While it may not have received a lot of mainstream media coverage, the recent passage of the New Jersey Insurance Fair Conduct Act (“NJIFCA”) was a huge victory for those injured in car crashes in New Jersey. The law was signed into effect by Governor Murphy on January 18, 2022, over the boisterous objection of the insurance companies and lobbyists here in New Jersey. In the past few months, you may have even received a letter from your insurance company asking you to contact your legislators and tell them to vote against the bill.

Think about that! Your insurance company was asking you to help shut down a bill that holds the company accountable if they do not treat you fairly. That’s right! This new law affords protections to those injured in New Jersey who have first-party insurance coverage under their automobile insurance policy.

New Jersey Bad Faith Insurance Law

If you are injured in an automobile accident that is someone else’s fault, and they do not have adequate coverage (or worse, any coverage!) under their insurance policy to fairly compensate you for your injuries, you may be able to make a claim against your own insurer under the Uninsured/Underinsured (UM/UIM) motorist coverage on your policy—these are also known as first-party claims. Unfortunately, as more and more drivers in our state carry the minimum required liability insurance of only $15,000, with some special types of policies providing no liability coverage at all, UM/UIM claims have become increasingly common.

The NJIFCA mandates that when you make a UM/UIM claim against your own insurance company for injuries you have suffered, the company must handle the claim fairly. That may seem like common sense; after all, this is your insurance company. But the fact that a law was needed tells you just how common this problem of insurance companies not treating their own clients fairly really is.

Over the years, many drivers in New Jersey, when dealing with their own insurance company on these UM/UIM claims, have made the same observation: “I’ve paid my premiums on time, every month for years, and now when I’m injured my insurance company doesn’t want to treat me fairly.” It is a refrain we hear far too often. This new law is aimed at fixing that problem.

New Jersey Insurance Fair Conduct Act (NJIFCA)

Under the NJIFCA, an insured person making a UM/UIM claim against their insurer can file a civil action in court against their insurance company if the company:

• Unreasonably denies a claim for coverage;

• Unreasonably denies payment of benefits;

• Unreasonably delays coverage or payment of benefits; or

• Violates the New Jersey Unfair Claims Settlement Practices Act (UCSPA) (N.J.S.A. 17:29B-4).

Prior to the enactment of the NJIFCA, a private citizen could not bring a claim under the UCSPA as it was only enforceable by the commissioner of the New Jersey Department of Banking and Insurance.

Notably, the law does not require a showing that the insurance company’s actions were “a general business practice” but rather only that, in that particular case, the company violated the NJIFCA.

If it is established that an insurance company violated the Fair Conduct Act, as described above, the insured person can seek damages that were not available to them before this law, including:

• The actual damages caused by the insurance company’s violation of the act up to three times the actual coverage under the policy; and

• Pre- and post-judgment interest, attorney’s fees, and expenses

What does this mean for you? What questions remain?

So now that the law was passed, how does this all play out in the real world? There are many questions still unanswered about how exactly the rights and remedies under the NJIFCA will be handled.

First and foremost, what is the statute of limitations for asserting such a claim? Does it run from the date of injury? From the date the claim is originally denied by the first-party insurer? From the date of a verdict?

There is also an issue of what exactly is needed to prove a claim under the NJIFCA. Generally, whenever a question of “reasonableness” comes into play in a legal setting, it is considered a question of fact that usually requires a jury to decide. It is also unclear if a verdict on the initial UM/UIM claim is required before asserting a claim under this new law arguing that the insurance company acted unreasonably?

Even once the claim is made, there is no guidance as to the standard used to evaluate if a person has successfully proven their claim—is it by a preponderance of the evidence? By clear and convincing evidence? Or some other standard that may yet be clarified by the Courts.

These questions seem to have been purposely left open in the bill and will certainly be the topic of hotly contested arguments for some time to come in New Jersey courts. However, those yet-to-be answered questions do not diminish the fact that this new law gives us a powerful tool to keep our injured clients in the fight! If you have been injured by an uninsured or underinsured motorist and feel your insurance company may have mistreated you, you can contact our NJ accident attorneys for a free case evaluation.