New Jersey Enacts an Insurance Bad Faith Law for Auto Insurers

On January 18, 2022, New Jersey Governor, Phil Murphy, signed into law the New Jersey Insurance Fair Conduct Act (“IFCA”).  Under the new law, policyholders who are injured in a motor vehicle accident can file suit against their automobile insurance company for “an unreasonable delay or unreasonable denial” of their claims.  Essentially the new law allows policyholders to sue their insurance company for acting in bad faith in failing to handle legitimate claims for their policyholders.  The IFCA applies to uninsured motorist (“UM”) or underinsured motorist (“UIM”) coverage.

If you are injured in an automobile accident that is someone else’s fault and they do not have adequate coverage under their insurance policy (or even worse, no coverage at all) to fairly compensate you for your injuries, you may be able to make a claim against your own auto insurer under your policy’s Uninsured/Underinsured (UM/UIM) motorist coverage – what is commonly referred to as “first-party benefits.” The IFCA mandates that when you make a UM/UIM claim against your own insurance company for injuries or harms you have suffered, the company must handle the claim fairly and professionally without unreasonable delay. This coverage is to protect you in case another negligent driver does not have sufficient bodily injury coverage or automobile insurance to cover your injuries and harms in a motor vehicle accident.   For example, if someone is involved in a serious motor vehicle where the other driver only has $25,000 in liability insurance coverage, but the permanent injuries and related damages exceed that amount, then that person needs to go through their own insurance policy to get additional funds to cover their extensive injuries and damages.

In New Jersey, the above scenario is fairly common and, unfortunately, insurance companies often fight such claims and delay the recovery process – sometimes for years. During this delay, the injured victim would not only have to invest time in pursuing their claim but be without the compensation that they may be entitled to for their injuries.

How does the IFCA help?

FCA allows an injured person to file a lawsuit against their own carrier for UM/UIM benefits when their insurance company engages in the following conduct:

• Unreasonably delays a claim for payment of benefits;
• Unreasonably denies a claim for payment of benefits; or
• Violates the New Jersey Unfair Claims Settlement Practice Act under N.J.S.A. 17:29B-4.

Damages

If it is established that an insurance company violated the Fair Conduct Act, as described above, the insured person can seek damages including:

• Actual damages caused by the insurance company’s violation of this act up to three (3) times the actual coverage of the policy;
• Pre and post-judgment interest, reasonable attorney fees, and reasonable litigation expenses.

We feel that this law levels the playing field for the insured who pays their premiums and acts responsibly, and this new law now requires their auto insurance company to also conduct their business in a fair and responsible manner. Too often, insurance companies delay paying legitimate claims to accidents victims or deny claims that should not be denied. This is good news for New Jersey drivers whose insurance carriers act in bad faith.

If you have any questions about the New Jersey Insurance Fair Conduct Act and how it affects your rights, please feel free to contact Christian Perrucci or Robert Donchez.