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New Jersey Enacts “Bad Faith” Statute

On January 18th, 2022, New Jersey Governor Phil Murphy signed the New Jersey Insurance Fair Conduct Act (“ICFA”) into law. The IFCA allows policyholders who are injured in motor vehicle accidents and entitled to UM or UIM coverage to sue an insurer who has: (1) unreasonably delayed or denied a claim for payment of benefits under an automobile insurance policy; or (2) violated the New Jersey Unfair Claims Practices Act (UCSPA). Policyholders who can prove that an insurer violated the IFCA “are entitled to recover actual damages, including trial verdicts, up to three times the applicable coverage, as well as pre- and post-judgment interest, litigation costs, and attorney’s fees.”

Importantly, the ICFA applies only to claims for UM and UIM benefits. This statute does not affect bad faith claims related to first-party property claims, which are still controlled by Pickett v. Lloyd’s.  In that case, the New Jersey Supreme Court detailed the requirements for asserting a bad faith claim in the first-party property context. The Court held that a bad faith claim can only be asserted against an insurance company where no “fairly debatable” reason existed to deny or delay processing the claim. Thus, Pickett establishes a more stringent standard for policyholders to establish a bad faith claim in the first-party property context.

If you have any questions or would like additional information, please contact any member of HKR’s team.