Professional Liability

New Jersey is on the brink of its first insurance bad faith statute after clearing both the Senate and Assembly by vote on January 10, 2022. While the New Jersey Legislature website does not indicate when it may happen, it is anticipated that Governor Murphy will sign this Bill into law.

The Bill is titled “New Jersey Insurance Fair Conduct Act.” The statute provides “claimants” with a private cause of action for conduct deemed “unfair and discriminatory,” as delineated in the Act, N.J.S.A. 17:B29-4. The earliest version of the Bill applied to all lines of insurance. However, the Assembly and Senate Committees pared the initial legislation down, and the current form of the law applies only to underinsured and uninsured motorist claims. 

Per the language of the statute, a claimant may file 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 P.L. 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 Act. Instead, the state could take administrative action against the insurer for violations of the Act, but only if the violations constituted a “general business practice.”

This Bill not only creates a private cause of action under the Act, but (unlike the state) a private claimant is not required to prove that the insurer’s actions were of such a frequency as to indicate a general business practice. If the claimant establishes that a violation has occurred, he/she “shall” be entitled to actual damages caused by the violation and prejudgment interest, reasonable attorney’s fees and all reasonable litigation expenses. 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 intent. 

It is unclear at this point how the courts will interpret “unreasonable delay” and/or “unreasonable denial”; however, they are certainly issues that will generate a great deal of litigation in the coming years. 

The attorneys in Marshall Dennehey’s Insurance Services Practice Group are highly experienced in handling such litigation and stand ready to answer questions and help you defend these cases once the Bill is signed into law. 

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

_{Legal Updates for Insurance Services – January 14, 2022, has been prepared for our readers by Marshall Dennehey Warner Coleman & Goggin. It is solely intended to provide information on recent legal developments, and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note to tamontemuro@mdwcg.com ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2022 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved.}