Archive for the 'NJ - Delay (Insured)' Category
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.)
In Onex Credit v. Atrium 5 Ltd., a company has purchased a disability policy on its CEO. The policy provided that if the terms were met, the company could receive a large lump sum payment. There were numerous conditions and exclusions, and after a lengthy investigation by the carrier’s representative coverage was denied. The company brought suit for breach of contract, bad faith (breach of the implied covenant of good faith and fair dealing), and also sought statutory attorney’s fees.
As to the bad faith claim, the company argued that there was a bad faith delay, and a bad faith refusal to pay. To show a bad faith denial of payment, an insured must show that the insurer lacked a “fairly debatable” reason for denying coverage and that it knew or recklessly disregarded the absence of a reasonable basis to deny the claim.
To establish an unreasonable delay case, the delay must be shown to be lacking any valid reason, and that the insurer knew or recklessly disregarded the fact that there was no valid reason justifying the delay. These tests are essentially the same. Thus, to make out a case, the insured has to show that it would be entitled to summary judgment on the bad faith claim, i.e., there can be no material issues of disputed facts that would favor the insurer in precluding summary judgment on the bad faith issue.
In this case, there were disputed issues of material fact as to the reasonableness of the insurer’s denial, specifically concerning its reliance on third party consultants in reaching a conclusion as to their qualifications and findings.
On the delay claim, the court found that the insured overstated the delay by one year and that its objection to producing certain documents resulted in another 6 month delay. The insurer had promised at one point a decision in 30 days, and had not requested the belatedly produced documents until a year after the original claim. The court indicated that a jury could find that, at most, this was the result negligence or mistake, which do not constitute bad faith.
The court rejected the argument that there was a need for more discovery concerning the consultants, as this simply circled back to establishing the presence of disputed facts that would not permit a grant of summary judgment in the insured’s favor.
Thus, the company could not overcome the fairly debatable obstacle to relief. The same result applied to the delay issue, as the reasons for the delay were fairly debatable, and neither negligence nor mistake could make out bad faith. Finally, the court would not entertain the statutory attorney’s fee claim under Rule 4:42-9(a)(6), in connection with having to bring suit to enforce coverage. This court found that this rule did not apply in the first party context.
Date of Decision: September 26, 2014
Onex Credit v. Atrium 5, Civil Action No. 13-5629 (ES), 2014 U.S. Dist. LEXIS 135778 (D.N.J. September 26, 2014) (Salas, J.)
In Certain Underwriters at Lloyd’s of London v. Alesi, the court heard an insurer’s declaratory judgment action seeking a determination of its liability for damages alleged by its insured under a homeowner’s policy. The insured counterclaimed for breach of contract and bad faith damages, to which the carrier responded by filing a motion for summary judgment. The dispute originally arose from an insurance claim made by the insured party for personal property loss and lost rent under a homeowner’s policy purchased from the carrier. The personal property loss claim concerned items that were allegedly stolen from the home by the insured’s estranged ex-wife. The insured’s claim for benefits also sought coverage for property damages that his home sustained when it was allegedly vandalized and flooded.
The carrier’s motion argued that, because of the insured’s willful misrepresentations of fact concerning his losses, the insured’s policy should be voided and summary judgment should be granted in the carrier’s favor. Having rejected the insured’s claims for personal property loss and lost rents, the court rejected the bad faith count as related to those two claims.
With respect to the insured’s property damage claim, stemming from the alleged vandalism to his home, the insured argued that irreconcilable estimates of damages justified its delay. Moreover, the insured was under investigation for insurance fraud in connection to the vandalism of his property. The carrier also claimed that the insured had sought coverage for items that he wanted to purchase, not merely required repairs.
Given these factual circumstances, the court reasoned, the insured was not entitled to damages for bad faith. The court therefore ruled in favor of the carrier under the “reasonably debatable” bad faith standard, concluding that the insured’s continued misrepresentations during the adjustment period were made to the carrier’s detriment.
Date of Decision: December 30, 2011
