Readers of this blog are aware that New Jersey is not the best state in the land if you want to hold insurance carriers to their promises by way of bad faith. The process just got even harder in light of the Supreme Court’s ruling in Badiali v. New Jersey Manufacturers Insurance.1
The Badiali case centered on an un-insured motorist action where an arbitration award was entered against NJM and another carrier equally for $29,148.62, making each carrier liable for $14,574.31. Under NJ uninsured motorist law, any arbitration award below $15,000 is binding upon the parties. Any award above $15,000 may be rejected by either party and the matter may proceed through litigation. Despite having an individual award of only $14,574.31, New Jersey Manufacturers Insurance (NJM) rejected the award which prompted the Mr. Badiali to file suit. Mr. Badiali won on summary judgment which was also affirmed by the Appellate Division. Ultimately, NJM paid the $14,574.31 award.
Subsequently, Mr. Badiali brought a bad faith action against NJM, claiming that they had no good faith basis to reject the award and force the Plaintiff into litigation. In defending the action, NJM relied upon an unpublished opinion in Geiger v. N.J. Manufacturers Insurance Company.2 The Gieger decision held, under almost identical facts, that rejecting an arbitration award where the aggregate amount was above $15,000 but where the individual liability was below $15,000 was proper. NJM acknowledged that the unpublished opinion was of no precedential value, but argued it was justified to rely upon the same.
Unfortunately for policyholders in the State of New Jersey, the New Jersey Supreme Court agreed with NJM. The Court held:
[T]his Court has never considered whether the mere existence of an unpublished opinion will allow a party to avoid a finding of bad faith for actions taken in accordance with its holding. In the context of the case before us, we find that it does; however we limit our holding to the in-house, business context present here. In our view, it is illogical to suggest that NJM, or any corporation, cannot rely on previous unpublished opinions — especially those in which they were specifically involved — in forming their business decisions.
Here the Court specifically found that the “mere existence of an unpublished opinion” will be sufficient to avoid liability for bad faith claims handling. Any scholar of insurance case law, or any case law for that matter, will immediately realize how dangerous a ruling this is. The legal landscape is littered with erroneous, unsupportable and just plain incorrect rulings in unpublished opinions. Because they are of no precedential value, they are often not addressed in briefs or published opinions so they go unchallenged and uncorrected for years, such as in the Geiger matter. I frankly could not disagree with this opinion more strongly than I do. In light of the atrocities committed by the insurance industry in the wake of Superstorm Sandy, one can only hope that the legislature will take the necessary steps to protect the policyholders of New Jersey.
1 Badiali v. N.J. Mfrs. Ins. Co., No. A-49-12 (N.J. Sup. Ct. Feb. 18, 2015).
2 Geiger v. N.J. Mfrs. Ins. Co., No. A-5135-02 (App. Div. Mar. 22, 2004).