Archive for the 'NJ – Delay (Payment)' Category
The district court allowed the insured to pursue claims against the insurer’s agent, even though the agent was not party to the insurance policy, where the policy was underwritten by Lloyds and effected through the agent.
The complaint alleged there was a delay in payment undisputedly due the insured after the claim was submitted. This unwarranted and unjustified delay allegedly caused the insured to suffer extra-contractual consequential damages. The insured alleged the insurer was liable for breach of contract and bad faith in delaying payment. The claims against the insurer itself, however, were not before the court.
Rather, the insured wanted to bring distinct claims against the insurer’s agent as a claims handler. The insured asserted the agent was independently liable for failing to timely process the claim and for failure to make undisputed payments promptly, leading to the consequential extra-contractual damages. The insured also brought a negligence claim against the agent for failing to meet its duty of care in claims handling. The insured contended the agent’s “conduct contributed to or caused Plaintiff’s damages and therefore, [the agent] is potentially liable to Plaintiff in contract for its bad faith.”
The court permitted all of these claims to proceed.
Citing the New Jersey Supreme Court’s seminal Pickett v. Lloyds opinion, the district court found the insurer’s agent could be “liable to the insured in contract for lack of good faith and fair dealing outside of its agency relationship with Lloyd’s for its role in the claims handling delay that caused consequential damages to the policyholder.” This requires that the agent’s own conduct contributed to the delay causing consequential damages.
Under Pickett, “’agents of an insurance company are obligated to exercise good faith and reasonable skill in advising insureds.’” The district court further observed that “’although the allegation of an agent’s breach of duty of care carries tort overtones, the contractual relationship between the insured and insurer dominates not only the relationship between them, but also that between the insured and the agent.’”
As to the negligence claim, the district court looked again to Pickett, which stated that “’clearly cases may arise in which the insurance company’s conduct in response to an insured’s claim for payment constitutes an independent tort.’” Thus, the district court held the insured could state a negligence claim against the agent, in addition to the contract claim.
Date of Decision: March 31, 2021
This is a bad faith case arising out of Superstorm Sandy damage to the insured’s home. Coverage for the full loss was denied, and breach of contract and bad faith claims followed. This opinion involves the insurer’s summary judgment motion on the bad faith claim. Judgment was entered on the bad faith claim for the insurer.
Bad Faith Standards
New Jersey recognizes bad faith claims for “both bad faith in denial of benefits and bad faith in delay of processing of claims.” A bad faith claim might exist where payment was intentionally and unreasonably delayed on an undisputed claim. The test is whether a claim is “fairly debatable”. If the insured cannot establish “as a matter of law a right to summary judgment on the substantive claim [e.g., the breach of the insurance contract]” there is no actionable bad faith claim. The plaintiff has to show the “absence of a reasonable basis for denying benefits of the policy and the defendant’s knowledge or reckless disregard of the lack of a reasonable basis for denying the claim.”
In the first party context, under New Jersey law: “Although a fairly debatable claim is a necessary condition to avoid liability for bad faith, it is not always a sufficient condition. Rather, we are satisfied that the appropriate inquiry is whether there is sufficient evidence from which reasonable minds could conclude that in the investigation, evaluation, and processing of the claim, the insurer acted unreasonably and either knew or was conscious of the fact that its conduct was unreasonable.” In this case, the “principal issue presented is whether Plaintiff has adduced factual evidence from which a reasonable jury could find that [the insurer] lacked a fairly debatable reason for denying the disputed portion of the claim. Because in this summary judgment motion [the insurer] has set forth the factual basis for its determinations of coverage and loss, and because Plaintiff has not come forward with evidence that Plaintiff’s entitlement to recover for these losses was so clear that it was not fairly debatable, Plaintiff will be unable to prove its bad faith claim in Count 2 and summary judgment will be granted….”
No bad faith conduct on the record in claims handling
Specifically, the court observed that the insured did not seek summary judgment on the breach of contract claim, and the court itself was not going to find it undisputed that the contract was breached. This alone would appear to be fatal to the insured’s opposition under the reasonably debatable standard. Further, the court observed that the insurer considered the opinions and advice of expert consultants in the claims handling process. The court also listed a variety of “plausible” steps the insurer took to adjust the claim.
No bad faith delay
The court further rejected the insured’s delay argument. It found the insurer promptly investigated the damages, retained experts and a licensed contractor to evaluate the claims, and shared its findings with the insured throughout the process. The insured failed to submit responsible estimates during the process with supporting documentation, and was unresponsive for many months at a time, included a delay in submitting a sworn statement in proof of loss.
Rhetorical assertions without support unsuccessful
The court addressed “Plaintiff’s rhetorical assertions that bad faith is demonstrable from assigning incompetent and inattentive claims adjusters who were ‘repeatedly told … to sit back and wait for the statute of limitations to run out in the hopes that the Plaintiff would miss the filing deadline’….” There was no support for this assertion and, to the contrary, the insured’s large loss director instructed the claim adjuster “to remind Plaintiff’s representatives in writing that the policy contained a two-year suit limitation condition” and the adjuster did so by writing a letter calling “attention to the suit limitation in advance of the approaching deadline.”
Alleged incompetent adjusting did not affect this claim
Early in the claims handling process an adjuster was criticized by his superior for not documenting the file. That adjuster was replaced. However, that this adjuster “temporarily failed to address the potential claim does not give rise to a material factual dispute, as it is undisputed that proper investigation was undertaken, results were shared and explained to Plaintiff and Plaintiff’s agent, and the claim file was put squarely on track as directed by the management. That there remains an area of disputed claims, as alleged in Count One, does not imply that those disputes were caused by [the insurer’s] deliberate indifference to a proper investigation and claims adjustment process.”
Attorney’s fees not recoverable
Date of Decision: March 29, 2018
Breitman v. National Surety Corp., Civil Action No. 14-7843 (JBS/AMD), 2018 U.S. Dist. LEXIS 52496 (D.N.J. Mar. 29, 2018) (Simandle, J.)
This opinion is the culmination of over a decade of litigation, originating in an April 2000 automobile accident. Nancy Palmer, as assignee of the insured-tortfeasor, brought suit against the tortfeasor’s insurer after a three-day trial in August 2004, which resulted in a $460,000 award in Palmer’s favor. The insured-tortfeasor had a $300,000 policy limit.
Prior to filing the underlying lawsuit, Palmer’s attorney made a demand to the insurer for $40,000. The insurer responded that it was not going to engage in any settlement talks, because it did not believe Palmer could meet her burden under New Jersey’s Automobile Insurance Cost Reduction Act, which required a heightened burden of proof for Palmer to recover non-economic damages. After filing the underlying lawsuit, Palmer reduced her demand amount, and an arbitrator entered a non-binding award of $22,500. The insurer rejected this arbitration award, and demanded a trial de novo, which led to the $460,000 verdict.
The insurer unsuccessfully appealed the $460,000 result, and ultimately paid Palmer. Thereafter, the insured-tortfeasor assigned Palmer the right to bring a bad faith claim against the insurer.
After an August 2015 non-jury trial, the trial court ruled that Palmer failed to meet her burden to show that the insurer acted in bad faith, either before the jury verdict or thereafter. Palmer appealed the trial court’s decision, and argued (1) the insurer’s claims handling activities violated its duty to exercise due care in protecting its insured; (2) the insurer failed to employ proper expertise in both investigating and negotiating settlement of the claim; (3) the insurer violated the law in appealing the August 2004 verdict without a reasonable probability of reversal; (4) the insurer failed to put the insured’s interests first; (5) the insurer failed to pursue all available settlement avenues; and (6) the trial judge misinterpreted the law and the evidence.
The Appellate Division disagreed, and affirmed the trial court’s decision. The Court ruled that the trial judge was owed considerable deference in “her critical finding that [the insurer] did convey an offer to settle the case for the policy limits while the appeal of the jury verdict was still pending.” Furthermore, the jury verdict in excess of the policy limits was neither reasonably anticipated nor reflective of Palmer’s own settlement demands. Lastly, the Appellate Division wrote, “we accept the judge’s finding that the insurer’s delay in making the post-verdict offer was neither reflective of bad faith nor that it produced appreciable prejudice to . . . the insured, beyond the happenstance of the excess verdict itself.”
Date of Decision: December 14, 2017
Palmer v. New Jersey Manufacturers Ins. Co., DOCKET NO. A-0854-15T3, 2017 N.J. Super. Unpub. LEXIS 3060 (New Jersey Appellate Division Dec. 14, 2017) (Sabatino, Ostrer, and Whipple, JJ.)
In Granelli v. Chi. Title Ins. Co., plaintiffs brought claims for bad faith and negligence, inter alia, against defendant title insurer, alleging that the insurer failed to find and resolve several title defects which repeatedly prevented them from selling their home. Although the insurer cured all defects after the commencement of the litigation, the plaintiffs amended the complaint, alleging that the insurer’s failure to cure the defects in a timely matter amounted to bad faith.
The lower court found that the insurer failed to cure the defects by filing quiet title actions due to a company-wide reorganization and a shut-down of the New York claims office. This reorganization occurred in the wake of the 2008 financial crisis while the insurer was handling a high volume of bankruptcy proceedings. Although the Court of Appeals vacated the District Court’s grant of summary judgment regarding Plaintiffs’ breach of contract and negligence claim, it affirmed summary judgment on the bad faith claims.
Addressing the plaintiffs’ bad faith claims, the Court stated that, under New Jersey law, in the case of a delay rather than an outright rejection, “[b]ad faith is established by showing that no valid reasons existed to delay processing the claim and the insurance company knew or recklessly disregarded the fact that no valid reason ssupported the delay…”
Judge Vanaskie compared the instant case to others from the New Jersey Supreme Court, reasoning that a delay due to restructuring was analogous to delays caused by a company-wide computer crash. The Court held that, although the delays may be found to constitute negligence, they were not sufficient to show any bad faith by the insurer.
The Third Circuit vacated the District Court’s judgment that the insurer’s actions were not negligent, but affirmed the lower court’s decision regarding bad faith.
Date of Decision: June 17, 2014
In Bello v. Merrimack Mut. Fire Ins. Co., the appellate court heard an appeal from a jury verdict that awarded an insured damages for bad faith stemming from its carrier’s denial of benefits under a policy covering a retaining wall on the insured’s multi-unit residential property.
Following a wind storm in 2008, the insured’s property sustained damages to its roof, retaining wall, and backyard. An adjuster for the carrier determined that damage to the roof was covered, but that damage to the wall was excluded. The insured challenged this claim, eventually filing a coverage action that also sought bad faith damages. The judge dismissed the insured’s coverage and bad faith claims with respect to the insured’s roof, but submitted to the jury all claims related to the insured’s damaged wall and yard.
The jury awarded the insured $624,023.20, representing the cost of the wall and landscaping the plaintiff’s yard. The carrier moved for a new trial or, in the alternative, for entry of a judgment notwithstanding the verdict. The judge denied the carrier’s requests, adding $195,583.34 in attorney’s fees and $31,346.41, representing costs of the suit.
On appeal, the carrier argued that (1) the trial court erred in denying its post-trial motions; (2) that it relied upon its adjuster’s findings in its denial of coverage for the insured’s roof; (3) that the judge improperly treated the insured’s claim for bad faith as if the claim was also based on bad faith delay in payment; and (4) that the evidence showed that its denial was fairly debatable and not grounded in bad faith.
The Appellate Division rejected these arguments, upholding the award. Specifically, it ruled that the evidence was sufficient to support the jury’s finding. The question of bad faith “was squarely presented to the jury” and “sufficient evidence was offered and apparently accepted by the jury as credible, supporting its finding of bad faith.” The court also reasoned that its award of attorney’s fees was proper. Such an award was “foreseeable because [the insured’s] damages resulted from defendant’s bad faith denial of plaintiff’s claim.”
Date of Decision: July 12, 2012
Bello v. Merrimack Mut. Fire Ins. Co., No. A-4750-10T4, 2012 N.J. Super. Unpub. LEXIS 1654, New Jersey Superior Court – Appellate Division (App.Div. July 12, 2012) (Cuff, Lihotz and St. John)
