A4293, legislation that would expand bad faith insurance remedies was released from AFI on Thursday, with significant amendments. The companion bill was voted out of the Senate in June of 2018, by a one vote margin. As the Lame Duck session comes to a close Monday January 13, 2020, the amended version would now need a floor vote in the Assembly and concurring floor vote in the Senate.
The changes made to the bill as released by AFI are significant. While the senate version would have applied to all first-party and third-party claims, the assembly version is limited to personal injury claims under uninsured or underinsured auto coverage. The penalties for “unreasonable” settlement practices have also been modified. Instead of treble damages, the assembly version actually provides for unlimited damages – significantly increasing the risk of going to trial with a potential bad faith claim.
The senate sponsor, Senator Scutari, testified in support of his legislation, claiming that first party claimants currently have no recourse against carriers who delay payment or offer unreasonably low settlements. The Assembly Minority Leader, Assemblyman Bramnick, co-prime sponsor on the legislation, agreed, claiming especially in the UM/UIM context, claimants have no remedy because bad faith claims are seldom successful.
NJCJI was among those testifying against the legislation. We pointed out that a bad faith claim is not the only remedy available for a policy holder who believes their claim is being handled unfairly. In fact, the Offer of Judgment Rule exists for precisely this reason. And in fact, the New Jersey Court’s Civil Practice Committee considered precisely the problem the sponsors raised, regarding settlement incentives for UM/UIM claims, and concluded a modest tweak to the Rule struck the appropriate balance. The Committee never considered anything as drastic as the remedies provided in A4293, but rejected even the more modest proposal of automatic fee shifting, for fear that it would distort incentives and result in higher insurance premiums.
Prospects for a floor vote in Assembly and Senate remain uncertain. Please email Alida if you would like to discuss this legislation further.