection under any
of the following circumstances:
1. On new business for seven calendar days following the
effective date of coverage; and
2. On replacement automobiles, an insurer may provide the
same type and level of
physical damage coverage which covered the replaced automobile,
without a request for coverage by the insured. Such automatic
coverage prior to the insured's request for coverage shall
be for a period of three days, including the day on which
the automobile Is acquired. The three‑day period
shall be extended by one day .for each Saturday, Sunday
or any New Jersey State legal holiday falling within the
period The insurer's election shall apply only to automobiles
replacing covered automobiles which were insured by the
insurer for physical damage coverage for at least the 12‑month
period preceding the replacement date and such election
once made shall apply to all the insurer's private passenger
automobile insurance. An insurer which makes an election
pursuant to this clause shall Me an appropriate policy
endorsement with the Commissioner and furnish a copy of
such endorsement to all of its insureds who have physical
damage coverage
(c) When an inspection is deferred pursuant to (a) or (b)
above, the insurer or producer shall:
1. At the time the insurance application is completed, obtain
the Acknowledgment of Requirement for Insurance Inspection
form (as set forth in Appendix A and incorporated herein
by reference) signed by the insured if the insured has
applied for coverage in person; or
2. At the time the insurance application is completed, confirm
physical damage coverage and advise the insured of the
inspection requirements and mail the insured the Notice
of Insurance Inspection form (as set forth in Appendix
B and incorporated herein by reference) if the insured
has applied for coverage by mail or by telephone. Documentation
of such verbal notices shall include the name of the person
giving the notice.
(d) In addition to the notice requirements set forth in (c))1
and 2 above, the insurer or producer shall furnish the
insured with information about where an inspection can
be conducted and the consequences of the insured's failure
to have the automobile inspected.
1. The insurer shall retain documentation of the required
notice in (c)) above in the insurer's file on the insured.
(e) When an insurer requires an insured's automobile to be
inspected as a condition for any annual renewal of physical
damage coverage, the insurer shall provide notice and coverage
as follows:
1. Whenever a renewal of physical damage coverage is conditioned
upon inspection, the insurer shall mail or deliver a written
Notice of Insurance Inspection (Appendix B) to the insured
at least 30 days prior to the renewal date. The insurer's
file on the insured shall reflect the mailing of such notice.
2. If the insured has not responded to the Notice of Insurance
Inspection, the insurer shall, at least 10 days prior to
the expiration of the above 30‑day deferral period,
mail a second Notice of Insurance Inspection to the insured,
to the producer of record, and any lienholders,
restating that failure to have the automobile inspected prior
to the expiration of the deferral period will result
in suspension of physical damage coverage. A certificate
of mailing of the second notice to the insured shall be
retained by the insurer: The insurer shall assist the insured
in arranging a convenient appointment for the required
inspection. The written notice of the inspection requirement
shall clearly inform the insured of the failure to comply
with the inspection requirement will result in the suspension
of automobile physical damage coverage. The notice shall
also state that a copy of the inspection report will be
given to the insured.
(f) An insurer shall decide whether to defer an inspection
based solely on underwriting criteria and not based on
age, sex, race, or marital status of the insured, the principal
place of garaging, or the fact that a policy is insured
in the residual market.
Amended by R. 1992 d.142, effective March
16, 1992.
See: 23 NJ.R. 1262(a), 24 NJ.R 953(b).
Text added at (b) and (e),
11:3‑36.6 Standards and procedures for inspection
(a) Inspections shall be made by an authorized representative
of the insurer at a time and place reasonably convenient
to the insured. A reasonably convenient time shall Include,
in addition to customary business hours, sufficient early
morning, evening and weekend hours. A reasonably convenient
place shall not be more than 10 miles from the city or
town where automobile is principally garaged
(b) If the insured acquires an additional or replacement
automobile outside of New Jersey, and such automobile will
be located outside New Jersey until after the expiration
of the deferral period permitted by N.J.A.C. 113‑36.5(a)
or (b), the insurer shall arrange to conduct the inspection
by an authorized representative during the deferral period
at a place which shall not be more than 50 miles from the
temporary location.
(c) If the insured automobile required to be inspected upon
renewal is temporarily located outside of New Jersey when
the required notice of inspection is mailed to the insured,
and such automobile will continue to be located outside
of New Jersey until the expiration of the deferral period
required by N.J.A.C. 11:3‑36.5(e)1, the insurer shall
arrange to conduct the inspection by an authorized representative
before the expiration of the deferral period at a place
which shall not be more than 50 miles from the temporary
location.
(d) Whenever an insurer requires an automobile to be inspected
pursuant to this subchapter, the insurer by itself or through
its authorized producer shall provide the insured with
a Notice of Inspection in the form set forth in Appendix
B or an Acknowledgment of Requirement forInsurance inspection as set forth in Appendix A. Any form
so provided shall not contain the vehicle identification
number. (VIN) of the automobile to be inspected.
(e) The inspection shall include the following:
1. Completion of the Automobile Insurance Inspection Report
as set forth in Appendix C incorporated herein by reference;
2. Two color photographs of the automobile, taken as directed
on the inspection report (Appendix C), which shall be a
part of the report .
3. A third close‑up color photograph showing the VIN
located on the Environmental Protection Agency/Federal
Certification Label (EPA sticker) affixed to the driver's
side door jamb. The photograph must be of sufficient clarity
that the information contained on the EPA sticker and VIN
is legible. If the EPA sticker is damaged, faded, missing
or otherwise not legible, a photograph of the EPA sticker,
or of the area of the door jamb where the sticker is normally
located, is still required;
4. The authorized representative may take additional photographs
showing any damaged areas, which shall also be a part of
the report; and
5. The authorized representative shall provide a copy of
the report, without photographs, to the insured at the
time of inspection.
(f) The insurer shall utilize authorized representatives
and systems to implement the provisions of this subchapter
which meet the following standards:
1. Verifies the accuracy, completeness and identity of the
person completing each inspection report;
2. Provides a control system for its inspection reports such
as the use of sequentially numbered or coded reports;
3. Completes all required information for each automobile
on the Automobile Insurance Inspection Report set forth
in Appendix C;
4. Takes photographs as required in (e)2 through 3 above;
5. Provides for the storage and retrieval of reports and
photographs in a manner that facilitates their use as set
forth in paragraph (j) below;
6. Provides for a backup system or other duplicate or secondary
source for the report, and for inspections conducted on
or after April 1, 1994 for the photographs to ensure against
loss
7. For inspections conducted on and after April 1, 1994,
provides the ability to view inspection reports and photographs
on a computer system monitor,
8. For inspections conducted on and after April 1, 1994,
provides the ability to print inspection reports and photographs
from a computer system with a code that identifies the
document by policy number, inspection report number or
other common Identifying code; and
9. For inspections conducted on and after April 1, 1994,
provides the ability for all of the insurer's New Jersey
claims offices to view or access the inspection report
and photographs.
(g) There shall be no direct charge to the insured by the
authorized representative or insurer in connection with
an inspection.
(h) After the inspection is completed, the report and photographs
shall be retained in the insurer's file on the insured
for five years.
(i) The insurer shall maintain an up‑to‑date
list of all authorized representatives and inspection sites
performing inspections for the insurer. The list shall
include the names, addresses and business telephone numbers
of all authorized representatives. The insurer shall send
a copy of the list to the Department and update it semi‑annually
at the following address:
New Jersey Department of Insurance
Fraud Division
CN 324
Trenton, New Jersey 08625
(j) The inspection report and photographs shall be used by
the insurer to document previous damage, prior condition,
options and mileage of the automobile on physical damage
claims whenever:
1. The appraisal indicates prior damage and the new damage
(claim) exceeds $1,000;
2. The automobile is a total loss or unrecovered theft; or
3. The new damage (claim) exceeds $3,000.
(k) A copy of the inspection report and photographs shall
be utilized, and made a part of the insurer's claim file,
in the settlement of all total loss claims. The inspection
report shall be made a part of the claim file regardless
of whether or not the payment is reduced based on the information
contained therein.
(l) The documents set forth as Appendices A through D provide
minimum standards. Insurers may enhance or alter the form
of these documents provided the minimum information requirements
are met.
Amended by R.1992 4.142, effective March
16, 1992.
See: 23 NJ.R. 1262(a), 24 N.J.R. 953(b).
Text added at (b) and (c).
11:3‑36.7 Suspension of physical damage coverages
(a) If the inspection is not conducted prior to the expiration
of the deferral period or the expiration of the policy
in the case of renewals, the insurer shall suspend
automobile physical damage coverage on the automobile
at 12:01 A.M.
of the day following the last day for inspection Suspension
of coverage shall apply to all insureds, owners and lienholders
(b) Whenever physical damage coverage is suspended, the insurer
shall:
1. No later :than the 30th calendar day after the effective
date of the suspension, mail to the insured, the producer
of record and any lienholders a Notice of Suspension of
physical damage coverage (as set forth in Appendix D incorporated
herein by reference);
2. Obtain a certificate of mailing or other evidence of mailing
of the Notice of Suspension to the insured and shall retain
the certificate and copy of the ,Notice in the insurer's
file on the insured; and
3. Make a pro‑rata premium adjustment (premium refund
or credit) whenever there is a suspension of physical damage
coverage for more than 10 days. A refund of premium, if
applicable, shall be sent to the insured within 45 days
of the effective date of suspension.
(c) A reinstatement of physical damage coverage shall only
be effective upon inspection and payment by the insured
to the insurer of the adjusted premium for the physical
damage coverage in full or in accordance with the insurer's
normal payment plan. Any such reinstatement shall be effective
at the time of inspection.
(d) If the automobile is not inspected pursuant to this subchapter
due to the fault of the insurer, or if the insurer fails
to give the verbal or telephone notice required by the
subchapter or mail or deliver the Notice of Insurance Inspection
(Appendix B) or obtain the Acknowledgment of Requirements
for Insurance Inspection (Appendix A) as set forth in this
subchapter, physical damage coverage on the motor vehicle
shall not be suspended. The failure of the insurer to act
promptly does not relieve it of its obligation to inspect.
An insurer's failure, however, to comply with (b) above
shall not restore physical damage coverage, but shall subject
the insurer to a penalty pursuant to N.J.S.A 1733E‑39.
(e) Physical damage coverage on a new automobile shall not
be suspended during the term of the policy due to the insured's
failure to provide the documents required by N.J.A.C. 11:3‑36.4(a).
l. Payment of a physical damage claim shall be conditioned
upon the receipt of such document(s) by the insurer.
2. If the above document(s) are not submitted by the insured
60 days prior to the next policy renewal date. the insurer
shall require an inspection upon renewal.
3. New automobiles acquired less than 90 days prior to the
next. policy renewal date have until 60 days prior to the
following policy renewal date to submit the required document(s)
or be subject to an inspection at that renewal in accordance
with N.J.AC. 11:3‑36.5(e).
(f) For renewal inspections, if the insured falls to have
the insured automobile inspected before the expiration
of the 30‑calendar day deferral period required by
N.J.A.C. 11:3‑36.5(e)1, physical damage coverage
on the insured automobile shall be suspended effective
at 12 :01 A.M. on the day following the last day of the
deferral and suspension shall continue until such inspection
is effected. The insurer, however, must reinstate coverage
for automobile physical damage if the insured thereafter
completes the inspection. Any such reinstatement shall
be effective at the time of that inspection and, for the
purposes of this subchapter, shall not be considered new
business.
1. If the insurer fails to mail or deliver the initial written
notice of inspection to the insured in the accordance with
N.J.A.C. 11:3‑36.5(e), it shall, nevertheless, give
written notice of the inspection requirement, and automobile
physical damage coverage shall continue without the required
inspection past the renewal date for up to 30 days from
the same of the delayed notice.
2. An insurer shall make every effort to conduct a renewal
inspection in advance of the normal inspection period for
such risk, in order to mitigate any hardship to the insured
which would otherwise result.
3. If an automobile is not inspected due to the fault of
the insurer, physical damage coverage on the automobile
shall not lapse.
Amended by 81992 d.14Z, effective March
16. 1992.
See: 23 N.J.R. 1262(a), 24 N.J.R. 953(b).
Documentation and inspection requirements
added at (e) and (f).
11:3‑36.8 Enforcement
(a) A violation of any provision of this subchapter by an
insurer shall be punishable, by a $500.00 fine pursuant
to N.J.S.A. 17:33B‑39.
1. Insurers shall be responsible for the conduct of their
authorized representatives with respect to all duties imposed
by this subchapter.
2. Each issuance, procurement, or negotiation of a policy
of insurance, or maintenance of a record in violation of
this subchapter shall be deemed a separate offense.
11:3‑36.9 Results and audits
(a) Insurers shall maintain records as to the costs and savings
related to this subchapter and shall make such records
available to the Department upon request.
(b) Insurers shall report the following information to the
New Jersey Department of Insurance Fraud Division on a
quarterly basis:
1. 'The number of automobiles inspected; and
2. The number of automobiles which were nut inspected by
reason of the insured's failure to present the automobile
for inspection.
11:3‑36.10 Severability
If any section or portion of a section of this subchapter
or its application to any person, entity or circumstance
is held invalid by any court, the remainder of this regulation
or the applicability of such provisions to other persons,
entities or circumstances shall not be affected thereby.
11:3‑36.11 Required amendatory endorsements
(a) For all policies providing automobile physical damage
coverage issued on or after June 1, 1991, or renewed on
or after July 1, 1991, insurers may adopt any one of the
following procedures:
1. Amend the policy by adding thereto the endorsements as
set out in (c)) below, which may include the option set
forth in (d) below and which is hereby deemed approved
upon filing with the Department;
2. Submit for Department approval the insurer's own similar
endorsement; or
3. Submit for Department approval the insurer's basic policy
form incorporating the substance of the endorsements set
out in (c) below, which may include the option set forth
in (d) below.
(b) An insurer which adopts any of the above procedures may
subsequently submit firings under any of the other procedures.
(c) The required endorsement is as follows: New Jersey Mandatory
Inspection Endorsement for Physical Damage Coverage. Notwithstanding
any conflicting provisions contained in the automobile
physical damage coverage of this policy, it is agreed that
the following conditions are added:
1. The company or its authorized representative hoe the right
to inspect any private passenger automobile, including
a nonowned automobile, insured or intended to be insured
under this policy before physical damage coverage shall
be effective.
2. During the term of the policy, coverage for an additional
or replacement private passenger automobile shall not become
effective until the insured notifies the company and requests
coverage for the automobile.
3. When an inspection is required by the company the insured
shall cooperate and make the automobile available for the
inspection.
(d) Insurers which elect to provide physical damage coverage
for a replacement automobile for three days without an
insured% request for coverage in accordance with N.J.A.C.
11:3‑36.5 may substitute the following provision
for item 2 in the endorsement in (c)) above
1. During the term of the policy, coverage for an additional
or replacement private passenger automobile shall not
become effective until the insured notifies the company
and requests
coverage for the automobile. However, this provision
does not apply to a replacement private passenger automobile,
for a period of three days, including the :day on which
the automobile is acquired, if
I. The automobiles acquired during the policy period; and
ii. There was Physical Damage Coverage on the vehicle replaced
for at least the 12‑month period preceding the replacement
date.
(1) The three‑day period in paragraph 1 above shall
be extended by one day for each Saturday, Sunday or New
Jersey State holiday failing within the three‑day
period.
New Rule, 81992 (.I42, effective March 16,
1992
See: 23 N.J.R. 1262(a), 24 N.J.R 953(b).
11:3‑36.12 (Reserved)
New Rule, KIM d.142, effective March 16,
1992.
see: 23 N.J.R. 1262(a), 24 N.J.R. 953(b).
Repealed by R.1992 d.424, effective October
19, 1992
See: 24 N.J.R. 2708(c), 24 NJ.R. 3729(a).
Text on October 1, 1942 operative date of N.J.A.C. 11:3‑36
deleted.
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