THIRD PARTY ADMINISTRATOR IS NOT AN INSURER FOR BAD FAITH PURPOSES (New Jersey Appellate Division)

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Yesterday, we summarized another case brought by the instant plaintiff against his homeowner’s insurer.

In this opinion, rendered the same day, the same plaintiff brought bad faith, negligence, and unfair trade practice claims against a hospital’s third party administrator (TPA). The hospital’s alleged medical malpractice practice purportedly resulted in the death of plaintiff’s godfather. Plaintiff brought suit in his own name, and not, e.g., as executor.

Plaintiff alleged that the TPA failed to facilitate negotiations to settle the medical malpractice suit. The trial court dismissed the claim with prejudice and the Appellate Division affirmed.

Generally, insurers have an obligation to explore settlement possibilities. A third party administrator, however, is not an insurer. Thus, the claim failed.

Further, plaintiff was not an insured or an insured’s assignee. The court observed “[a]n insurer’s duty of good faith and fair dealing . . . has never been applied in New Jersey to recognize a bad-faith claim by an individual or entity that is not the insured or an assignee of the insured’s contract rights.”

The Appellate Division found the claims could not be salvaged, and affirmed dismissal with prejudice.

Date of Decision: June 22, 2020

Yew v. Inservco Insurance Services, Superior Court of New Jersey Appellate Division DOCKET NO. A-4604-18T2, 2020 N.J. Super. Unpub. LEXIS 1202, *1 (N.J. App. Div. June 22, 2020) (Messano, Ostrer, JJ.)

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