As Superstorm Sandy insurance claims wend their way through the courts, we are beginning to see decisions related to motions on the pleadings, especially with regard to extracontractual claims. The first such decision in the New Jersey federal courts that we are aware of was recently issued in Beekman v. Excelsior Insurance Company and Peerless Insurance, 2014 U.S. Dist. LEXIS 21864 (D.N.J. Feb. 21, 2014). Plaintiff Beekman was a homeowner residing in Union Beach, New Jersey whose home was damaged by Superstorm Sandy. In addition to his breach of contract claim, plaintiff also alleged that the defendant insurers improperly adjusted his claim, misrepresented the cause, scope, and cost of repairs to the insured premises, underpaid the claim without any reasonable basis, conducted an inadequate, biased, and result-oriented investigation of Plaintiff’s claim, and unreasonably delayed full payment of Plaintiff’s claim. Plaintiff further alleged that the insurers violated the New Jersey Consumer Fraud Act (“CFA”) through their deceptive acts during the adjustment which were part of an ongoing general business practice.
Defendants Peerless and Excelsior moved to dismiss the second count of the complaint alleging breach of the implied covenant of good faith and fair dealing, the fourth count, alleging a violation of the CFA, and plaintiff’s claims for punitive damages and attorney’s fees. The District of New Jersey, Judge Anne E. Thompson, dismissed the bad faith claim and the claims for punitive damages and attorney’s fees, but denied the motion with respect to the alleged violations of the CFA. With respect to the bad faith allegations, the court found that plaintiff had pleaded only that defendants’ actions with respect to the claim handling were not “reasonable” and had failed to allege any facts “sufficient to support a conclusion that the party alleged to have acted in bad faith has engaged in some conduct that denied the benefit of the bargain originally intended by the parties.” In addition, with respect to the claim for punitive damages contained in the complaint’s third count and the fourth (CFA) count, the court found that plaintiff had failed to plead the “egregious” conduct that might support a punitive damage claim for a wrongful refusal to pay a claim. And with respect to plaintiff’s claim for attorney’s fees, the court granted the motion to dismiss, restating the longstanding bar to recovery of attorney’s fees in a first-party action.
In addressing the CFA claim, the court declined to dismiss. Relying on the Third Circuit’s decision in Weiss v. First Unum Life Ins. Co., 482 F.3d 254 (3d Cir., 2007), the court stated that the New Jersey Supreme Court’s “sweeping statements regarding the application of the CFA” required it to permit the claim to proceed.
Interestingly, the court acknowledged, but rejected, a 2009 decision from the District of New Jersey, (Capogrosso v. State Farm Ins. Co., CIV.A. 08-CV-2229DMC, 2009 WL 3447068 (D.N.J. Oct. 21, 2009) (“this Court cannot permit Plaintiff’s CFA claims to proceed insofar as they pertain to the payment of insurance benefits”)), which post-dated Weiss. It will be interesting to watch for New Jersey state and district court decisions addressing CFA claims alleging deceptive acts in adjustment (as opposed to sales), which we expect to see this year, given the large number of Superstorm Sandy cases recently filed.