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Insurance Bad Faith in New Jersey

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Richard L. McMonigle, Jr., Principal, Post & Schell, Lindsay B. Andreuzzi


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 Newly Revised Annual Edition!

New Jersey bad faith law, presents challenges to attorneys for claimants and insurers alike, as many procedural and substantive issues remain unresolved. Insurance Bad Faith in New Jersey, by Richard L. McMonigle, Jr., with Lindsay B. Andreuzzi, Principals Post & Schell, is the best single volume collection of New Jersey Law on bad faith litigation; it analyzes the judicial reasoning behind the court decisions, cites relevant statutory and regulatory authority, and identifies the legal theories the practitioner may encounter.

Insurance Bad Faith in New Jersey Includes:

·        Detailed summaries of all significant New Jersey and federal bad faith decisions organized by category

·        In-depth analysis of all relevant topics in the field

·        Procedural and strategic considerations in bringing and defending against a bad faith claim

·        Discussion of the hot issues facing policyholders and their insurers


New in this Edition!

  • Forty-five (45) new court opinions briefed and discussed
  • Comprehensive discussion of the Supreme Court’s latest bad faith decisions in:

-  Badiali v. N.J. Mfrs. Ins. Co., addressing the“fairly debatable” bad faith standard

-  Wadeer v. New Jersey Mfrs. Ins. Co., discussing badfaith and the entire controversy doctrine

  • Analysis of the important issues facing policyholders and their insurers, including:

-    Limitationsupon punitive damages claims

-   Whetherattorneys’ fees should be recoverable in first party insurance claims

Contents

INTRODUCTION TO INSURANCE BAD FAITH IN NEW JERSEY

HISTORICAL DEVELOPMENT OF BAD FAITH

ROVA FARMS AND PICKETT:THE SEMINAL CASES

INSURED’S COMMON LAW RIGHTS AND REMEDIES ARISING FROM INSURER’S BAD FAITH CONDUCT

TO INSURANCE CLAIMS

PARTIES TO A BAD FAITH ACTION

DEFINING INSURANCE BAD FAITH:APPLICABLE STANDARDS AND LIMITATION OF SCOPE

PROCEDURAL ISSUES IN BAD FAITH ACTIONS

EXAMPLES WHERE COURTS HAVE FOUND BAD FAITH MAY EXIST

EXAMPLES WHERE BAD FAITH HAS BEEN FOUND NOT TO EXIST

AMOUNTS RECOVERABLE FROM AN INSURANCE COMPANY FOR BAD FAITH CONDUCT

CLAIMS FOR PUNITIVE DAMAGES IN BAD FAITH ACTIONS

DISCOVERY IN BAD FAITH LITIGATION

PREEMPTION OF BAD FAITH CLAIMS


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  • Availability: Available
  • Brand: The Legal Intelligencer
  • Product Type: Books
  • Edition: 3rd
  • ISBN: 978-1-62881-028-8
  • Pub#/SKU#: PBFNJ15?
  • Pub Date: 10/20/2015

Author Image
  • Richard L. McMonigle, Jr., Principal, Post & Schell

Richard L. McMonigle, Jr. is a principal in the Insurance Law Department in the law firm of Post & Schell, P.C., where he works in the firms Philadelphia and Princeton offices.  His national practice focuses upon the defense and trial of first and third party insurance matters involving coverage issues, alleged bad faith, policyholder fraud, and life, health and disability claims. A veteran litigator, he also provides training to claims professionals and attorneys on the subject of good faith claims handling. He is admitted to the state and federal courts in Pennsylvania and New Jersey. He also serves as a voluntary mediator and legal consultant in insurance coverage and bad faith matters.

 

Mr. McMonigle received his undergraduate degree from Dickinson College in 1977, and graduated cum laude from Villanova Law School in 1980 where he was an Associate Editor of the Villanova Law Review and winner of the Reimel Moot Court Competition. Following graduation, he served as law clerk to the Honorable Daniel L. Herrmann, Chief Justice of the Supreme Court of the State of Delaware. He then spent nearly four years as a prosecuting attorney with the Philadelphia District Attorneys Office and later with the Delaware County District Attorneys Office.

 

Mr. McMonigle has been handling bad faith matters since 1990.  He is the author of Insurance Bad Faith in Pennsylvania, first published by ALM in 2000, and now in its 12th edition.  He frequently lectures on insurance coverage and bad faith issues. He has authored several other articles on bad faith, including, ERISA Pre-emption of Bad Faith Claims, MEALEYS ERISA REPORT (October 2002); Attorney-Client Privilege Still Possible in Bad Faith Cases, THE LEGAL INTELLIGENCER (February 2001); The SIU Challenge: Fighting Fraud While Steering Clear of Bad Faith, MEALEYS INSURANCE FRAUD REPORT (February 2001). 

 He presently serves as an Adjunct Professor of Law at Villanova University School of Law.  He has been recognized by his peers for multiple years in the publications "Superlawyers" and Best Lawyers, in the area of Insurance Law.

 Mr. McMonigle shares his time between Drexel Hill, Pennsylvania, and Stone Harbor, New Jersey, with his wife Kathleen Chancler; three children, Leigh, Gavin and Ross; and Hank the family dog. 


Also by Richard L. McMonigle, Jr., Principal, Post & Schell:
Insurance Bad Faith in Pennsylvania


Author Image
  • Lindsay B. Andreuzzi

Lindsay B. Andreuzzi is a Principal in Insurance Law Department in the law firm of Post & Schell, P.C., where she works in the firm’s Philadelphia and Princeton offices. She focuses her litigation practice on advising and defending personal, commercial and surplus line insurers in complex insurance coverage matters and allegations of bad faith claims handling. Ms. Andreuzzi has an extensive background in bad faith law in Pennsylvania and New Jersey, having collaborated with Richard McMonigle on the 11th, 12th, 13th and 14th editions of Insurance Bad Faith in Pennsylvania, as well as the initial edition of Insurance Bad Faith in New Jersey.


Ms. Andreuzzi received her undergraduate degree from Princeton University in 1991, and graduated with distinction from George Mason University School of Law in 1995. Following graduation, she served as a law clerk for Honorable Robert H. Cleland of the United States District Court for the Eastern District of Michigan and then practiced as an associate in the commercial litigation department with a firm in Detroit, Michigan.

She currently resides in Paoli, Pennsylvania with her husband Tom and two children, Doug and Louisa.


 

 TABLE OF CONTENTS

Chapter 1: INTRODUCTION TO INSURANCE BAD FAITH IN NEW JERSEY

§1:01 Introduction

§1:02 Historical Development of Insurance Bad Faith in Other Jurisdictions

§1:03 Common Law Development of Insurance Bad Faith Law in New Jersey

§1:04 Statutory Law Applicable to Insurance Claims in New Jersey..........................................................................4

§1:05 Procedural Issues Arising in Bad Faith Actions ......................5

§1:06 Court Decisions Concerning What May Be, And What is

Not, Bad Faith.....................................................................5

§1:07 Damages Recoverable in a Bad Faith Action .........................9

§1:08 Discovery in Bad Faith Litigation.........................................10

§1:09 Preemption Issues..............................................................11

Chapter 2: HISTORICAL DEVELOPMENT OF BAD FAITH

§2:01 Overview...........................................................................13

§2:02 Third Party Insurance Claims..............................................14

§2:03 First Party Insurance Claims................................................15

§2:04 Development of the Law of Third Party Bad Faith in Other Jurisdictions......................................................................17

§2:05 Development of the Law of Third Party Bad Faith in New Jersey................................................................................20

§2:06 Development of the Law of First Party Bad Faith in Other Jurisdictions......................................................................25

§2:07 Development of the Law of First Party Bad Faith in New Jersey................................................................................30

Chapter 3: ROVA FARMS AND PICKETT: THE SEMINAL CASES

§3:01 Overview...........................................................................33

§3:02 Insurer’s Failure to Settle Third Party Claim Against Its Insured: Rova Farms Resort, Inc. v. Investors Insurance Company of

America, 65 N.J. 474 (1974)..............................................34

§3:03 Insurer’s Failure to Process Insured’s First Party Claim in Good Faith: Pickett v. Lloyd’s, 131 N.J. 457 (1993).......................42

§3:04 Analysis.............................................................................52

Chapter 4: INSURED’S COMMON LAW RIGHTS AND REMEDIES ARISING FROM INSURER’S BAD FAITH CONDUCT

§4:01 Introduction......................................................................56

§4:02 Cause of Action for Insurer’s Unreasonable Failure to Settle Third Party Claim Against Its Insured (Rova Farms)..............57

§4:03 Cause of Action for Insurer’s Failure to Process Insured’s First Party Claim in Good Faith (Pickett).....................................60

§4:04 Cause of Action for Insurer’s Failure to Process Insured’s Third Party Claim in Good Faith ..................................................63

§4:05 Cause of Action for Insurer’s Bad Faith Denial of Coverage in First Party Claim ................................................................63

§4:06 Cause of Action for Insurer’s Bad Faith Denial of Coverage in Third Party Claim ..............................................................65

§4:07 Estoppel Resulting From Insurer’s Failure to Timely Investigate and Communicate With Its Insured Regarding Third Party Claim ...............................................................................67

§4:08 Estoppel Resulting From Insurer’s Failure to Timely Investigate and Communicate With Its Insured Regarding First Party Claim ...............................................................................71

§4:09 Analysis.............................................................................72

Chapter 5: NEW JERSEY STATUTES APPLICABLE TO INSURANCE CLAIMS

§5:01 Introduction......................................................................76

§5:02 The Insurance Trade Practices Act, Unfair Claims Settlement Practices Act, and Related Regulations...............................76

§5:03 —Cases Holding that the Insurance Trade Practices and Unfair Claims Settlement Practices Acts Do Not Provide an

Insured With a Private Right of Action................................84

§5:04 —Cases Discussing Whether a Violation of the Insurance Trade Practices and Unfair Claims Settlement Practices Acts or Related Regulations is Relevant to a Bad Faith Action..........89

§5:05 The New Jersey Consumer Fraud Act..................................99

§5:06 —Cases Discussing Whether Insurers May Be Liable Under the Consumer Fraud Act..................................................100

§5:07 A Statutory Bad Faith Remedy?........................................115

§5:08 Summary........................................................................117

Chapter 6: PARTIES TO A BAD FAITH ACTION

§6:01 Introduction....................................................................121

§6:02 Who May Bring a Bad Faith Action...................................122

§6:03 — Cases, Assignee’s Right to Bring Bad Faith Action.............................................................................124

§6:04 — Cases, Excess Insurer’s Right to Bring Bad Faith Action.............................................................................136

§6:05 Who May be Sued for Bad Faith.......................................144

§6:06 — Cases..........................................................................146

Chapter 7: DEFINING INSURER BAD FAITH: APPLICABLE STANDARDS AND LIMITATION OF SCOPE

§7:01 Introduction....................................................................158

§7:02 Standard Applicable In Cases Alleging the Unreasonable Failure to Settle a Third Party Claim .................................159

§7:03 — Cases..........................................................................160

§7:04 The “Fairly Debatable” Standard Applicable to Claims Alleging Bad Faith Denial of Policy Benefits ......................164

§7:05 — Cases..........................................................................168

§7:06 The Standard Applicable to Alleged Bad Faith Claims Processing: No Reasonable Basis and the Knowledge or Reckless Disregard of Same..............................................175

§7:07 — Cases..........................................................................177

§7:08 Negligence or Bad Judgment Is Not Bad Faith...................180

§7:09 — Cases..........................................................................180

§7:10 Limitations on the Scope of a Bad Faith Action.................183

§7:11 — Cases..........................................................................184

§7:12 Analysis...........................................................................192

Chapter 8: PROCEDURAL ISSUES IN BAD FAITH ACTIONS

§8:01 Pleading Bad Faith...........................................................200

§8:02 Who Decides if Bad Faith Exists? ......................................202

§8:03 Statute of Limitations Issues.............................................206

§8:04 Motions to Dismiss..........................................................212

§8:05 Motions for Summary Judgment......................................218

§8:06 Miscellaneous Procedural Issues.......................................225

— §8:06(a) Bad Faith and the Entire Controversy Doctrine..............225

— §8:06(b) Removal of Bad Faith Actions to Federal Court............228

— §8:06(c) Class Certification Unlikely in Bad Faith Cases...............232

— §8:06(d) Posting Supersedeas Bond After Third Party Excess Verdict............................................................................233

— §8:06(e) Appeal of Trial Court Decision on Policy Coverage Generally Not Permitted Until Disposition of Bad Faith Claim......................................................................235

— §8:06(f) Contribution and Indemnity Not Available to Insurers in Bad Faith Actions.............................................................236

Chapter 9: EXAMPLES WHERE COURTS HAVE FOUND BAD FAITH MAY EXIST

§9:01 Overview.........................................................................240

§9:02 Unreasonable Failure to Settle Third Party Claim Within Policy Limits (Rova Farms)..........................................................242

§9:03 — Cases..........................................................................245

§9:04 Bad Faith Delay in Processing First Party Claim

(Pickett)...........................................................................285

§9:05 — Cases .........................................................................289

§9:06 Bad Faith Delay in Processing Third Party Claim ................297

§9:07 — Cases .........................................................................299

§9:08 Unreasonable Denial of Coverage for First Party Claim..............................................................................304

§9:09 — Cases..........................................................................307

§9:10 Unreasonable Denial of Coverage for Third Party Claim..............................................................................321

§9:11 — Cases..........................................................................323

§9:12 Estoppel Resulting From Insurer’s Failure to Timely Investigate and Communicate With Its Insured Regarding First or Third Party Claim......................................................................325

§9:13 — Cases..........................................................................328

Chapter 10: EXAMPLES WHERE BAD FAITH HAS BEEN FOUND NOT TO EXIST

§10:01 Introduction....................................................................350

§10:02 Insurer Takes Reasonable Position Regarding Settlement of Third Party Claim.............................................................352

§10:03 — Cases..........................................................................355

§10:04 No Bad Faith Delay by Insurer in Processing First Party Claim..............................................................................366

§10:05 — Cases..........................................................................368

§10:06 No Bad Faith Denial of Benefits by Insurer in First Party Claim..............................................................................380

§10:07 — Cases, Court Finds No Benefits Due Under Applicable Policy..............................................................................387

§10:08 — Cases, Court Finds Insurer’s Denial of Benefits Wrong, But Reasonable.....................................................................405

§10:09 — Cases, Court Finds Insurer’s Claims Decision Reasonably Based Upon Suspected Fraud or Misrepresentation by Insured............................................................................411

§10:10 — Cases, Court Finds Insurer’s Claims Investigation Reasonable.....................................................................417

§10:11 —Cases, Court Finds Questions of Fact Regarding Insurer’s Coverage Decision...........................................................420

§10:12 No Bad Faith in Denial of Benefits by Insurer in Third Party Claim......................................................................436

§10:13 — Cases, Court Finds No Benefits Due Under Applicable Policy..............................................................................440

§10:14 — Cases, Court Finds Insurer’s Denial of Benefits Wrong, But Insurance Bad Faith in Pennsylvania

Reasonable.....................................................................450

§10:15 Alleged Improper Conduct by Insurer Held to Not Rise to the Level of Bad Faith............................................................456

§10:16 —Cases..........................................................................458

§10:17 Court Rejects Insured’s First or Third Party Bad Faith Estoppel Claim..............................................................................470

§10:18 — Cases..........................................................................470

Chapter 11: AMOUNTS RECOVERABLE FROM AN INSURANCE COMPANY FOR BAD FAITH CONDUCT

§11:01 Overview.........................................................................476

§11:02 Recovery of Amount of Verdict in Excess of Liability Policy Limits..............................................................................478

§11:03 —Cases..........................................................................479

§11:04 Other Compensatory Damages for Insurer Bad Faith Conduct..........................................................................487

§11:05 —Cases..........................................................................488

§11:06 Recovery of Attorneys’ Fees — N.J. Court Rule 4:42-9(a) (6).............................................................497

§11:07 — Fee Awards for Claims Under a Liability or Indemnity Policy..............................................................................503

§11:08 — Rule 4:42-9(a)(6) Held Inapplicable to First Party Claims.............................................................................510

§11:09 — Fee Awards for PIP Claims...........................................513

§11:10 — Fee Awards in Bad Faith Cases.....................................517

§11:11 Recovery of Pre-Judgment Interest...................................520

§11:12 —Cases..........................................................................522

§11:13 Analysis...........................................................................528

Chapter 12: CLAIMS FOR PUNITIVE DAMAGES IN BAD FAITH ACTIONS

§12:01 Introduction....................................................................533

§12:02 New Jersey Law Regarding Imposition of Punitive Damages,

 

Generally........................................................................536

§12:03 Constitutional Limitations on Punitive Damages Awards...........................................................................538

§12:04 Requirement of “Egregious Circumstances” in Addition to Bad Faith for Imposition of Punitive      Damages...................544

§12:05 New Jersey Court Decisions Discussing Punitive Damages in the Context of Insurance Bad Faith Allegations.................546

§12:06 — Cases Suggesting that a Punitive Damages Claim May Proceed...........................................................................550

§12:07 — Cases Not Allowing Punitive Damages Claim to Proceed...........................................................................559

§12:08 Analysis...........................................................................578

Chapter 13: DISCOVERY IN BAD FAITH LITIGATION

§13:01 Overview.........................................................................581

§13:02 Discovery Issues in Other Jurisdictions..............................582

§13:03 Discovery Issues in New Jersey..........................................588

§13:04 — Cases, Attorney Communications and Work Product...........................................................................593

§13:05 — Cases, Other Discovery Issues......................................603

Chapter 14: PREEMPTION OF BAD FAITH CLAIMS

§14:01 ERISA and Bad Faith.........................................................615

§14:02 — U.S. Supreme Court Decisions Regarding ERISA Preemption.....................................................................616

§14:03 — Decisions Within the Third Circuit Regarding ERISA Preemption.....................................................................620

§14:04 — Recent District Court Cases.........................................622

§14:05 Other Federal and State Statutes and Bad Faith................633

§14:06 — Cases..........................................................................634

APPENDIX OF REGULATIONS............................................................641

TABLE OF AUTHORITIES....................................................................657

TOPICAL INDEX................................................................................669

SELECTED BIBLIOGRAPHY................................................................677