New Jersey’s Insurance Fair Conduct Act created a legal cause of action for certain first-party claimants involving uninsured and underinsured motorist (UM/UIM) coverage.
Under the Act, a qualifying claimant may bring a civil action when an insurer unreasonably denies coverage or payment of benefits, unreasonably delays coverage or payment, or violates certain provisions of New Jersey insurance law.
The full statutory language is available through the New Jersey Legislature’s Insurance Fair Conduct Act.
For additional information about accident-related legal matters, visit our Personal Injury practice area.
What Changed Under the New Jersey Insurance Fair Conduct Act?
Before the Act, New Jersey courts commonly evaluated certain insurance bad faith claims under the "fairly debatable" standard discussed in cases such as Pickett v. Lloyd’s.
Under that standard, an insurer generally would not be found liable for bad faith when the underlying insurance claim was fairly debatable. The 2022 statute introduced a specific statutory cause of action involving qualifying UM/UIM claims and expressly refers to an "unreasonable denial" or "unreasonable delay" of coverage or benefits.
This raised an important legal question at the time the statute took effect: how would courts interpret the term "unreasonable," and how would the new statutory framework interact with New Jersey’s existing bad faith case law?
The "Fairly Debatable" Standard
In Pickett v. Lloyd’s, the New Jersey Supreme Court addressed the standard applicable to certain insurance bad faith claims. The decision established that when an insurer had a fairly debatable basis for denying a claim, a bad faith claim generally could not proceed.
Later decisions continued to examine how this standard applied when evaluating an insurer’s conduct and the factual basis for denying or delaying benefits.
The Insurance Fair Conduct Act changed the legal landscape for qualifying UM/UIM claimants by creating an express statutory remedy for certain unreasonable insurance practices.
What the 2022 Law Means for UM/UIM Policyholders
The Act applies to qualifying first-party claimants seeking uninsured or underinsured motorist benefits under an insurance policy.
The statute provides that a claimant may bring an action against an insurer for:
- An unreasonable denial of a claim for coverage or payment of benefits
- An unreasonable delay in providing coverage or payment of benefits
- Certain violations of New Jersey insurance law
The statute also establishes remedies that may be available when a violation is proven, subject to the limitations and requirements contained in the law.
Because the application of the statute depends on the specific facts, insurance policy, claim history, and applicable law, each matter must be evaluated individually.
Understanding UM/UIM Insurance Claims in New Jersey
UM/UIM coverage may become relevant when another driver does not have insurance or does not carry enough insurance to address the losses associated with an accident.
Questions involving these claims can include coverage, policy language, documentation, communication with the insurer, and the timing of claim decisions.
If you would like additional information about related legal matters, explore our Personal Injury services.
Legal Guidance for Insurance Matters in Paterson, NJ
Salomon & Aquino, LLC provides legal guidance from its Paterson, NJ office for individuals seeking to better understand insurance-related and accident-related legal matters.
If you have questions about a UM/UIM insurance claim or how New Jersey law may apply to your situation, contact our Paterson office or call 862-418-1336 for additional information.