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Scott Tredwell
New Jersey’s Bad Faith Statute
By Scott Tredwell
Until recently, New Jersey uninsured (UM) and underinsured (UIM) claims were subject to common law bad faith claims. See Pickett v. Lloyd’s, 621 A.2d 445 (N.J. 1993). Insurers could successfully defend (or avoid) such an action by showing that their conduct was “fairly debatable.” See Pickett, 621 A.2d at 454. In practice, this meant that extra-contractual damages were rarely awarded (or even sought).
Given this nearly insuperable standard for demonstrating an insurer’s bad faith, Last year, the New Jersey legislature created a statutory cause of action, the New Jersey Insurance Fair Conduct Act (the “IFCA”), N.J.S.A. 17:29BB-1, et seq. Under the statute, insurers can now be sued for either:
• An “unreasonable” delay or denial in coverage; or
• A violation of any of the sixteen enumerated unfair claim settlement practices under the UCSPA.
What’s more, if bad faith can be shown, the statute allows insureds to recover:
• Up to three (3) times the policy limit;
• Counsel fees;
• Litigation expenses;
• Pre- and post-judgment interest, and;
• Other “actual damages.”
Numerous questions remain unanswered. Among the first is the effective date of the IFCA. The statute itself states it “take[s] effect immediately.” But it does not contain language explaining whether the Act applies only to policies issued after the effective date, to claims made after the effective date, or more generally to bad faith conduct occurring after the effective date. As a consequence, courts have been struggling. One case has made it to appeal, Stankovits v. Penn National Insurance et al., Docket No. MID-L-6851-20, but as of the writing of this article, no decision has been issued.
While we await guidance, some litigants are turning arguing from analogous statutes. James v. New Jersey Manufacturers, 83 A.3d 70 (N.J. 2014) (applying “step down” statute prospectively); Bunk v. Port Auth. of New York & New Jersey, 144 N.J. 176, 676 A.2d 118 (1996) (applying New Jersey statute barring state employees from simultaneously obtaining accidental disability pension benefits and
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Extra-Contractual Liability Law
FDCC ANNUAL INSIGHTS 2023