STATE OF NEW JERSEY
PRE-FILED FOR INTRODUCTION IN THE 2012 SESSION
Senator NICHOLAS P. SCUTARI
District 22 (Middlesex, Somerset and Union)
Provides private cause of action for bad faith in settlement of insurance claims.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel
An Act concerning bad faith in the settlement of insurance claims and supplementing Title 17 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. As used in this section:
"Claimant" means an individual, corporation, association, partnership or other legal entity asserting a direct or assigned right to payment by an insurer under an insurance policy, arising out of the occurrence of a contingency or loss covered by the policy.
"Insurance policy" means any insurance policy or contract issued, executed, renewed or delivered in this State pursuant to the provisions of Title 17 of the Revised Statutes.
"Insurer" means any individual, corporation, association, partnership or other legal entity which issues, executes, renews or delivers an insurance policy in this State, or which is responsible for determining claims made under the policy.
b. A claimant may file a cause of action against an insurer arising from the insurer’s breach of its duty of good faith and fair dealing, which breach shall include the insurer’s failure to attempt in good faith to effectuate a prompt, fair and equitable settlement of a claim in which liability has become reasonably clear. Notwithstanding any other law, regulation, or rule to the contrary, the cause of action shall be heard and determined by a judge in a court of competent jurisdiction.
c. In order to recover damages in the cause of action provided for in this section, the claimant shall prove that the insurer acted unreasonably in the investigation, evaluation, processing, payment or settlement of the claimant’s claim for coverage under the policy or without a reasonable basis in denying the coverage.
d. Upon establishing those proofs provided for in subsection c. of this section, the claimant shall be entitled to:
(1) the full amount of damages as determined by the judge, 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 this section. The prejudgment interest shall be calculated at the rate provided for tort actions, or for non-acceptance of a formal offer for judgment, whichever is higher, as prescribed in the Rules of Court; 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 acts or omissions.
2. This act shall take effect immediately and shall apply to all claims filed on or after the effective date.
This bill establishes a private cause of action for insureds or their assignees regarding bad faith settlement practices in the settlement or attempted settlement of claims involving insurance coverage.
The bill permits a claimant to file a cause of action against an insurer arising from the insurer’s breach of good faith and fair dealing with the claimant, which breach shall include the insurer’s failure to attempt in good faith to effectuate a prompt, fair and equitable settlement of a claim in which liability has become reasonably clear. In this “breach of good faith” cause of action, in order to prevail, the claimant shall prove that the insurer acted unreasonably in the investigation, evaluation, processing, payment, or settlement of the claimant’s claim for coverage or without a reasonable basis in denying the coverage.
The bill incorporates into statutory law New Jersey’s current case law, which recognizes private causes of action in first-party and third-party claims arising out of the bad faith actions of insurance companies which result in harm to their insureds. See Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474 (1974). The bill also reverses the recent holding of the Supreme Court of New Jersey in Wood v. New Jersey Manufacturers Ins. Co., 2011 N.J. Lexis 679, (2011), that bad faith breach of contract claims against insurers are actions to which the right to a jury trial attaches; the bill provides that these claims are to be heard and decided by a judge of competent jurisdiction.