TRENTON – State Sen. Nicholas P. Scutari yesterday introduced legislation to provide consumers with a method of civil recourse in the event that an insurance company acts in bad faith with regard to a claim, a measure he says would better protect residents who were affected by Superstorm Sandy and are attempting to recoup their losses.
“Residents across the state are trying to rebuild their lives after the devastation caused by Sandy,” said Scutari (D-Union). “Especially for those who are attempting to recoup their losses from the storm, even a single act of bad faith by an insurance company is one too many. Providing a method of recourse for those who are treated unfairly by their insurer, whether or not the company has made these tactics a long-standing practice, will better protect our residents and help hold insurance companies accountable.”
Currently, the Commissioner of Banking and Insurance can investigate and, after a hearing, issue a cease and desist order to an insurance company regarding any unfair claims practices that the company commits or performs with such frequency as to indicate a general business practice. Examples of unfair claim settlement practices include, misrepresenting pertinent facts or insurance policy provisions relating to coverage, failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies, refusing to pay claims without conducting a reasonable investigation based upon all available information, and failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.
The senator’s bill, the “Consumer Protection Act of 2012,” would allow a consumer to take a private cause of action against an insurance company that engages in unfair practices in the settlement or attempted settlement of insurance claims arising out of property and casualty insurance policies. This includes homeowners or auto insurance.
Specifically, the bill provides that a claimant may, regardless of any action by the Commissioner of Banking and Insurance, file a civil action in court against an insurer that engages in unfair practices, regardless of whether the insurer does it with enough frequency as to indicate a general business practice.
Under the bill, if the claimant can establish such a violation, the claimant is entitled to:
(1) the full amount of damages as set forth in the final judgment, regardless of the coverage limits of the policy;
(2) prejudgment interest, reasonable attorney’s fees, and all reasonable litigation expenses from the date of the institution of the action filed pursuant to the provisions of this bill. The prejudgment interest shall be calculated at the rate provided for tort actions, or for non-acceptance of a formal offer for judgment, whichever is higher, as prescribed in the Rules of Court; and
(3) punitive damages, when the insurer’s acts or omissions demonstrate, by clear and convincing evidence, actual malice or wanton and willful disregard of any person who foreseeably might be harmed by the insurer’s acts or omissions.
The bill is intended to incorporate into law certain aspects of New Jersey’s current case law, which recognizes private causes of action in first-party and third-party claims regarding the bad faith actions of insurance companies which result in harm to their insureds.
“We need to ensure that people attempting to recover in the aftermath of Sandy are not being ignored, denied fair payment, or given incorrect information by companies as they are trying to work through the claims process,” said Scutari. “In cases where this is occurring and residents are not being provided the appropriate financial assistance due to them under their policies, this measure will allow for them to take swift legal action against the insurer.”
The bill takes effect immediately upon enactment and applies to all claims filed on or after October 1, 2012, which would ensure that residents affected by Sandy are provided the protections offered under the measure.
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