NJ Legislature Embraces Bad Faith – What’s Next?? – Assurance

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United States: NJ Legislature Embraces Bad Faith – What’s Next??

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New Jersey is on the verge of its first bad faith insurance status after clearing the Senate and Assembly by vote on January 10, 2022. Although the New Jersey Legislature website does not state not when it may happen, it is expected that Governor Murphy will sign this bill into law.

The bill is titled “New Jersey Insurance Fair Conduct Act”. The law offers “plaintiffs” a private cause of action for conduct deemed “unjust and discriminatory,” as stated in the statute, NJSA 17:B29-4. The first version of the bill applied to all branches of insurance. However, House and Senate committees have pared down the original legislation and the current form of the law only applies to claims from underinsured and uninsured motorists.

According to the wording of the statute, a plaintiff may bring a civil action against an automobile insurer for “(1) an unreasonable delay or unreasonable denial of a claim for payment of benefits under an insurance policy; or ( 2) any violation of the provisions of section 4 of PL 1947, c.379 (C.17:29B-4) [The New Jersey
Unfair Claims Settlement Practices Act].” It is important to note that in New Jersey, a private right of action did not exist under the law. Instead, the state could take administrative action against the insurer for violating the law, but only if the violations constituted a “general business practice.”

This bill not only creates a private cause of action under the law, but (unlike the state) a private plaintiff is not required prove that the actions of the insurer were of such frequency as to indicate a general business practice. If plaintiff establishes that a breach has occurred, plaintiff will “shall” be entitled to actual damages caused by the breach and prejudgment interest, reasonable attorneys’ fees, and all reasonable court costs. Thus, the bill turns a law designed to deter “general business practices” into a sword to punish violations on a case-by-case basis, which was never its original intention.

It is unclear at this stage how courts will interpret “unreasonable delay” and/or “unreasonable refusal”; however, these are certainly issues that will generate a lot of litigation in the years to come.

The attorneys in Marshall Dennehey’s Insurance Services Practice Group are highly experienced in handling such disputes and stand ready to answer questions and assist you in defending these cases once the bill becomes law.

Click here to view the bill: https://www.njleg.state.nj.us/bill-search/2020/S1559 or contact us for a copy.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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