The New Jersey Senate will soon vote on a bill that would establish a statutory cause of action for the bad faith handling of insurance claims. If enacted, the New Jersey Insurance Fair Conduct Act would create a private cause of action for “an unreasonable delay or unreasonable denial of a claim for payment of benefits under an insurance policy.” The Insurance Fair Conduct Act would also create a private cause of action for any insurance unfair trade practices prohibited by N.J. Stat. 17:29B-4, including: misrepresentations of policy contracts; false advertising; defamation; unfair discrimination; and unfair claim settlement practices. The unfair claim settlement practices set forth under this statute include: “[n]ot attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear”; “[m]isrepresenting pertinent facts or insurance policy provisions relating to coverages at issue”; “[f]ailing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies”; and “[n]ot attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liabllity has become reasonably clear.” A cause of action under the Insurance Fair Conduct Act would not require proof that the insurer’s conduct constituted a general business practice. A plaintiff establishing a violation of the Insurance Fair Conduct Act would be entitled actual damages, treble damages, prejudgment interest, attorney’s fees, and “all reasonable litigation expenses.”

Clark & Fox will continue to monitor and report upon the status of the Insurance Fair Conduct Act.