In a recent op-ed article published in the Star Ledger, Rutgers Law Professor Jay Feinman debunked the myth that insurance companies have been using for decades to prevent good faith claims handling bills from passing through the legislature. As Feinman noted, insurance companies argue that the Insurance Fair Conduct Act (IFCA) is unnecessary and would be harmful, suggesting the bill would dramatically raise insurance premiums.

Under the current case law for bad faith conduct:

A policyholder has an effective recourse only if his or her insurance company knows that it has no basis at all for denying a claim but denies the claim anyway. That is one of the toughest standards in the country; many other states have consumer protections like those proposed in this legislation. And the current standard is almost impossible to meet. The law is so stacked against insurance consumers that since the Supreme Court established the current rule in 1993, only one case has even made it to a jury trial.

(Emphasis added).

Feinman goes on to state that states that have similar protections as the IFCA, insurance companies are less likely to delay or underpay claims, and policyholders who do not have to sue are the ones who benefit the most. As most policyholders are aware if they’ve ever been treated unfairly by their insurance company and have to file suit, they are never made whole because they usually have to pay a public adjuster, an attorney, and all costs associated with proving their claim and litigation. Those costs and fees usually come out of any recovery that is paid by the insurance company. The IFCA would level the playing field against insurance companies who have endless bank accounts to pay to defend claims rather than pay them. This especially holds true with smaller claims that attorneys usually cannot take because it’s not economically feasible to prosecute a small claim and spend enough money to properly litigate it.

Generally, I would leave you with a quote that is relatable to the subject matter of the blog. However, I believe it is important to stress the importance of IFCA and how much it makes sense to pass. Here’s an analogy given by Professor Feinman about why a slight potential increase in premiums is worth it:

Here’s how to think about why – even if the legislation causes a modest increase in insurance premiums…The average annual expenditure for auto insurance in New Jersey is about $1,300. Suppose you go to Best Buy and purchase a really nice television. The sales clerk gives you a choice. You can buy the TV for $1,300, but if you do, it comes without a warranty; if it doesn’t work when you get it home or if it stops working later, you’re on your own. But for another few dollars, you can buy a warranty that guarantees the TV will work; and if it doesn’t, Best Buy will repair or replace it. Which would you buy?

The IFCA is like a warranty. You buy an insurance policy. How do you know the insurance company will treat you reasonably and follow the law if you have a claim? The bill makes sure that the company will.

Call your local representative and tell them to vote for the New Jersey Insurance Fair Conduct Act.