The insured alleged the carrier owed reimbursement for counsel fees due under a management insurance policy. The carrier did not pay when reimbursement was initially demanded, but did make full payment after the insured instituted the suit at hand against the carrier. The insurer relied upon this full payment as its defense.
While the insured agreed full counsel fees were ultimately paid, this did not eliminate the claim against the insurer. The insured argued that the insurer’s “’unjustified delay in processing the insured claims,’ resulted in additional costs.” It alleged “that the length of delay in reimbursement was unreasonable, and that the delay constitutes a breach of the Policy.”
On the breach of contract claim, the court found plaintiff sufficiently alleged that payment was not made within the time period required under the contract, as the delay in payment, as pleaded, was unreasonable. Chief District Judge Wolfson further notes, however, that “courts have generally found that an insurer’s failure to timely furnish payment in accordance with the terms of an insurance policy, creates a cause of action for breach of the implied covenant of good faith and fair dealing, not breach of contract.”
She cites a leading New Jersey bad faith case, Pickett v. Lloyd’s, 131 N.J. 457 (1993), as “an action against the carrier for breach of the duty of good faith and fair dealing arising out of its failure to promptly pay the insured’s claim,” adding, “[t]o be certain, the bad faith cause of action announced by the New Jersey Supreme Court rested upon the implied covenant of good faith and fair dealing, a duty, which the Court noted, is ‘to be implied in every contract.’”
In the present case, “the parties’ briefing does not adequately address whether any potential remedy for Plaintiff’s alleged damages, taken in the insurance context, lies more appropriately under the implied covenant of good faith and fair dealing, such that Plaintiff’s claims for breach of contract are duplicative….” Thus, Judge Wolfson denied the insurer’s motion to dismiss, without prejudice.
Date of Decision: November 10, 2021
Microbilt Corporation v. Certain Underwriters at Lloyd’s, London, No. CV 20-12734 (FLW), 2021 WL 5238995 (D.N.J. Nov. 10, 2021) (Wolfson, J.)