Opinion ID: 1464124
Heading Depth: 1
Heading Rank: 3

Heading: Is there a duty on the part of an insurance carrier to exercise good faith in processing an insured's claims?

Text: We are satisfied that there is a sufficient basis in law to find that an insurance company owes a duty of good faith to its insured in processing a first-party claim. We begin by noting that every contract imposes on each party the duty of good faith and fair dealing in its performance and its enforcement. In New Jersey, we have stated that obligation to be an implied term of every contract. Onderdonk v. Presbyterian Homes, 85 N.J. 171, 182, 425 A. 2d 1057 (1981); Bak-A-Lum Corp. v. Alcoa Bldg. Prods., Inc., 69 N.J. 123, 129-30, 351 A. 2d 349 (1976); Palisades Properties, Inc. v. Brunetti, 44 N.J. 117, 130, 207 A. 2d 522 (1965). Rova Farms itself emphasized that principles of equity, fair dealing and good faith    breathed new lifegiving honesty into the bare contractual relationship sometimes mentioned as existing between insured and insurer. 65 N.J. at 491, 323 A. 2d 495 (citing McDonald v. Royal Indem. Ins. Co., 109 N.J.L. 308, 162 A. 620 (E. & A. 1932)). Agents of an insurance company are obligated to exercise good faith and reasonable skill in advising insureds. Weinisch v. Sawyer, 123 N.J. 333, 340, 587 A. 2d 615 (1991). Implicit in that holding that the agent of the insurer owes a fiduciary duty to the insured is that the principal owes an equal duty. See also Sobotor v. Prudential Property & Casualty Ins. Co., 200 N.J. Super. 333, 337-41, 491 A. 2d 737 (App.Div. 1984) (finding that relationship of insured and insurer, either agent or broker, is fiduciary one, carrying with it affirmative duties toward the insured); Sandler v. Lawn-A-Mat Chem. & Equip. Corp., 141 N.J. Super. 437, 450-51, 358 A. 2d 805 (App.Div.), certif. denied, 71 N.J. 503, 366 A. 2d 658 (1976) (stating that insurer owes insured special duty of good faith and fair dealing). Moreover, the New Jersey Legislature has defined the relationship between insurance companies and insureds by promulgating a broad range of statutory provisions. For example, N.J.S.A. 17:29B-1 to -14 regulates the insurance trade by defining and prohibiting unfair practices, among them, Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. N.J.S.A. 17:29B-4(9)(f); see also N.J.S.A. 17B:30-13.1(f) (regulating life and health insurance industries with identical provision). At least forty-five states, including New Jersey, have adopted versions of model legislation proposed by the National Association of Insurance Commissioners concerning unfair competition and unfair and deceptive trade practices. Diana C. White, Liability Insurers and Third-Party Claimants: The Limits of Duty, 48 U.Chi.L.Rev. 125, 146 n. 75 (1981). Under the legislation, the Commissioner of Insurance has the power to adopt regulations, to investigate violations of the duty of good faith and fair dealing, and to impose sanctions therefor. Among the regulations adopted is N.J.A.C. 11:3-10.5, which requires that automobile physical-damage claims be settled within 30 calendar days assuming no clear justification for a delay exists. Although the regulatory framework does not create a private cause of action, it does declare state policy and we do not think that finding a cause of action for the breach of the duty of good faith and fair dealing would conflict with that policy.