Since the 1990s, the New Jersey Supreme Court has recognized a common-law claim for bad faith denials of insurance coverage.  Subsequent attempts to establish a statutory bad faith claim in New Jersey have failed.  However, a bill currently pending before the state legislature would create a statutory cause of action for bad faith in New Jersey. Under the proposed legislation, known as the “New Jersey Insurance Fair Conduct Act,” an insurer's potential liability for bad-faith denials would be significantly greater than New Jersey courts currently allow.  This could lead to increased costs for insurers and then an increase in insurance premiums for their insureds.

How the Law Could Change Under S2144

The bill now before the legislature, S2144, would expressly allow any claimant to sue their insurance company for “an unreasonable delay or unreasonable denial of a claim for payment of benefits under an insurance policy.”   It would also permit first party claims for property damage, uninsured/underinsured motorist benefits, and personal injury protection coverage.  S2144 would authorize a jury to award not only actual damages, but also treble damages, as well as attorney's fees and litigation expenses.

S2144 also defines “insurer” broadly to cover individuals associated with executing, renewing, or delivering an insurance policy covered by New Jersey law. In other words, a plaintiff could theoretically not only sue the insurance company, but also the agent or adjusters whose actions led to an alleged bad-faith delay or denial of their claim.

As of this writing, S2144 has not become law. It passed the state Senate on June 7, 2018, by a 21-14 vote. It is currently pending before the Assembly's Financial Institutions and Insurance Committee.  If you have any questions or concerns about how this legislation could affect you or your business, please contact Juliann Alicino at jalicino@hoaglandlongo.com or call 732-545-4717 today.