It is not bad faith to reject a UM arbitration award and seek trial de novo in reliance on an unpublished case and independently under policy language.

After the plaintiff was struck by an uninsured motorist, he filed a UM claim against his auto insurer and that of his employer, which proceeded to arbitration. The insurers were ordered to split equally an award in the plaintiff’s favor. The employer’s insurer paid, but NJM rejected the award and demanded a trial de novo. The trial court summarily affirmed, and NJM paid its share. The plaintiff then sued NJM for bad faith, seeking treble and punitive damages and attorney’s fees. The New Jersey Supreme Court held for NJM, noting that, while “[o]ne inherent fiduciary obligation of every insurer is the duty to settle claims,” nevertheless, “bad faith against an insurer in denying an insurance claim cannot be established through simple negligence. Rather, to establish a first-party bad faith claim for denial of benefits in New Jersey, a plaintiff must show ‘that no debatable reasons existed for denial of the benefits.’” In this case, the Supreme Court held that NJM’s position in rejecting the arbitration award was “fairly debatable” because it was based on an unpublished appellate case. The court also independently held that NJM’s position was “fairly debatable” under its policy language at issue because the award itself exceeded the minimum financial responsibility limits, even though its one-half share did not. And so, the court rejected the plaintiff’s bad faith claim.

_{Case Law Alerts, 2^nd Quarter, April 2015}

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