Jan 24, 2022

New Jersey Enacts Bad Faith Law Creating a Private Cause of Action Against Automobile Insurers for the Denial or Delay of Uninsured/Underinsured Motorist Benefits

By Frank M. Coscia, Esq. and Valerie A. Vladyka, Esq.

On January 10, 2022, the New Jersey Legislature passed the New Jersey Insurance Fair Conduct Act ("IFCA") which was subsequently signed into law by Governor Murphy on January 18, 2022. The IFCA creates a private cause of action against automobile insurers for the unreasonable delay or unreasonable denial of uninsured/underinsured motorist benefits. Under the new law, a claimant, defined under the IFCA as any individual injured in a motor vehicle accident who is entitled to uninsured or underinsured motorist benefits, may file a civil action against his/her automobile insurer for:

  1. An unreasonable delay or unreasonable denial of a claim for payment of benefits under the automobile insurance policy; or
  2. Any violation of the New Jersey Unfair Claims Settlement Practices Act (N.J.S.A. 17:29B-4)

Prior to the passage of the IFCA, only the Department of Banking and Insurance (DOBI) had enforcement power over alleged violations of the Unfair Claims Settlement Practices Act. Under this new law, any claimant will be able to bring a civil action for alleged violations of the Unfair Claims Settlement Practices Act. It is significant to note that a claimant is not required to prove that an insurer's actions were of such frequency as to indicate a general business practice. Thus, a single violation of the Unfair Claims Settlement Practices Act, if proven, will establish liability.

Under the IFCA, a claimant who succeeds in proving an unreasonable delay/denial of a claim or a violation of the Unfair Claims Settlement Practices Act is entitled to actual damages caused by the violation which shall include, but is not limited by, the actual trial verdict not to exceed three (3) times the policy limit. Additionally, a successful claimant is entitled to pre and post judgment interest, reasonable attorney's fees and all reasonable litigation costs.

Finally, the IFCA provides that carriers are prohibited from passing on any rate increase to the policyholder due to the carrier's compliance with the law.

The IFCA affords claimants with a powerful new weapon in pursuing uninsured/underinsured motorist claims against carriers. In all likelihood, bad faith claims will increase because of this new law. As a result, carriers need to review their current claims handling procedures and immediately implement new practices in response to the IFCA. Schenck Price will continue to monitor the effects of the IFCA and will provide further analysis of the impact of the new law, along with guidance for responding to these claims.

If you have any questions or require additional information, please contact Frank M. Coscia at fmc@spsk.com, or Valerie A. Vladyka at vav@spsk.com.


DISCLAIMER: This Alert is designed to keep you aware of recent developments in the law. It is not intended to be legal advice, which can only be given after the attorney understands the facts of a particular matter and the goals of the client.