The Case for A-4293, New Jersey Insurance Fair Conduct Act

In NJ, car insurance is mandatory. Not having car insurance can result in huge financial penalties, loss of drivers licence and even jail for repeat offenders. And as we are all too aware, car insurance in NJ is not cheap, especially if you have kids or you are a driver under 25.

When someone purchases an insurance policy, that person expects that they will be covered in their time of need.  All too often, insurance companies do not play fair. They deny claims and medical treatment for seriously injured people, they delay payment and the resolution of claims and/or they defend those claims unnecessarily to avoid paying an injured person the benefits to which he/she is entitled under their policy for a valid claim. This trend began in the mid 1990's by companies like All State Insurance who recognized they could make a lot more money holding onto benefits and forcing injured people to have to sue them and win at trial just to receive the benefits they deserve. 

The insurance companies engaged in an unrivaled propaganda campaign to provide the public with the impression that people who sue in car accident cases are either lying completely (fraud) or not all that badly hurt (ever see the All State head on car crash commercial, where everyone walks away just fine? Yeah, that doesn't happen in real life- people get hurt, badly.) These disingenuous efforts by the insurance industry were meant to mislead the public and fuel the call for "tort reform" because juries are "out of control" with their awards. 

In NJ, when a person is forced to sue the person who caused an accident and injured them, although the suit is against the person who caused the crash ("tortfeasor"), that person's insurance company actually defends the case. This is because the tortfeasor has a certain limit of insurance through their liability policy that is designated to pay an injured person and protect the personal assets of the tortfeasor.

Therefore, when the insurance carrier is doing it right, so to speak, the assets of the person who caused an accident are protected simply because they have insurance. But the insurance carrier must act in good faith to resolve the case against the tortfeasor, their insured, within the policy limits. If the insurer does not do this and as a result a jury awards more money to the injured person than the insured torfeasor has in policy limits, the insured person has a bad faith claim against his insurance company because now his personal assets are at stake.

This bad faith law protects both injured people and the insured, holding the insurance companies accountable for resolving claims reasonably. 

But unfortunately, this concept currently does not apply to an injured person's own insurance and that is what A-4293 seeks to rectify. Currently, if an insurance company acts unreasonably in delaying payment or denying a valid claim, even if it breaks the law in doing so, under the law of NJ, an insurance policyholder has no effective remedy. This happens often in cases where the person who caused a crash either does not have insurance (Uninsured Motorist or "UM") at all or a policy not significant enough to cover the injuries (Underinsured Motorist or"UIM). In that instance, an injured person must look to the UM or UIM benefits of their own policy to compensate them for their harms and losses and injuries.

Under A-4293, if an insurance company acts unreasonably, a policyholder can sue for his benefits, attorneys fees and treble (triple) the damages. The treble damages measure is similar to what is allowed in the Consumer Fraud Act law in NJ and seeks to deter insurers from acting unreasonably in the first place. This bill creates a warranty against insurance companies committing bad faith against its own policyholders. 

Often, when injured people are delayed in receiving the benefits to which they are entitled, they become financially burdened with out of pocket medical expenses, loss of income and employment, which then results in issues with other bills and creditors. Their life, through no fault of their own, becomes a frustrating nightmare while the money they should be receiving is collecting interest for the insurance company. The current state of the law does not allow any redress for this type of bad treatment by the insurance company that is just polishing its own bottom line. 

In the 9 states that have already enacted a 1st Party Insurance Bad Faith Law, like this one, insurance claims are paid more quickly and there are fewer lawsuits and cases of actual fraud. (Fraud happens; not nearly as often as the insurance industry would have us believe, but it does.)

Insurance customers, who like in NJ are required to buy auto insurance, are entitled to have their claims resolved in a fair and equitable manner without unreasonable delay and the need to seek redress when an insurance company doesn't play by the rules. Perhaps with a law, like A-4293 in NJ, the playing field will finally be equal. 

I urge anyone who has or had a claim against an insurance company, or attorneys who represent injured people, to reach out to your local leaders and ask that they consider and support A-4293 as it heads into the NJ Assembly.

Thank you to the New Jersey Association for Justice and President Lynne Kizis for their research and hard work in providing much of the information contained in this post. And thank you to the NJ Senators and Assemblymen/women for sponsoring this bill and helping to protect people's rights.  For more information on this bill and other bills that affect NJ residents, visit
www.njleg.state.nj.us/