In September, the New Jersey Supreme Court heard argument in two cases, which address the issue of bad faith conduct by an automobile insurer in failing to fairly investigate and resolve uninsured/underinsured (UM/UIM) claims brought by two of its policyholders.
In New Jersey, when a person is injured as a result of the negligence of an automobile driver who is uninsured or is injured, but the person causing the collision has insufficient insurance, a driver or passenger may bring a claim against his/her own automobile insurance carrier for uninsured (UM) or underinsured (UIM) motorist coverage. Unfortunately, in many instances, automobile insurers treat their own policyholders (insureds) as adversaries and not as insureds to whom they owe a fiduciary duty of good faith and fair dealing.
The two cases, both involving New Jersey Manufacturers Insurance Company, were brought by NJM policyholders who asserted that NJM treated them unfairly and in bad faith.
Unfortunately, under New Jersey law, there is no remedy when an automobile insurance company fails to treat its insureds unfairly when appraising UM and UIM claims. A successful claimant is not entitled to obtain attorney fees as a result of the conduct of its own insurance company. Furthermore, because a claimant is only entitled to recovery the amount of its own policy limits, a claimant can never received more than the amount of the coverage which the insured bought. Thus, insurance companies have no incentive to pay the full amount of the claim even when the claimant’s injuries far exceed the policy limits. Knowing that claimants will have to expend money to pursue a claim, the insurance companies know that a claimant will be forced to take less than his/her own policy limits. The two cases before the New Jersey Supreme Court seek to hold insurance companies responsible when they fail to timely investigate and resolve meritorious claims.
Attorneys for the insureds rightly argued that such bad faith conduct by insurance carriers is epidemic and that without a remedy to the problem that insurance carriers will continue to mistreat their insureds. What was most astounding, but what plaintiff trial lawyers in New Jersey have long known, was the statement of New Jersey Manufacturers’ (NJM) own attorney, who publicly acknowledged during argument that NJM does not believe that it owes a fiduciary duty to its own policyholders and that its policyholders who make claims under its policies are treated as adversaries. This was an astounding admission as it is counter to the law in the State of New Jersey.
Hopefully the New Jersey Supreme Court will provide New Jersey consumers with a real remedy when their insurance carriers act in bad faith.