On January 18, 2022, Governor Phil Murphy signed The New Jersey Fair Conduct Act, allowing policyholders to pursue a private cause of action against their insurance company when the insurer unreasonably delays or denies uninsured (UM) / underinsured (UIM) motorist claims.
Under the new law, an insured individual claiming UM/UIM benefits may now file a civil lawsuit against their insurance company if the company:
- Unreasonably denies a claim for coverage;
- Unreasonably delays a claim for coverage; or
- Violates the New Jersey Unfair Claims Settlement Practices Act (N.J.S.A. 17:29B-4)
Before the new law, it was left to the Commissioner of the New Jersey Department of Banking and Insurance to enforce the New Jersey Unfair Claims Settlement Practices Act. Now, private citizens may take action to ensure they are not taken advantage of.
Where it is established that an insurance company violated the New Jersey Fair Conduct Act, the insured may seek the following:
- Actual damages resulting from the insurance company’s unreasonable delay or denial, up to three times the policy limit;
- Pre- and post-judgment interest;
- Attorney’s fees; and
- Litigation expenses.
Insurance companies hotly contested the new law, arguing that the law could potentially result in a flood of litigation driving up car insurance premiums. Further, many insurance companies sent their New Jersey insureds warnings of potential drastic increases in car insurance premiums. They asked insurers to contact their legislators and demand they vote against the bill.
However, think about what the insurance companies were asking you to do. They asked that you help shut down a bill that would hold them responsible if they did not treat you fairly. Thus, allowing them to continue to unreasonably delay and deny claims.
On the other hand, plaintiffs’ attorneys representing injured victims viewed the bill as a way to level the playing field and provide insurance companies with a deterrent not to unreasonably delay and deny uninsured/underinsured motorist claims. Moreover, as the new law governs only uninsured and underinsured motorist claims, much of the apprehension regarding premiums is probably misplaced, as it is more likely the new law will only be invoked in extraordinary circumstances.
Under the prior laws, insurance companies were almost incentivized to delay claims, as doing so would drive up litigation costs. This would then eat away at the injured party’s recovery or act to place the injured individual in a situation of desperation, where they would accept a lower payment rather than continue to fight for a reasonable settlement. Consequently, it is the undersigned's opinion that it will largely depend on how insurance companies decide to conduct their businesses.
Where plaintiffs’ attorneys and insurance companies seem to agree, however, is that the new law is not well-defined, as the law provides little to no guidance on what constitutes an unreasonable denial or delay. But see Pickett v. Lloyd’s, 131 N.J. 457 (1993).
If you have been injured due to another individual's negligence and wish to discuss your legal options, Farrell & Thurman, P.C., offers a variety of convenient ways to schedule a free, no-pressure consultation. You may do so directly on our website (Schedule A Consult), via phone (609-924-1115), or by email (Contact Us).