USA – NEW JERSEY Trends and Developments Contributed by: William (Bill) Wilson and Craig R. Rygiel, Mound Cotton Wollan & Greengrass
court determined the plaintiffs failed to plead that the defendant lacked a reasonable basis for denying the claim because they conceded that the defendant’s insurance policy “conditioned coverage for claims arising from prior work and [that] they failed to meet at least one of those conditions” (id). Similarly, in Johnson v Hanover Ins. Co. , No 23-1294, 2025 WL 1527444 (D.N.J. May 29, 2025), the trial court applied the “fairly debatable” standard to dis- miss a bad faith claim at the summary judgment stage in connection with a homeowner’s insurance dispute. The parties in Johnson agreed that the plaintiffs’ home sustained damage during a hailstorm but disagreed over whether the roof sustained any covered damage. The plaintiffs argued the defendant “acted in bad faith by refusing to submit their dispute over the roof dam- age to appraisal” (id at *6). Because the defendant contended the roof did not sustain any damage, the trial court found that the defendant had raised a coverage issue that was not subject to appraisal. It thus concluded that the rejec- tion of the plaintiffs’ appraisal demand “[a]t the very least… was ‘fairly debatable,’ precluding any find- ing of bad faith” (id at *6). Additionally, the plaintiffs argued the defendant acted in bad faith by initially applying the wrong deductible before later correcting itself. The trial court also dismissed this legal theory as a matter of law, concluding that the plaintiffs failed to “offer… evidence suggesting that the initial error was anything more than a clerical mistake” (id at *7). Such evidence, the court said, was necessary to show wrongful intent or reckless disregard. New Jersey courts apply the same analytical frame- work when the alleged bad faith concerns the inatten- tion to processing an uncontested claim rather than the denial of benefits. “In a delay case, bad faith is established by showing that no valid reasons exist- ed to delay processing the claim and the insurance company knew or recklessly disregarded the fact that no valid reasons supported the delay” ( Shamrock Techs., Inc. v Ill. Union Ins. Co. , No 25-00105, 2025 WL 3670535, at *4 (D.N.J. Dec. 17, 2025) (cleaned up)). This standard is “essentially the same” as the “fairly debatable” standard (id) (quoting Onex Credit
Partners, LLC v Atrium 5, Ltd. , No 13-5629, 2014 WL 4798578, at *8 (D.N.J. Sept. 26, 2014)). In Shamrock Technologies, the trial court dismissed the plaintiff’s bad faith claim at the pleading stage, concluding that “Plaintiff’s conclusory allegations that Defendant did not promptly address Shamrock’s claim fails to state a claim upon which relief can be granted” (id at *5). More than 30 years after the New Jersey Supreme Court first recognised a cause of action for bad faith in Pickett, it remains the case that an insurer only needs to identify “the existence of material issues of disput- ed fact in the underlying contract dispute” to satisfy the “fairly debatable” standard (Vincent Cusumano Architect, 2025 WL 957699, at *7 n.6 (citing Snowden v Standard Ins. Co. , No 23-2493, 2024 WL 1154471, at *3 n.2 (D.N.J. Mar. 18, 2024))). Replacement Cost Estimates Are Insufficient on Their Own To Establish Actual Cash Value In recent years, insureds and insurers have clashed over the type of evidence necessary to prove actu- al cash value (ACV). Often, insureds will attempt to rely solely on their replacement cost (RC) estimates, arguing ACV can be derived therefrom. Two federal courts confirmed that these estimates on their own are plainly insufficient to raise a triable issue as to dam- ages (see Kimmel v Mass. Bay Ins. Co. , 787 F. Supp. 3d 18 (D.N.J. 2025); Johnson v Hanover Ins. Co. , No 23-1294, 2025 WL 1527444 (D.N.J. May 29, 2025)). In Kimmel , the insured sued his homeowner’s insurer, seeking coverage for structural damage to his house. The insured attributed the structural damage to vibra- tions and soil displacement caused by a recently fallen tree, while the insurer instead found the claim involved pre-existing damage, which was the result of long- term settlement and other unrelated factors. Following the close of discovery, the insurer moved for summary judgment, arguing that the insured was limited to recovering the ACV of the damage because he did not repair or replace the damaged property, as required by the policy to recover the RC of the damage, and that he failed to produce evidence to establish the ACV of the damage. In response, the
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