Some commentators are getting so excited about the prospect of the "New Jersey Insurance Fair Conduct Act" becoming law that they may have jumped the gun, just a bit.
It is true that on June 7, 2018 the New Jersey State Senate passed Bill S2144, which would become the Act, once the New Jersey State Assembly passed it.
However, on June 11, 2018 the New Jersey State Assembly sent S2144 to the Assembly Financial Institutions and Insurance Committee. Presumably, the Bill will not become a law until it is passed out of that Committee and is approved by the full Assembly.
When it does become law, the Act for sure bears watching. It will take a little while to understand all of the issues it raises, so the present interval we have before enactment is time that can be put to good use studying the final version when and if it passes the New Jersey State Assembly. In the interim, the biggest excitement seems to be the onset of first-party bad faith litigation if the bill becomes law in anything like its present form.
Time will tell. In the interim, one provision that has so far survived two bouts in the New Jersey Senate and the introduction of a corresponding bill in the New Jersey Assembly, is this language that has not been changed in its appearances in either chamber:
- As used in this act:
"First-party claimant" or "claimant" means an individual, corporation, association, partnership or other legal entity asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy.
(Emphasis added.) The italicized language does not appear to be ambiguous in any way. Taken literally, this language would mean that parties other than an insured could assert an insured's entitlement to benefits owed "on behalf of an insured under an insurance policy."
So, if a mortgagee like a bank that has lent money for a mortgage is owed money after a loss, or even if say it is named as a payee on the check that pays the loss ("ATIMA," or as their interests may appear), does this mean that it can assert "an entitlement to benefits owed ... on behalf of an insured under an insurance policy" that protects the collateral, in this case, the insured's house?
As a mortgagor, every insured homeowner has to agree to obtain insurance to protect the bank's interest in being paid. So, it is usual and ordinary for that insurance policy to reflect that the bank will be named as a payee on the check that pays the insured's loss, as the bank's interests may appear.
So, to say again, will the New Jersey Insurance Fair Conduct Act -- if enacted in anything like the pending bills' present forms -- confer standing on a bank or any other mortgagee to sue the insurance company because, as the mortgagee, it has an entitlement to benefits owed on behalf of the homeowner-insured under the insurance policy?
So, to say again, time will tell.
Please Read The Disclaimer. ©2018 Dennis J. Wall. All Rights Reserved.
Comments