The New Jersey Insurance Fair Conduct Act Means Big Changes For NJ Auto Insurers

• Published date: 31 January 2022
• Subject Matter: Insurance, Insurance Laws and Products
• Law Firm: Riker Danzig Scherer Hyland & Perretti
• Author: Riker Danzig Scherer Hyland & Perretti

On January 18, 2022, Governor Phil Murphy signed into law the New Jersey Insurance Fair Conduct Act (the "Act"). The Act takes effect immediately and represents a significant change in the law governing the conduct of automobile insurers in New Jersey.

The Act establishes a private cause of action for claimants who are injured in a motor vehicle accident and who are entitled to uninsured ("UM") or underinsured motorist ("UIM") coverage. Under the Act, a claimant may file a lawsuit against an insurer for: "1) an unreasonable delay or unreasonable denial of a claim for coverage or for payment of benefits; or 2) any violation of the provisions of section 4" of a separate statute, the New Jersey Unfair Claims Settlement Practices Act (N.J.S.A. 17:29B-4), which governs unfair methods of competition and unfair and deceptive acts or practices.

Case law in New Jersey had previously held that there was no private right of action for violations of the Unfair Claims Settlement Practices Act, but the Act now creates a private right of action for such violations. The Unfair Claims Settlement Practices Act sets forth various prohibited practices, such as failing to acknowledge and act reasonably promptly upon communications concerning claims, failing to adopt and implement reasonable standards for the prompt investigation of claims, failing to pay claims without a reasonable investigation, and attempting to settle a claim for less than the amount to which a reasonable person would have believed based on advertising material accompanying the application.

The new Act further notes that "the claimant shall not be required to prove that the insurer's actions were of such a frequency as to indicate a general business practice." If the plaintiff establishes that the insurer violated provisions of this Act, plaintiff is entitled to: "1) actual damages caused by the violation of this act which shall include, but need not be limited to, actual trial verdicts that shall not exceed three times the applicable coverage amount; and 2) pre- and post-judgment interest, reasonable attorney's...