A Capehart Scatchard Blog

New Jersey Enacts Bad Faith Law Covering the Payment of Uninsured/Underinsured Motorist Benefits

By on January 21, 2022 in Legislation with 0 Comments

On January 18, 2022, Governor Murphy signed into law the “New Jersey Insurance Fair Conduct Act” (“IFCA”) which creates a private cause of action for insurance bad faith in the handling and payment of claims for uninsured/underinsured (“UM/UIM”) benefits. Under the IFCA, a claimant “who is unreasonably denied a claim for coverage or payment of benefits or who experiences an unreasonable delay for coverage or payment of benefits, under an uninsured or underinsured motorist policy by an insurer”  may file a civil suit against his/her automobile insurer.

In addition to be able to sue for an unreasonable delay or unreasonable denial of a claim for benefits under an insurance policy, an aggrieved claimant may also sue for any violation of the New Jersey Unfair Claims Settlement Practices Act (N.J.S.A. 17:29B-4). This Act governs “unfair methods of competition and unfair and deceptive acts or practices in the business of insurance.” The deceptive acts or practices include “unfair claim settlement practices,” which enumerates 15 different types of practices which qualify as unfair settlement practices.

A claimant who is able to prove a violation of the IFCA would be entitled to actual damages that shall not exceed three times the applicable coverage amount, interest, reasonable attorney’s fees, and reasonable litigation expenses. Not only are insurers subject to the law, but it also includes any individual or entity that is responsible for determining claims under the policy. That means bad faith liability would apply to third party administrators who handle claims and could potentially apply to individual claims adjustors. Public entities (including joint insurance funds) are excluded from this law. The law takes effect immediately.

The IFCA does not define what is meant by “unreasonable” conduct in denying a claim or what is an “unreasonable” delay in paying benefits. It also leaves open whether a claimant would be entitled to a jury trial to pursue a violation of the IFCA.

What is clear is that this law provides a new remedy for claimants who feel that their insurance company committed bad faith in the handling and payment of their UM/UIM claims. Insurers need to be aware of this new law and may want to take this opportunity to review their claims handling of their UM/UIM claims to be able to defend against lawsuits alleging a violation of this new law.   


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About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 30 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

For the years 2020-2023, Ms. Ramos was selected for inclusion in The Best Lawyers in America© in the practice area of Litigation - Insurance. The attorneys on this list are selected based upon the consensus opinion of leading lawyers about the professional abilities of their colleagues within the same geographical area and legal practice area. A complete description of The Best Lawyers in America© methodology can be viewed via their website at: https://www.bestlawyers.com/methodology.

In 2021, Capehart Scatchard and Ms. Ramos received the “Best Law Firm” ranking in the area of Litigation – Insurance (Metro, Tier 3) published by U.S. News & World Report and Best Lawyers®. Law firms included on the list are recognized for professional excellence with consistently impressive ratings from clients and peers. To be eligible for a ranking, a firm must have at least one attorney who has been included in the current edition of Best Lawyers in America, which recognizes the top five percent of practicing lawyers in the United States. Betsy Ramos (Litigation – Insurance) was recognized for this prestigious award in the 2021 edition. For a description of the “Best Law Firm” selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

“Best Law Firms” is published by Best Lawyers in partnership with U.S. News & World Report. For a description of the selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

*No aspect of this advertisement has been submitted to or approved by the Supreme Court of New Jersey.


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