USA – NEW JERSEY Trends and Developments Contributed by: William (Bill) Wilson and Craig R. Rygiel, Mound Cotton Wollan & Greengrass
Mound Cotton Wollan & Greengrass 30a Vreeland Road Suite 210 Florham Park NJ 07932 USA
Tel: +1 973 494 0600 Fax: +1 973 242 4244 Email: wwilson@moundcotton.com Web: www.moundcottton.com
Introduction With the exception of the New Jersey Supreme Court, New Jersey state courts, unlike those in other juris- dictions, largely eschew issuing published decision, meaning most decisions are “unpublished” and, therefore, not binding upon any other court. These decisions, however, are not entirely valueless as they may be cited as secondary authority and often either presage future developments in the law or reinforce existing principles. In keeping with this general practice, New Jersey courts in recent years have issued few precedential decisions involving insurance law. This past year was no different. Nonetheless, when viewed together with the decisions issued by the federal courts in New Jer- sey, the “unpublished” state court decisions issued in 2025 have provided useful guidance with respect to several issues that are frequently contested in insur- ance coverage litigations. New Jersey Courts Reiterate That Insureds Face a High Bar to Establishing an Insurer’s Bad Faith In 2025, New Jersey courts had multiple opportunities to reiterate that the bar to maintaining a bad faith claim based on an insurer’s denial of benefits or inattention to processing a valid claim remains high. Under New Jersey law, a plaintiff must show two ele- ments to establish a claim for bad faith: “(1) the insurer lacked a ‘fairly debatable’ reason for its failure to pay a claim, and (2) the insurer knew or recklessly disre- garded the lack of a reasonable basis for denying the claim” ( Ketzner v John Hancock Mut. Life Ins. Co. ,
118 F. App’x 594, 599 (3d Cir. 2004) (citing Pickett v Lloyds , 621 A.2d 445, 454 (N.J. 1993))). To satisfy the first prong, “a plaintiff must establish as a matter of law a right to summary judgment on the substantive claim; a plaintiff who cannot do so is not entitled to assert a claim for bad faith—including at the motion to dismiss stage” ( Vincent Cusumano Architect, P.C. v Berkshire Hathaway Direct Ins. Co ., No 23-22970, 2025 WL 957699, at *7 (D.N.J. Mar. 29, 2025)). Applying the “fairly debatable” standard, the District of New Jersey dismissed an alleged bad faith claim at the motion to dismiss stage in Vincent Cusumano Architect . There, the parties disputed the availability of coverage under a professional liability insurance policy for claims involving the plaintiffs’ prior work. Notably, there was a three-month gap in coverage between the expiration of the plaintiffs’ prior policy and the commencement of the policy issued by the defendant. The plaintiff argued, among other things, that the defendant “knowingly issued an insurance policy with a three-month gap to deprive Plaintiffs of coverage for claims stemming from prior work, and such conduct is sufficient to establish bad faith” (id at *7). The trial court rejected the plaintiffs’ argument that the “fairly debatable” standard did not apply to the claim because the defendant’s alleged bad faith related to its decision to issue an insurance policy with a three-month gap in coverage. As the plaintiffs acknowledged their bad faith claim relied on the same set of facts as their breach of contract claim, the trial
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