Legislation is under consideration in Connecticut and New Jersey that may significantly expand a claimant’s ability to directly sue an insurer over unfair claims settlement practices.

Connecticut

S.B. No. 763 amends the Connecticut Unfair Insurance Claims Practices Act (“CUIPA”) to allow a private cause of action for unfair claim settlement practices without the necessity of showing a general business practice on the part of an insurer. The proposed legislation accomplishes this by removing the words “with such frequency as to indicate a general business practice” in the definition of and unfair claim settlement practices codified in Conn. Gen. Stat. § 38a-816(6). The text of S.B. No. 763 also states that “[p]roof of public interest or public injury shall not be required in any action brought under [Conn. Gen. Stat. § 38a-816(6)].”

Therefore, S.B. No. 763 modifies CUIPA to allow an individual plaintiff, whether first- or third-party, to bring suit against an insurer for any single occurrence of a statutory unfair claim settlement practice. In addition, S.B. No. 763 empowers the courts, in their discretion, to award punitive damages and any such equitable relief as deemed necessary or proper. The amendment would apply to both property and casualty insurers and life and health insurers.

If passed, the effective date for the law is October 1, 2009.

To see a full version of S.B. No. 763, click here.

New Jersey

Similar to the proposed legislation in Connecticut, the New Jersey version, S.B. No. 132, provides for a private cause of action against insurers for unfair claims settlement practices and allows the courts to award punitive damages and reasonable attorneys’ fees in such actions, but is limited to first-party claimants. Courts may include punitive damages “when the violation demonstrates, by clear and convincing evidence, actual malice or wanton and willful disregard of persons who foreseeably might be harmed by the insurer’s acts or omissions.”

In its current form, S.B. No. 132 applies to the claims settlement practices of both property and casualty insurers under N.J. Stat. § 17:29B-4(9) as well as life and health insurers under N.J. Stat. § 17B:30-13.1. Under S.B. No. 132, a first-party claimant may bring suit against an insurer for any single occurrence of an unfair claim settlement practice as defined by statute.

If passed, the law will be effective immediately.

To see a full version of S.B. No. 132, click here.