The Governor has signed what is referred to as the “New Jersey Insurance Fair Conduct Act (“Act”) (SB1559).
The Act applies to all pending and open claims and creates a new cause of action in favor of UM/UIM claimants in cases involving:
- An unreasonable delay or unreasonable denial of UM/UIM benefits; or
- A violation of the New Jersey Insurance Trade Practices Act, N.J.S.A. 17:29B-4
A claimant that successfully proves a violation of the Act will be entitled to recover from the UM/UIM insurer:
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Actual damages caused by the violation including “actual trial verdicts that shall not exceed three times the applicable coverage amount”
- Attorney’s fees, suit costs and pre-judgment and post-judgment interest
Thus, the Act allows for recovery of amounts in excess of the stated UM/UIM policy limit. In doing so, the Act seemingly allows for recovery of what are essentially punitive damages based on negligence or inadvertence. There is no express requirement that a claimant prove willful or outrageous conduct. The Act also does not incorporate the higher standard of proof – clear and convincing - normally required to support a claim for punitive damages. Instead, the Act merely requires proof by a preponderance of evidence. It is inevitable that the inclusion of the fee shifting provision will result in increased allegations of unreasonable delay or denial in existing and future UM/UIM cases. Further, the Act gives rise to a private cause action under the New Jersey Insurance Trade Practices Act, N.J.S.A. 17:29B-4, that New Jersey Courts have heretofore not recognized. The Act also allows for claims professionals to be named as defendants based on the definition of “Insurer” (includes “any individual…which is responsible for determining claims made under the policy.”) Litigation can be expected regarding the fact-sensitive issues of what constitute unreasonable delays and unreasonable denials in particular cases.
Given the increased potential exposure for UM/UIM insurers and claim professionals handling such claims, New Jersey UM/UIM insurers must be alerted to and cognizant of the provisions and consequences of the Act and implement practices with heightened focus on prompt and timely processing of UM/UIM claims.
