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A Private Cause of Action for Unfair Claims Settlement Practices in New Jersey?

Blogs, Insurance Coverage

Last month the New Jersey State Senate introduced the “Consumer Protection Act,” (S-2460), a bill that would establish a private cause of action for insureds in connection with unfair claims settlement practices; a right previously articulated by the State Supreme Court in Rova Farms Resort Inc. v. Investors Ins. Co., 65 N.J. 474 (1974). Specifically, the proposed bill would allow an insured, regardless of any action by the Commissioner of Banking and Insurance, to file a civil action against its insurer for any violation of the provisions of subsection (9) of N.J.S.A. 17:29B-4 regarding unfair claim settlement practices, notwithstanding that the insurer did not violate any applicable provision with enough frequency as to indicate a general business practice.

The legislation also provides that upon establishing a violation of N.J.S.A. 17:29B-4(9), an insured is entitled to recover the full amount of damages set forth in the final judgment, pre-judgment interest, reasonable attorney’s fees, and punitive damages where the insured can prove actual malice or wanton and willful disregard.

If enacted the legislation would take effect immediately and apply to all claims filed or on after October 1, 2012.

Download S-2460