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New Jersey Assembly Debates Bill Providing Private Right of Action Against Insurers

Blogs, Insurance Coverage

Currently pending before the New Jersey Assembly is A-4382, a bill which would allow both individuals and businesses to pursue actions against their insurers for improper handling of insurance claims. The bill, which would apply to all insurance claims filed on or after October 1, 2012, would cover natural disasters, as well as other events that result in a declared state of emergency. Under this bill, insureds would be able to recover the full amount of their damages (regardless of the limits of the applicable policy), as well as attorneys’ fees, expenses, and punitive damages. The private right of action would be independent of any actions by state regulators, and that it does not narrow or limit an insured’s existing rights under New Jersey law to sue their insurers.

The conduct prohibited by the bill includes misrepresenting pertinent facts or policy provisions concerning coverage, failing to respond “reasonably promptly” to claims-related communications, failing to adopt and implement reasonable claims investigation standards, compelling insureds to sue for coverage by offering substantially less than the amounts ultimately recovered in litigation, and failing to make a good-faith attempt to promptly and fairly settle claims in which liability is reasonably clear.

Nearly identical bills (A-3710 and S-2460) were proposed before the Assembly and Senate in January, although these bills were not limited to disaster-related insurance claims. Both prior bills have been referred to committee, but neither has yet received a hearing. Although no one can predict whether this bill (or the bills proposed earlier this year) will ultimately be enacted into law, they nonetheless remain important signals by New Jersey lawmakers of the protections that New Jersey insureds are afforded. Especially in the face of climate change and an increasingly-difficult regulatory environment, insurers writing policies and adjusting claims in New Jersey must remain cognizant of the ever-changing landscape.