Badiali v. New Jersey Manufacturer’s Insurance Group, 220 N.J. 544 (2015). [Disclosure: My firm, Lite DePalma Greenberg, LLC, represents New Jersey Manufacturers Insurance Company in certain litigation, but the firm had no involvement in this case]. When an insurer wrongfully denies an insured’s claim, the insured can sue for bad faith denial. In order to do so successfully, however, the insured must show that “no debatable reasons existed for denial of the benefits.” Simple negligence or failure to settle a debatable claim does not constitute bad faith. As the Supreme Court said in Pickett v. Lloyd’s, 131 N.J. 457, 473 (1993), “a claimant who could not have established as a matter of law a right to summary judgment on the substantive claim would not be entitled to assert a claim for an insurer’s bad faith refusal to pay the claim.”
In this case, defendant (“NJM”) asserted that its denial of benefits was “fairly debatable” because there was “a 2004 unpublished decision in which the Appellate Division held, under essentially the same circumstances, that the insurer (also NJM) was entitled to reject the arbitration award at issue and demand a trial de novo. Geiger v. N.J. Mfrs. Ins. Co., No. A-5135-02 (App. Div. Mar. 22, 2004).” The trial court agreed with NJM and granted summary judgment in NJM’s favor even though discovery had not been completed, ruling that discovery could not change the outcome. The Appellate Division affirmed. Plaintiff went to the Supreme Court, which affirmed in a unanimous opinion by Justice Fernandez-Vina.
Justice Fernandez-Vina observed that Rule 1:36-3, a rule “that has been affirmed time and time again by this Court,” states that an unpublished opinion shall not constitute precedent. But that Court Rule did not apply here. NJM was not relying on Geiger for its precedential value, but “to prove that NJM acted in good faith in conducting its business as an insurance claims handler.” Having been successful in Geiger, NJM acted reasonably in taking that same position in this case. Plaintiff had contended that there was no evidence that NJM had actually relied on Geiger when it rejected plaintiff’s claim, but the Court did not accept that argument. Justice Fernandez-Vina went on to find that, independent of Geiger, NJM’s position was “fairly debatable” based on language of its insurance policy as well.
In addressing the effect of the unpublished Geiger decision, the Court elegantly distinguished Rule 1:36-3. But this case likely would have been much clearer if the distinction between officially published and unpublished opinions no longer existed. Had Geiger been published, it seems that plaintiff’s arguments against “fairly debatable” would have easily been rejected. That Geiger was unpublished should not have made a difference. That is especially so since even “unpublished” opinions have for a number of years been readily available on the Judiciary website. Nonetheless, the Supreme Court shows no signs of eliminating the distinction between published and unpublished opinions.