Most insurance companies in New Jersey and their employees are honest businesspeople. However, sometimes insureds butt heads with their business, homeowners’ or auto insurance company. The claims process is taking too long or the adjuster does not return phone calls. Or maybe the company denied the claim or made a low-ball offer. If you feel the insurance company treated you unfairly, can you sue a New Jersey insurance company for bad faith conduct?
The Short Answer is Yes, You Can Sue a New Jersey Insurance Company for Bad Faith Conduct
Insureds who feel their insurance company has acted in bad faith can sue the carrier-but it is not easy.
Insurance policies are contracts. In return for accepting your premium payments, insurance companies agree to protect you if you get in a car accident and get sued. Likewise, if a storm or fire damages your home or business, your homeowners’ or business insurance will pay to repair or replace your damaged property.
But what happens if the investigation of your claim is taking too long? You pointed out the different areas of your home the storm damaged, but the adjuster did not include them all in his report? After ignoring several calls, the insurance company has offered a settlement, but it seems too low?
One of the leading New Jersey Supreme Court cases on suing an insurance company for bad faith conduct is Pickett v. Lloyd’s, 131 N.J. 457 (1993). In Pickett, the New Jersey Supreme Court ruled that an insurance company owes an insured a duty of good faith and fair dealing when processing a claim. Moreover, an insurance company may be liable to the insured for its bad faith failure to properly process a claim or pay benefits under the policy.
However, bad faith in denying all or part of a claim cannot be established if the underlying claim was “fairly debatable.”.
New Jersey Unfair Claims Settlement Act
In 2013, the state legislature passed the New Jersey Unfair Claims Settlement Act. Section 17:29B-4 of the UCSPA prohibits insurance companies from engaging in several types of misconduct. Some of that misconduct includes:
- Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
- Failing to acknowledge and act reasonably promptly upon communications regarding claims arising under insurance policies;
- Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
- Refusing to pay claims without reasonably investigating based the claim;
- Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
- Not attempting in good faith to effectuate prompt and fair settlements of claims in which liability has become reasonably clear; and
- Compelling insureds to institute litigation to recover amounts due under an insurance policy.
There are several more examples of prohibited conduct under the UCSPA in the statute.
The USCPA does not provide for a private cause of action. However, violations of the UCSPA can support an insured’s claim for bad conduct by his or her insurance company.
New Jersey Insurance Fair Conduct Act
Notwithstanding the above, in January 2022 Governor Murphy signed into law the New Jersey Insurance Fair Conduct Act (IFCA) (N.J.S.A. 17:29BB-1, et. seq.) The IFCA lets persons who make uninsured motorist/underinsured motorist (UM/UIM) claims sue for bad faith conduct by New Jersey auto insurance companies.
The IFCA enables persons who make UM/UIM claims to sue their insurance carrier in three situations:
- When the insurance carrier “unreasonably” denies a claim for coverage or benefits;
- When the carrier “unreasonably” delays providing coverage or paying benefits; and
- Lastly, when the carrier violates the USCPA.
Under the IFCA, motorists may seek damages including actual trial verdicts up to three times the coverage limits, pre-and post judgement interest. They may also seek reasonable attorneys’ fees and reasonable litigation expenses.
Now aggrieved insureds who believe their insurance company acted in bad faith may sue their carriers under the IFCA-but only those who are motorists who have filed UM/UIM claims with their carrier.
Statute of Limitations
Under New Jersey law, there is a six-year statute of limitations for suing a party for breach of contract (N.J.S.A. 2A:14-1). That means an insured who believes her insurance company has acted in bad faith must sue within six years of the insurance company’s bad faith conduct.
However, the insurance policy could have a different time within which an insured must sue the carrier.
Therefore, insureds who believe they have been the victim of bad faith conduct by their carrier need to check their policy to see when they need to sue.
You Can Complain to the State About Your Insurance Company
In New Jersey, an insured who believes his insurance carrier has mistreated him can complain to the Ombudsman’s Office in the Department of Insurance and Banking. There is no special letter or form that is required. Rather, an insured can send a letter outlining the problem he is having with her insurance company. He can include supporting documentation, photographs, etc.
However, before filing a complaint with the Ombudsman’s Office, the insured must make an internal appeal to the insurance carrier. State insurance regulations require insurance companies in New Jersey to have an internal appeal process in place. The carrier’s employees who review appeals do not regularly handle claims.
Regulations require the insurance company to send a decision on the appeal to the insured within 10 business days of receipt of the appeal.
You May Have to Sue Your Insurance Company
The Ombudsman’s Office can review your complaint. However, the Ombudsman’s Office can only fine the insurance company for its bad conduct. The Ombudsman’s Office does not award you compensation or force the insurance company to pay you for an improperly delayed or denied claim.
Consequently, if you still believe you are the victim of bad faith conduct, you will have to sue the carrier.
The New Jersey Insurance Attorneys at Schiller Pittenger & Galvin Can Help
If you believe you are the victim of bad faith conduct by your insurance company, you are not alone. Remember, insurance companies are in the business of collecting premiums and settling claims as cheaply as possible. The USCPA, IFCA and New Jersey courts recognize that insurance companies act in bad faith while handling claims. If your insurance company has handled your claim in a bad faith manner, you may be entitled to compensation. Contact the experienced New Jersey insurance lawyers at Schiller, Pittenger & Galvin, P. C., at their Scotch Plains office at 908-490-0444 or email them here to schedule an appointment.