What Is The Time for Responding to a Defense Tender?
An insurer has 10 business days to acknowledge the receipt of a claim. N.J. Admin. Code §§ 11:2-17.6 – 11:2-17.8.
After receipt of proof of loss, an insurer must accept or deny a claim within 30 days for first-party claims (except for personal injury and automobile damage claims, which are subject to a 60 day limit); within 45 days for third-party property claims; and 90 days for third-party bodily injury claims. If more time is needed, the insurer must notify the insured and mist continue to do so every 45 days thereafter until it makes a coverage determination. N.J. Admin. Code §§ 11:2-17.6 – 11:2-17.8.
Does Reserving Rights Create a Conflict of Interest?
Yes. A liability insurer must pay for independent counsel where a conflict of interest arises due to matters for which it has denied coverage or is reserving its rights. Battista v. Olson, 594 A.2d 260, 263-264 (N.J. Super. 1991).
Does a Reservation of Rights Create Additional Duties?
An insurer is required to notify its insured and obtain consent prior to defending under a reservation of rights. Battista v. Western World Ins., 545 A.2d 841, 845 (N.J. 1988) (overruled on other grounds).
What Must Be Done If A Conflict of Interest Exists?
Yes. A liability insurer must pay for independent counsel where a conflict of interest arises due to matters for which it has denied coverage or is reserving its rights. Battista v. Olson, 594 A.2d 260, 264 (N.J. Super. 1991).
An insured may reject a defense under a reservation of rights. Merchants Indem. Corp. v. Eggleston, 179 A.2d 505, 511 (N.J. 1962).
The insured may select its own counsel subject to approval by the insurer. Burd v. Sussex Mut. Ins. Co., 267 A.2d 7, 11 (1970).
Who Is Responsible for Fees of Independent Counsel?
The insurer is obligated to reimburse the insured if it is later determined that the claim was within the policy. Burd v. Sussex Mut. Ins. Co., 267 A.2d 7,11 (1970). Counsel for insured is only entitled to reasonable hourly rate for defense work of that nature. Aquino v. State Farm Ins. Cos., 793 A.2d 824, 833 (N.J. Super. App. 2002).
What Are Independent Counsel’s Obligations?
What Settlement Duties Exist?
A liability insurer must exercise good faith in handling an insured claim and must consider the insured’s interests in deciding whether to settle a claim, even for an amount within the policy limits. American Home Assur. Co. v. Herman’s Warehouse Corp., 563 A.2d 444, 445-446 (N.J. 1989).
What Actions May Result in a Claim for Bad Faith?
An insurer’s bad faith refusal to pay first-party benefits to its policyholder could form the basis for an action for damages, including consequential damages, in excess of policy limits. In such circumstances, an insurer’s bad faith refusal to pay a claim “sounds in both tort and contract.” Pickett v. Lloyd’s, 621 A.2d 445, 470 (N.J. 1993).
Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?
Attorney’s fees are available in an action upon liability or indemnity insurance to a successful litigant. N.J. Ct. R. 4:42-9(a)(6).
Are Punitive Damages Recoverable in Insurer-Insured Dispute?
Absent egregious circumstances, no right to recover for emotional distress or punitive damages exists for an insurer’s allegedly wrongful refusal to pay a first-party claim. Pickett v. Lloyd’s, 621 A.2d 445, 470 (N.J. 1993).
Alternative Coverage Options
A declaratory judgment proceeding may be brought in advance of the trial on the underlying action to the end that the third-party claim can be litigated by the party ultimately liable. Polarome Intern., Inc. v. Greenwich Ins. Co., 961 A.2d 29, 48-49 (N.J. Super App. 2008).
Declaratory Judgment – N.J. Rev. Stat. § 2A:16-52.
“All courts of record in this state, shall within their respective jurisdictions, have power to declare rights, status, and other legal relations, whether or not further relief is or could be claimed; and no action or proceeding shall be open to objection on the ground that a declaratory judgment or decree is demanded…”
New Jersey’s Unfair Claims Settlement Practice Act does not provide for a private right of action against an insurer. Pickett v. Lloyd’s, 621 A.2d 445, 456 (1993).