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Keywords

damagesgood faithbad faith

plaintiffnegligencetrialgood faith

Related Cases

Pickett v. Lloyd’s, 131 N.J. 457, 621 A.2d 445

Facts

Burton Pickett, an owner/operator trucker, lost his truck in an accident and had a $30,000 physical-damage policy with Lloyd's, placed through agents Kast and Peerless. After the accident, there were significant delays in processing his claim, including miscommunication and a lack of urgency from the insurer's agents. Pickett's claim was not resolved until nine months after the accident, resulting in economic losses and the loss of his seniority status with his employer.

Plaintiff, Burton Pickett, of Branchville, New Jersey lost his 1983 Mack tractor-trailer truck in a highway accident on Interstate 70 in Ohio on January 13, 1987.

Issue

Whether an insurance carrier's bad-faith failure to pay collision damage benefits to an insured can be the basis for an action for damages exceeding the policy benefits.

The question in this case is whether recognizing a cause of action for bad-faith failure to pay an insured's first-party claim is consistent with the principles and policies of New Jersey insurance law.

Rule

An insurer has a duty to exercise good faith in processing claims, and bad faith is established by showing that no valid reasons existed for the delay or denial of benefits.

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.

Analysis

The court found that the insurer's conduct was unreasonable and that they knew or recklessly disregarded the fact that their actions were unjustified. The delays in processing Pickett's claim were not only excessive but also detrimental to his livelihood, which the insurer was aware of. The court emphasized that the insurer's failure to act in good faith warranted the award of damages beyond the policy limits.

Thus, for example, when a claim is lost in the computer, those processing the claim 'should not be penalized for [their] efforts when, through no intentional act[,] * * * a claim runs afoul of the system.'

Conclusion

The Supreme Court affirmed the lower court's decision, recognizing the cause of action for bad-faith failure to pay and upholding the damages awarded to Pickett.

The trial court best articulated the rationale for such a remedy in its rhetorical question to the insurance companies: You mean that even if this had taken years that Lloyds [sic] hadn't paid [.] * * * [I]f you weren't paid in January, February, March, * * * and you weren't paid in 1987, you weren't paid in 1988, you weren't paid in 1989; you mean that none of that would make any difference?

Who won?

Burton Pickett prevailed in the case because the court found that the insurer acted in bad faith by failing to process his claim in a timely manner, resulting in significant economic losses.

The jury awarded Pickett $70,000 and apportioned the negligence 60% against Peerless and 40% against Lloyd's.

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