The New Jersey Insurance Fair Conduct Act
What does this act mean for you and your family?
I discussed what your coverages mean in a separate post here. This post is intended to hash out the UM/UIM coverage a little bit and explain this new act. Briefly, UM/UIM is coverage that applies when a person that causes you injury is either uninsured or has less insurance than you. Let’s play with numbers for a second.
Let’s assume you purchase a $100K/$300K UM/UIM policy. A person with a $15K/$30K BI policy rear ends your vehicle and you are injured.
Your policy will provide coverage up to $100K. They do get a credit for the underlying coverage. You would recover from the person who rear ended you. Then your insurance would provide $85K in excess coverage (i.e. $100K-$15K = $85K).
Until The New Jersey Insurance Fair Conduct Act [The Act] was passed in January 2022, that’s all you could recover. If a jury awarded you $1,000,000.00, didn’t matter, you got $85K. There were some minor things you could do to get attorneys fees and costs if you were forced to try the case, but the UM/UIM coverage for your injuries was capped at $85K.
- The Legislature passed The Act on January 18, 2022. The Act allows individuals to file a civil action against their UM/UIM carrier for the following:
- Unreasonable denial of a claim for coverage or payment of benefits.
- Unreasonable delay for coverage or payment of benefits.
Any violation of the Unfair Claim and Settlement Practices Act. (This is an old act that used to apply to the insurance company of the person who hit you and not your insurance company. A detailed analysis is beyond the scope of this post).
If a claimant proves a violation of The Act, there are several remedies available:
- Actual damages which “shall include, but need not be limited to, actual trial verdicts (not to exceed three times the UM/UIM coverage).
- Pre-judgment interest.
- Post-judgment interest.
- Reasonable attorney fees.
- Reasonable litigation expenses.
Going back to our initial example, what if our injured person, let’s call him Bob, has to try his case because the insurance company denies or delays payment in violation of The Act? What if a jury awards Bob $1,000,000.00? What are Bob’s options?
Bob would hire an attorney to file a civil action under The Act. His claim would be that the insurance company was unreasonable in their denial or delay of coverage for his UM/UIM claim. If he was successful, he would be entitled to $300,000.00 in “actual damages” (remember, this cannot exceed three times the UM/UIM coverage), pre-judgment interest and post-judgment interest on this amount, reasonable attorney fees and reasonable litigation expenses.
The purpose of The Act is to encourage insurance companies to resolve UM/UIM claims. Before The Act was passed, insurance companies knew they were capped. The insurance company would never have to pay more than the coverage. So, even when a case was worth far in excess of the UM/UIM coverage, they could play hard ball and offer less. The Act now places consequences on this approach.