New Jersey has passed a law that changes the relationship between drivers and insurance companies. The law allows drivers to sue their insurance company if it denies claims based on spurious reasons or delays the payout of approved claims.
Suing for bad faith
The new law is called the New Jersey Insurance Fair Conduct Act, and it exists to provide customers with a measure of protection against bad actions by their insurers. The law applies to claims that involve a driver who gets into an accident with another driver who is uninsured or underinsured. Sometimes, in these cases, the insurance company might deny the claim so it doesn’t have to deal with the complexity of getting reimbursement from an uninsured driver.
According to the new law, customers can sue their insurance companies when they deny a claim “unreasonably.” Customers can also sue if the insurance company approves the claim but takes an unreasonable amount of time to pay out the claim.
The law helps customers who had trouble getting insurance companies to pay for claims that should have been paid out according to the policy. Motor vehicle accidents often entail behind-the-scenes interactions between insurance companies, and this law prevents some of that from falling on customers in the case of an uninsured or underinsured driver. The law does not specify what counts as unreasonable, but the definition will likely be ironed out once some lawsuits under this law go to court.
This may set off a trend of other states passing laws that govern how fast and whether insurance companies need to provide service and reimbursement. Hopefully, more car accident victims will be able to get the compensation they are due.