Two New Jersey Assemblymen, Reed Gusciora and Timothy J. Eustace, recently proposed Bill A-4382 which would provide insureds with a new private cause of action against insurers for bad faith conduct. The statute would make unfair claims settlement conduct a violation of New Jersey Statute 17:29B-4, the state’s Unfair Claims Settlement Practices Act, regardless of whether the insurer’s violations are indicative of a general business practice. The text of the proposed bill clarifies that the law is not intended to narrow or limit any existing rights under New Jersey case law to assert a private cause of action for bad faith against an insurer.
However, the law would apply only to claims arising out of a declared disaster, defined in the proposed Bill as “any natural, technological, or civil emergency that causes damage of sufficient severity and magnitude to result in a declaration of a state of emergency by the Governor [of New Jersey] or the President of the United States.” If the bill passes, it would be effective immediately and would apply retroactively to all claims filed on or after October 1, 2012, including all Superstorm Sandy-related insurance claims.
Applicable violations would include, but would not be limited to, actions such as:
(1) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
(2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
(3) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
(4) Refusing to pay claims without conducting a reasonable investigation based upon all available information; and
(5) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.
If the claimant is able to establish such a violation, the claimant would be entitled to:
(1) The full amount of damages set forth in the final judgment, regardless of the coverage limits of the policy;
(2) Prejudgment interest, reasonable attorney’s fees, and all reasonable litigation expenses from the date of the institution of the action filed pursuant to the provisions of the bill; and
(3) Punitive damages, when the insurer’s acts or omissions demonstrate, by clear and convincing evidence, actual malice or wanton and willful disregard of any person who foreseeably might be harmed by the insurer’s act or omissions.