Will New Jersey Enact a Bad Faith Statute?
In New Jersey, bad faith claims are currently governed by two New Jersey Supreme Court decisions: Rova Farms Resort, Inc. v. Investors Ins. Co. and Pickett v. Lloyd’s. In Rova Farms the New Jersey Supreme Court recognized that an insurance company can be held liable for bad faith failure to settle a claim within the policy limits. In Pickett, the Court held that a bad faith claim could be asserted against an insurance company where no “fairly debatable” reason existed to deny, or otherwise delay the processing of, the claim. Together, these cases establish standards and remedies for bad faith in both the first-party and third-party contexts.
During each of the last several years, the New Jersey Legislature has introduced (and re-introduced) bills that, if enacted, would create a statutory claim for insurance bad faith. These bills have taken two different forms: (1) attempting to codify New Jersey’s bad faith case law, or (2) establishing a private cause of action during declared disasters for singular violations of New Jersey’s Unfair Claims Settlement Practices Act. Each year, the bills have been left on the table and re-introduced during the next legislative session.
Right now, all we can do is wait and see whether New Jersey will follow Pennsylvania and enact a bad faith statute. If enacted, the statute would not only shake up New Jersey’s bad faith jurisprudence, but could potentially re-ignite the issue in New York, which has not yet enacted a bad faith statute either.
Timoney Knox will continue to monitor this important issue and report any significant developments.