Philadelphia Personal Injury Lawyer Blog

Perhaps the only thing worse than being seriously injured in a car accident, is when YOUR insurance company fails to pay in good faith.  After paying insurance premiums year after year after year, drivers expect their auto insurance company to fairly evaluate claims and promptly make a good faith payment if they are injured in an accident.  Unfortunately, this rarely happens. 

Automobile insurers in New Jersey are notorious for failing to pay valid claims and delaying payments for as long as possible.  Although New Jersey has enacted laws to protect insureds from their insurer, the legislature has failed to provide incentive for insurance companies to abide by the law.  

For example, N.J. Stat. Ann. § 17:29B-4(9) prohibits a myriad of unfair practices, including: failing to acknowledge and act reasonably promptly on communications relating to claims under insurance policies; not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability is reasonably clear; compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds; failing to promptly settle claims, where liability is reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

However, even if it is proven that an insurer has failed to follow the law and provide prompt and fair compensation to the insured, absent egregious circumstances, the insured has no right to recovery for punitive damages.  (Punitive damages are designed to punish a defendant and deter bad conduct.  They are awarded in many states when insurers fail to negotiate in good faith).   Instead, in New Jersey, the measure of damages if an insured can prove bad faith is only foreseeable consequential damages.  By failing to provide for punitive damages, auto insurers have almost no incentive to pay claims fairly knowing that failure to do so will at most cost them prejudgment interest and litigation costs.  That is a minimal additional exposure, and really does not provide any incentive, because they have held the money all along and received the benefit of it.

These pro-business (i.e. pro-insurance company) laws come at the expense of all insureds and accident victims in the state.  I encourage you to contact your senator and congressman and encourage them to pass legislation that will hold auto insurance companies accountable for their failure to act in good faith.