Initially introduced in January 2014, Assembly Bill No. 231 made its way before New Jersey lawmakers during a committee hearing on December 10, 2015. The bill, "establishes a private cause of action for insureds or their assignees regarding unfair practices in the settlement or attempted settlement of insurance claims arising out of a declared disaster."
The bill is sponsored by Assemblyman Reed Gusciora, Assemblyman Timothy J. Eustace, and Assemblywoman Marlene Caride, and was drafted in wake of Superstorm Sandy. In discussing the bill, Gusicora stated, “[w]hen another major storm or natural disaster hits, this is when people and homeowners and New Jersey residents are most vulnerable, and these claims should be resolved with less difficulties than we’ve seen after Superstorm Sandy,” and that “it was ‘shocking’ that the state has no good faith standard for insurance claims.”1
Assembly Bill No. 231 states, “a claimant may, regardless of any action by the commissioner, file a civil action in a court of competent jurisdiction against its insurer for any violation of the provisions of subsection (9) of section 4 of P.L.1947, c.379 (C.17:29B-4), regarding unfair claim settlement practice.” The violations which give rise to the action are:
Violations under subsection (9) of section 4 of P.L. 1947, c.379 (C.17:29B-4) include, but are not limited to, actions such as:
(1) misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
(2) failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
(3) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
(4) refusing to pay claims without conducting a reasonable investigation based upon all available information; and
(5) not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.
If a claimant or insured can establish that the insurance carrier committed one or more of the above acts, the claimant will be entitled to:
(1) the full amount of damages as set forth in the final judgment, regardless of the coverage limits of the policy;
(2) prejudgment interest, reasonable attorney’s fees, and all reasonable litigation expenses from the date of the institution of the action filed pursuant to the provisions of the bill. The prejudgment interest shall be calculated at the rate provided for tort actions, or for non-acceptance of a formal offer for judgment, whichever is higher, as prescribed in the Rules of Court; and
(3) punitive damages, when the insurer’s acts or omissions demonstrate, by clear and convincing evidence, actual malice or wanton and willful disregard of any person who foreseeably might be harmed by the insurer’s acts or omissions.
This bill gives teeth to the insureds, but it has one caveat: the claim must arise out of a catastrophe or as the bill refers to it, a ”Declared Disaster.” The bill defines a Declared Disaster as: “any natural, technological, or civil emergency that causes damage of sufficient severity and magnitude to result in a declaration of a state of emergency by the Governor or the President of the United States.” This means that the law (if enacted) would not apply to most claims like your standard house fire, pipe break or collapse. It would only be used following a major event where a state of emergency is declare.
While not perfect, I think it’s a step in the right direction for New Jersey and hope to see it enacted. However, my fingers are crossed but I won’t be holding my breath. The Insurance Lobby in New Jersey is strongly opposing the bill. We’ll see how far it gets and we’ll keep you posted.
As always, I’ll leave you with a (mildly) related tune, here’s Death Cab for Cutie with Crooked Teeth: