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Legal Memorandum: Handling of an Underinsured Motorist Claim

Issue: Do genuine issues of material fact surround the fairness and good faith of the handling of an underinsured motorist claim?

Area of Law: Insurance Law
Keywords: Underinsured motorist claim; Duty of good faith and fair dealing
Jurisdiction: New Jersey
Cited Cases: None
Cited Statutes: None
Date: 04/01/2006

Under New Jersey law, it is well settled that an underinsured motorist claimant may maintain a first-party bad faith claim against an insurer.  Miglicio v. HCM Claim Mgmt. Corp., 288 N.J. Super. 331 (Law. Div. 1995).  To establish such a claim, “a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and the defendant’s knowledge or reckless disregard of the lack of a reasonable basis for, denying the claim.”  Pickett v. Lloyd’s, 131 N.J. 457, 473 (1993).  The insurer’s knowledge of a lack of reasonable basis for its actions “‘may be inferred and imputed to an insurance company where there is a reckless . . . indifference to facts or to proofs submitted by the insured.'”  Ibid. (quoting Bibeault v. Hanover Ins. Co., 417 A.2d 313, 319 (R.I. 1980)).  However, where a claim is uncertain and “fairly debatable,” the insurer is justified in denying the claim and defending its rights under the policy.  Pickett, supra, 131 N.J. at 473; Miglicio, supra, 288 N.J. Super. at 342.  See also Pickett, supra, 131 N.J. at 466 (“‘To be a good faith decision, it must be an honest and intelligent one in the light of the company’s expertise in the field.'” (quoting Radio Taxi Serv., Inc. v. Lincoln Mut. Ins. Co., 31 N.J. 299, 305 (1960)). 

In handling an underinsured motorist claim, “[t]he duty of good faith and fair dealing pervades [the] insurance contract[].”  Sears Mortgage Corp. v. Rose, 134 N.J. 326, 347 (1993).  See also N.J.S.A. […]

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