On January 18, 2022, Governor Murphy signed into law the “New Jersey Insurance Fair Conduct Act” (“IFCA”) which creates a private cause of action for insurance bad faith in the handling and payment of claims for uninsured/underinsured (“UM/UIM”) benefits. Under the IFCA, a claimant “who is unreasonably denied a claim for coverage or payment of benefits or who experiences an unreasonable delay for coverage or payment of benefits, under an uninsured or underinsured motorist policy by an insurer” may file a civil suit against his/her automobile insurer.
In addition to be able to sue for an unreasonable delay or unreasonable denial of a claim for benefits under an insurance policy, an aggrieved claimant may also sue for any violation of the New Jersey Unfair Claims Settlement Practices Act (N.J.S.A. 17:29B-4). This Act governs “unfair methods of competition and unfair and deceptive acts or practices in the business of insurance.” The deceptive acts or practices include “unfair claim settlement practices,” which enumerates 15 different types of practices which qualify as unfair settlement practices.
A claimant who is able to prove a violation of the IFCA would be entitled to actual damages that shall not exceed three times the applicable coverage amount, interest, reasonable attorney’s fees, and reasonable litigation expenses. Not only are insurers subject to the law, but it also includes any individual or entity that is responsible for determining claims under the policy. That means bad faith liability would apply to third party administrators who handle claims and could potentially apply to individual claims adjustors. Public entities (including joint insurance funds) are excluded from this law. The law takes effect immediately.
The IFCA does not define what is meant by “unreasonable” conduct in denying a claim or what is an “unreasonable” delay in paying benefits. It also leaves open whether a claimant would be entitled to a jury trial to pursue a violation of the IFCA.
What is clear is that this law provides a new remedy for claimants who feel that their insurance company committed bad faith in the handling and payment of their UM/UIM claims. Insurers need to be aware of this new law and may want to take this opportunity to review their claims handling of their UM/UIM claims to be able to defend against lawsuits alleging a violation of this new law.
