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Analysis of NJ’s 2022 Bad Faith Statute

Analysis of NJ’s 2022 Bad Faith Statute

Jun 14, 2022 | Plaintiff's Information Center

The Act affords a claimant seeking UM/UIM coverage, who is either (a) “unreasonably denied a claim for coverage or payment of benefit;” or (b) who experiences an unreasonable delay for coverage or payment of benefits,” a civil cause of action against the responsible insurance company. Unfortunately, the Act does not define what would constitute an “unreasonable” delay or denial. An insurance carrier does not act in bad faith if the claimant’s insurance claim was “fairly debatable.” Pickett v. Lloyd’s, 621 A.2d 445, 452 (N.J. 1993); see also Tariso v. Provident Ins. Co., 108 F. Supp. 2d 397, 400—1 (D.N.J. 2000). In defining the “fairly debatable standard”, the New Jersey Supreme Court held that “a claimant who could not have established as a matter of law a right to summary judgment on the substance of the claim would not be entitled to assert a claim for an insurer’s bad faith refusal to pay a claim.” Pickett, 621 A. 2d. at 453-54. We anticipate that carriers will rely upon Pickett’s “fairly debatable” standard to defend any bad faith claims asserted under the Act.

In Tariso, the court doubted “the wisdom of this standard”  questioning why a claimant is denied a “bad faith” claim simply because there may be issues of fact concerning the underlying claim that is separate from the carrier’s conduct giving rise to the bad faith claim. Tariso, 108 F. Supp. 2d., at 401. Accordingly, in Tariso, the court was “compelled” to deny Plaintiff’s bad faith claim because there were conflicting medical expert reports reflecting whether Plaintiff, the president of his father’s construction company, was sufficiently depressed to present a claim for benefits under  his disability insurance policy. Id., at 402. Tariso highlights the problem with the Pickett standard as there will almost always be a factual dispute between the plaintiff and defense medical experts in every bodily injury claim. If the carrier has, by statute and common law, a covenant of good faith and fair dealing concerning coverage, than the carrier should as acknowledge by the Act, have the same duty to act in good faith in the uninsured motorist context as it does in any other insurance coverage. Accordingly, rather than the stringent summary judgment standard imposed upon the claimant by Pickett, perhaps the burden should be on the carrier to provide that, after an thorough investigation of the underlying claim, it is raising a “genuine factual dispute” to plaintiff’s claim. See, e.g., Maslo v. Ameriprise Auto & Home Insurance, B249271 (Ca. Ct. Ap. June 27, 2014). A plenary review of other valid methods of determining a carrier’s bad faith is outside the scope of this article, but if Pickett remains the standard, recovery under the Act may prove difficult. The Act does, however, favorably eliminate the second prong imposed by Pickett requiring the claimant to also prove the carrier’s knowledge or reckless disregard of the lack of a reasonable basis for denying the claim to maintain a bad faith claim. Accordingly, the claimant no longer needs to establish the carrier’s state of mind when asserting a claim for bad faith against the carrier.

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