On June 7, 2018, the New Jersey Senate passed the New Jersey Insurance Fair Conduct Act, NJS2144 after years of legislative stagnation during which insurance companies received a “free pass” for unfair claim denials. The Act, which still must proceed through the State Assembly and be signed by the Governor, seeks to establish a private cause of action for claimants whose insurance claims are (1) unreasonably delayed or denied; or (2) administered in violation of the New Jersey Unfair Claims Settlement Practices Act. See N.J.S.A. § 17:29B-4. Insurers will certainly have their eye on the Act as it works its way through the legislative process because it would go a long way in evening the playing field between claimants and insurance companies.
Under current bad faith insurance law, insurers in New Jersey are protected by the “fairly debatable” standard. See Pickett v. Lloyd’s, 131 N.J. 457 (1993). A claimant whose individual disability claim is wrongfully denied cannot prevail on a bad faith claim in court—a claim seeking extra-contractual damages for extra-reprehensible conduct—unless the claimant can prove there was no debatable reason for the insurance company’s decision. So long as the insurance company can point to a few facts supporting the denial, a court will not find the company engaged in bad faith. As such, successful bad faith claims are few and far between. Additionally, under the Unfair Claims Settlement Practices Act, only the New Jersey Commissioner of Banking and Insurance can bring suit against an insurance company for unfair claims practices (and even then, only in response to a “pattern or practice” of unlawful claim denials). The lack of teeth for individual claimants has left individuals facing unfair claim denials with little recourse outside of pursuing a run-of-the-mill breach of contract claim.
If the proposed Act is passed into law, all that will change. The Act would provide judicial relief for claimants whose disability claims are administered or denied improperly—including prejudgment interest, attorney’s fees, litigation expenses, and treble damages. Insurers would no longer be able to point to any debatable reason for denying a claim. Rather, insurers would be required to make reasonable claim decisions based on all the facts or suffer the consequences of treble damages. We will be following the Act closely and advocating for its passage, so we can seek justice for our clients and hold the insurance companies to their insurance promises.
We at Bonny G. Rafel LLC are pleased that New Jersey is finally recognizing this private cause of action and will continue to advocate for this bill’s passage. Clients who claims are denied must be entitled to seek reinstatement of benefits, consequential damages and counsel fees. Bonny G. Rafel LLC.