USA Herald -- On January 18, 2022, New Jersey Governor Philip Murphy signed into law, the Insurance Fair Conduct Act (IFCA) limited to providing further protections for uninsured and underinsured motorist claims. 

Almost a year later, some attorneys say the statutory language of the Act could use some clarification regarding what constitutes reasonableness.

They say part of the problem can be found under IFCA section 3.a., which provides that “a claimant, who is unreasonably denied a claim for coverage or payment of benefits, or who experiences an unreasonable delay for coverage or payment of benefits, under an uninsured or underinsured motorist policy by an insurer may … file a civil action in a court of competent jurisdiction against its automobile insurer for:

(1) an unreasonable delay or unreasonable denial of a claim for payment of benefits under an insurance policy; or

(2) any violation of the provisions of section 4 of P.L.1947,38 c.379 (C.17:29B-4), governing Unfair Claim Settlement Practices.)”

The common complaint from attorneys and insurers is that under section 3.a.(1) of the Act, it appears an insured/plaintiff must only prove negligent/unreasonableness, which requires a much lower burden of proof.

Insurers and their attorneys alike are also scrambling on how to deal with the possibility of litigating a suit involving allegations of violating the IFCA.

Under section 3.d., a prevailing plaintiff “shall be entitled to (1) actual damages caused by the violation of this act which shall include, but need not be limited to, actual trial verdicts that shall not exceed three times the applicable coverage amount; and (2) pre-and post-judgment interest, reasonable attorney’s fees, and reasonable litigation expenses.”

At the USA Herald, we have been reporting on various States that have recently enacted their own versions of New Jersey’s IFCA, as it appears that more States are inclined to provide “private right of action” for UMPD/UIMPD Claims.

A “private right of action” is defined as a right for a private person to bring a claim to protect one's rights under the law.

Historically, prior to New Jersey’s adoption of IFCA, there had been no private right of action for violations of the Unfair Claims Settlement Practices Act. However, Section 3.a.(2) changes all that.  Under the IFCA, an uninsured and underinsured motorist can now bring a private action (lawsuit) against the insurer for the delay in processing the claim.

Under IFCA section 3.b., “In any action filed pursuant to this act, the claimant shall not be required to prove that the insurer’s actions were of such a frequency as to indicate a general business practice.”

Notwithstanding the concerns of insurers and their attorneys, the IFCA does provide greater policyholder protections. Policyholders should stay informed of developments in this area and stay abreast of any new case law arising from litigation that is sure to ensue.