New Jersey Assemblyman Reed Gusciora (D-Mercer/Hunterdon) last week proposed a bill aimed at strengthening homeowners’ cases against their insurers in civil lawsuits.
Assemblyman Gusciora said the bill (A-4382) would strengthen the cases of policyholders who sue their insurers in civil court for not properly handling their insurance claims, by making the expectation that insurance companies act in good faith actual law.
Assemblyman Gusciora, who is vice-chair of the Assembly Environment and Solid Waste Committee, said he drafted the bill after hearing countless stories from homeowners affected by Sandy with insurance claims that still remain unresolved.
The homeowners — who spoke at public hearings held jointly by the New Jersey Assembly and Senate environment committees on the progress of Sandy rebuilding effort — complained about insurance companies ignoring their legitimate damage claims, offering small settlement amounts, and operating in bad faith with the insured, according to the Assemblyman’s announcement.
“It’s disheartening to hear how these individuals have been treated,” said Gusciora. “These homeowners are being victimized all over again. First by the storm; and now by insurance companies more interested in their bottom line, than helping people who still have not moved back into their homes.”
The bill creates a private cause of action for policyholders when the insurance companies operate in “bad faith” during the attempted settlement of insurance claims arising out of a declared disaster. A declared disaster means any natural, technological or civil emergency that causes damage of sufficient severity and magnitude to result in a declaration of a state of emergency by the governor or President of the United States.
The bill provides that for claims arising out of a declared disaster, a claimant may, regardless of any action by the state commissioner of banking and insurance, file a civil action in a court of competent jurisdiction against his or her insurer for any violation of state provisions regarding unfair claim settlement practices, notwithstanding that the insurer did not violate any applicable provision with enough frequency as to indicate a general business practice.
Violations include, but are not limited to, actions such as:
• misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
• failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
• failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
• refusing to pay claims without conducting a reasonable investigation based upon all available information; and
• not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.
Under the bill, if the person filing the claim can establish that such a violation took place, he or she is entitled to:
• the full amount of damages as set forth in the final judgment, regardless of the coverage limits of the policy;
• prejudgment interest, reasonable attorney’s fees, and reasonable litigation expenses from the date of the institution of the action filed pursuant to the provisions of the 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 in the Rules of Court; and
• 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 foreseeable might be harmed by the insurer’s acts or omissions.
“It is unfortunate that the nightmare continues for many homeowners who were affected by Hurricane Sandy. They paid their policies, expecting their insurance companies to do their part when disaster struck. Instead, they are offered a pittance for their insurance claims and they are still not in their homes,” said Gusciora.
“Insurance companies are expected to deal with policy holders in good faith, but that is clearly not happening. This bill would help these homeowners pursue legal action against their insurance companies if they are not living up to their end of the bargain,” he said.
The bill clarifies that the bill is not intended to narrow or limit the rights of insureds under established case law to assert a private cause of action for the bad faith actions of insurance companies.