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AASP-NJ warns insurer misleading over private right of action bill

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Announcements | Associations | Business Practices | Insurance | Legal
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The Alliance of Automotive Service Providers of New Jersey on Monday warned that an insurer had been sending out letters “making false and misleading comments” about a bill allowing a private right of action to sue over insurer misbehavior.

AASP-NJ Executive Director Charles Bryant said he had confirmed one letter from NJM Insurance, and provided us with a copy. However, he said he’s heard NJM isn’t the only carrier doing so.

Senate Bill 2144 would permit claimants to sue over “an unreasonable delay or unreasonable denial of a claim for payment of benefits under an insurance policy” or any violation of the state’s “unfair methods of competition and unfair and deceptive acts or practices in the business of insurance” law, Title 17:29B-4. The bill only applies to first-party claimants.

Though 17:29B-4 defines an unfair claim settlement practices as something done “with such frequency as to indicate a general business practice,” a claimant could sue over such a practice performed once. (Which is logical, considering the consumer would only be familiar with their own claim.)

If the claimant won the lawsuit against the insurer, the consumer could win actual damages, the costs of the litigation, prejudgment interest and “treble damages.”

SB 2144 passed the New Jersey Senate 21-14 on June 7, 2018. It was sent to the Assembly on June 11, 2018.

But the related Assembly Bills 3850 and 4293 have sat in the Assembly Financial Institutions and Insurance Committee since April 12, 2018, and June 27, 2018, respectively. Bryant said its Senate sponsors were going to try and speak to the committee about taking up their bill.

Despite the months of inaction in the Assembly, NJM CEO Mitchell Livingston claimed lawmakers were “fast tracking legislation.”

“Certain insurers are starting to send out letters to their insureds, making false and misleading comments, in my opinion, in an effort to prevent the legislation from becoming law,” Bryant said in a statement. “One claim that is being made is that the New Jersey Legislature is fast tracking the legislation that will substantially increase the price of personal automobile and homeowners’ insurance coverage in the state. This is certainly incorrect and apparently stated to mislead people at best. This legislation is not on the fast track. It was first introduced in March 2018 and then referred to the Assembly Financial Institutions and Insurance Committee that June. It has been stalled there ever since. Bills similar to this have been presented in the past and were buried in the same way and eventually dumped.”

Mitchell said NJM felt the bill as the work of “special interests … actually trying to create an imbalance in the present system by permitting, and indeed encouraging frivolous and unnecessary lawsuits to generate higher costs and legal fees. If they are successful, these additional costs will result in substantial automobile and homeowners’ rate increases for all New Jersey residents.”

This ignores that a claimant would have to prevail in court to win items like attorney fees and treble damages under the bill — which means the defendant insurer had in fact wronged the consumer and deserved to pay those costs, at least in the eyes of the New Jersey court.

“This legislation will only serve special interests needlessly increasing insurance Costs without providing any benefit to you,” Livingston wrote.

According to Bryant, insurers couldn’t pass on such legal costs to consumers anyway.

“An insurer cannot abuse its insured or improperly deny an insured’s claim and then be forced by a court of law to pay what the insured was actually owed or entitled to – along with court cost, attorney fees and treble damages – and then use those additional costs that resulted from their own wrongdoing as a basis to obtain a rate increase,” he said in a statement. Bryant said New Jersey law prohibited this.

“An independent study performed by one of the nation’s leading actuarial firms estimated that the legislation will increase overall insurance premiums in New Jersey by over $2.5 billion per year,” Livingston wrote in the letter. “This means residents would likely receive increases of nearly $300 per policy for automobile insurance and over $100 per policy for homeowners insurance.”

Spelling out that consumers have a private right of action can provide a layer of teeth when insurers violate the law or insurance regulations. Otherwise, insurers can argue that only a regulator is permitted to take action against them.

If the regulator is unwilling or unable to help, but the court determines that only the regulator has authority, repairers and consumers have no recourse.

An example arose in Washington state this year. The Supreme Court in a 5-4 decision Oct. 3 reversed a Court of Appeals ruling that state law allows a policyholder to sue both an insurer and individual adjuster for bad faith.

As part of its denial of a consumer’s right to sue an adjuster for bad faith, the Washington Supreme Court majority implied the right to crack down is instead granted to the Office of Insurance Commissioner:

As to the statutory context, we find it significant that the insurance code contains several specific enforcement mechanisms. The insurance commissioner has broad authority to make rules and conduct investigations to give effect to the insurance code.RCW 48.02.060(3). The commissioner also has authority to suspend or revoke the licenses of insurers and adjusters, and may subject them to fines. RCW 48.05.130, .140, .185 (insurers); RCW 48.17.530, .560 (adjusters). Criminal liability may attach where service providers make payments to get claimant referrals. RCW 48.30A.015. The insurance code provides generally that “[e]xcept as otherwise provided in this code, any person violating any provision of this code is guilty of a gross misdemeanor.” RCW 48.01.080. In our view, the presence of such specific provisions for enforcement of the insurance code suggests that the legislature’s omission of a provision creating a private cause of action for violations of RCW 48.01.030’s duty of good faith was intentional. (Emphasis added.)

Livingston wrote that “claimants already have the right to challenge an insurer’s actions under existing laws. In fact, New Jersey’s current insurance consumer protection laws are among the strongest in the country.”

Bryant said Monday the claim about the strength of the laws was inaccurate. In September, he described a New Jersey Department of Business and Insurance which responds to complaints with, “‘we can’t help you,’” and has reversed 30 years of precedent by ceasing to accept direct complaints by auto body shops.

“The department allows auto body shops to file a complaint with the department and that process remains unchanged,” a DOBI spokesperson wrote in an email when contacted for a response to Bryant’s comments in September.

“The department takes complaints seriously and urges consumers and business entities who have complaints or inquiries about any banking, insurance or real estate matter to contact the department by phone at 1-800-446-7467 or online at:”

Neither NJM nor DOBI had yet responded to an email request for further comment Monday.

“This bill holds the insurance company responsible. It puts their feet to the fire. Without it, it’s the wild, wild west. Nobody is enforcing the rules and regulations now,” AASP-NJ President Jerry McNee (Ultimate Collision Repair) said in a statement. “For them to say that this will increase premiums…that is simply untrue. It’s smoke and mirrors. If they were doing what they were supposed to, this would not be an issue. Insurance companies are in fear of this passing.”

The letters encourage policyholders to criticize the bill to legislators, according to the AASP-NJ. The trade group said policyholders should instead contact lawmakers and tell them to pass the bill.

“Consumers – especially those who have been abused by an insurer when they put in a claim to cover a loss and were either shortchanged on their claim or had their claim improperly denied and received no help from the Department of Insurance – should be calling their legislators and telling them to vote ‘yes’ to this bill,” Bryant said in a statement.

The concept of a private right of action and alleged regulator inactivity arose in an April Society of Collision Repair Specialists “Repairer Roundtable.”

During the discussion of her first meeting as a consumer liaison to the National Association of Insurance Commissioners, collision industry attorney Erica Eversman said the country’s regulators fell into three categories.

Some are out to protect insurers, Eversman (Vehicle Information Services) told a SCRS Repairer Roundtable  on April 17. Others come at their regulatory role with a focus on laws and regulation and act narrowly within those parameters. The third type is very consumer-friendly, and she said she was “taken aback” by their numbers, expecting to encounter more of the “‘insurers are perfect’” type of commissioners than she did.

Any bills needed a means of enforcement, perhaps a private right of action — which “they will kick and scream” over, she said.

“That’s the biggest problem … we have with the insurance industry,” she said.

She said insurers were “totally insulated” and without a private right of action, you can’t sue them for violating insurance regulations.

Be heard: Complaints can be filed at the Department of Banking and Insurance here. Senator and assembly member contact information can be found here.

More information:

“AASP/NJ Warns Collision Shops of Insurers’ Claims on Proposed Legislation”

Alliance of Automotive Service Providers of New Jersey, Dec. 23, 2019


The New Jersey General Assembly chamber is shown. (gnagel/iStock)

Alliance of Automotive Service Providers of New Jersey Executive Director Charles Bryant shakes a hand at NORTHEAST 2019. (Provided by Thomas Greco Publishing)

The New Jersey Capitol is shown. (Tashka/iStock)

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