Under New Jersey law, the bad faith plaintiff must show (1) an absence of a reasonable basis for denying benefits under the policy, and (2) the insurer’s knowledge or reckless disregard of the lack of a reasonable basis in denying the claim. The court originally ruled that the insured adequately pleaded there was no reasonable basis to deny benefits, and the judge saw “no reason to now disturb that finding that is now law of the case.”
The amended allegations went to the test’s second prong, and the court found the new allegations in the amended bad faith claim adequate.
The insured alleged that the insurers had “independently investigated [the insured’s] claim for coverage in the [Underlying] Action; that the Insurers’ counsel confirmed that coverage was due under the policy; that the Insurers were aware that proceedings in the [Underlying] Action were costly and rapidly progressing, and aware of the status of the case; that [the insured’s] counsel explained in correspondence that the Insurers owed a duty to defend under New Jersey law; and that the Insurers ‘have delayed the processing of the claim knowingly or in reckless disregard of the fact that they had no valid reason for doing so.’” These allegations went beyond mere legal conclusions and met the Twombly/Iqbal standards.
