Legal Updates for Coverage & Bad Faith
Legal Updates for Coverage and Bad Faith
Edited by Allison Krupp, Esq.
Proposed Insurance Bad Faith Law Will Significantly Alter the Legal Landscape in New Jersey
By David Blake, Esq.
A bad faith bill authored by two New Jersey State Senators recently passed a vote in the Senate on its way to a full vote by the State Assembly. The passing of the bill marks the first time that a bad faith bill has made it out of the Senate. The bill, labeled “New Jersey Insurance Fair Conduct Act,” creates a private cause of action for single and “technical” violations of “unfair or discriminatory” practices delineated in the “New Jersey Unfair Claim Settlement Practices Act” N.J.S.A. 17:B29-4. The term “claimants” includes first and third party (assignee’s) claimants. The responsibility to enforce the provisions of the existing law is that of the Commissioner of Insurance, and its objective is to provide regulatory authority and oversight of industry-wide trade practices, not single instances of “alleged” violations. The Bill number is Senate, No. 2144. The statement accompanying the Bill provides:
This bill establishes a private cause of action for insureds or their assignees regarding bad faith settlement practices in the settlement or attempted settlement of claims involving insurance coverage. The bill permits a claimant to file a cause of action against an insurer arising from the insurer’s breach of good faith and fair dealing with the claimant, which breach shall include the insurer’s failure to attempt in good faith to effectuate a prompt, fair and equitable settlement of a claim in which liability has become reasonably clear. In this “breach of good faith” cause of action, in order to prevail, the claimant shall prove that the insurer acted unreasonably in the investigation, evaluation, processing, payment, or settlement of the claimant’s claim for coverage or without a reasonable basis in denying the coverage. The bill incorporates into statutory law New Jersey’s current case law, which recognizes private causes of action in first-party and third-party claims arising out of the bad faith actions of insurance companies which result in harm to their insureds. See Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474 (1974). The bill also reverses the recent holding of the Supreme Court of New Jersey in Wood v. New Jersey Manufacturers Ins. Co., 2011 N.J. Lexis 679, (2011), that bad faith breach of contract claims against insurers are actions to which the right to a jury trial attaches; the bill provides that these claims are to be heard and decided by a judge of competent jurisdiction.
The remedies provided by the Bill include attorney fees, costs, and treble damages to individual “claimants.” An individual “claimant” arguably has a right to discovery of all facets of an insurer’s claim operation due to the Bill’s tie to the statute that regulates trade practices. If passed, the Bill will undoubtedly increase the cost of conducting insurance business in the state of New Jersey. Some estimates are that New Jersey consumers may see premium increases as much as 40%. The Bill’s sponsors include State Senator Nicholas Scutari [(908) 587-0404 (District Office)] and Vin Gopal [(732) 695-3371 (District Office)].
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