Insurance Coverage Disputes and Bad Faith Claims

We Sue Insurance Companies

Wenstrand Law LLC represents policyholders against their insurers. We do not represent insurance companies, and we never will, because the two sides of this work do not mix.

If your claim was denied, delayed, or paid for a fraction of what it was worth, you already know how the process feels. The denial letter is polite. It quotes a policy provision or an exclusion you have never heard of. It thanks you for the opportunity to review your claim. What it does not tell you is what is in the adjuster’s file: the reserve that was set months ago, the engineer who was hired to find a reason, the supervisor’s note about exposure. Getting that file, and holding the carrier to what it actually shows, is most of the work.

This is a specialized area and the firm staffs it that way. Coverage and bad faith matters are handled by counsel whose practice is concentrated in them, with the rest of the firm’s litigation and real estate capability behind them when a claim touches property, title, or a business we already advise.

The Claims We Handle

Property and homeowners. Fire, burst pipes and water damage, storm and wind damage, roof claims, mold, collapse, theft. The fights are usually about the scope of the loss, whether the damage was “sudden and accidental” or long-term seepage, actual cash value versus replacement cost, withheld depreciation, and the anti-concurrent causation clause the carrier is relying on.

Business interruption and commercial property. Lost income, extra expense, the period of restoration, contingent business interruption, and the valuation disputes that follow a partial denial.

Uninsured and underinsured motorist claims. When the other driver had no insurance or not enough, your own carrier becomes the adversary. This is the most common bad faith scenario in New Jersey, and it now has its own statute.

Disability and life insurance. Own-occupation versus any-occupation definitions, pre-existing condition and contestability defenses, surveillance, and “independent” medical examinations that are neither.

Duty to defend. When a carrier refuses to defend you against a lawsuit, defends under a reservation of rights, or files a declaratory judgment action to get out of the policy. The duty to defend is broader than the duty to indemnify. It is triggered by what the complaint alleges, and a carrier that gets it wrong faces serious consequences.

Failure to settle. When a carrier could have settled a case against you within your policy limits, refused, and left you personally exposed to a verdict above the limits.

Breach of Contract, and What Comes After It

Every coverage case starts as a breach of contract claim. The policy is a contract. The carrier promised to pay. It did not. The benefits owed plus interest are the floor.

The real question is whether the carrier’s conduct supports something more than that, and here New Jersey and New York diverge sharply. People are misinformed about this constantly.

New Jersey recognizes first-party bad faith. The standard, set by the New Jersey Supreme Court in 1993, is that a carrier is liable for a bad faith denial or delay only if your claim was not “fairly debatable.” If a reasonable carrier could have disputed the claim on the facts and the law in front of it, there is no bad faith, even if the carrier turns out to have been wrong. That is a real hurdle. But if you clear it, your damages can include consequential losses beyond the policy limits, meaning the foreseeable harm that flowed from the carrier’s failure to pay. The Court reaffirmed that framework in 2015, and in the same pair of decisions delivered a procedural warning that has ended otherwise good cases: a bad faith claim can be barred by the entire controversy doctrine if it is not brought together with the underlying coverage claim.

New Jersey also has the Insurance Fair Conduct Act, which created a statutory claim for uninsured and underinsured motorist claimants who face unreasonable delay or denial, with attorneys’ fees and enhanced damages available. It has changed the leverage in UM and UIM disputes, and its scope has been litigated actively since it passed.

New York does not recognize a standalone tort of bad faith. A policyholder generally cannot turn a denied claim into a tort case or a punitive damages case without an independent tort and conduct aimed at the public at large. What New York does allow is significant and often overlooked. In two 2008 decisions, the Court of Appeals held that a policyholder can recover consequential damages for breach of an insurance contract, above the policy limits, where those damages were within the contemplation of the parties when the policy was issued. For a business that failed because its carrier would not pay a business interruption claim, that is often the whole case.

On the third-party side, New York requires a showing of gross disregard for the insured’s interests before a carrier is liable for refusing to settle. New Jersey’s standard, set in a 1974 decision that still governs, holds a carrier responsible for the excess judgment when it refused a settlement within limits in bad faith.

Neither state’s unfair claims settlement practices statute gives you a private right to sue under it. Those provisions are enforced by regulators. But the standards they set still tell a court what reasonable claims handling looks like.

The ERISA Problem

If your disability or health coverage came through your employer, ERISA probably preempts your state law claims entirely. No bad faith. No consequential damages. No jury. Often a deferential standard of review that asks only whether the plan administrator’s decision was arbitrary. People arrive furious and are told the most they can recover is the benefits themselves.

We raise this at the first meeting because it changes everything, most of all the administrative appeal. That appeal is usually the last chance to put evidence into the record, and a court later will be confined to reviewing that record. Getting the appeal right is the single most valuable thing an ERISA claimant can do, and most people do it without a lawyer.

How We Build These Cases

We read the whole policy, including the endorsements. Coverage is frequently restored or expanded by an endorsement the denial letter never mentions.

We get the claim file: the adjuster’s notes, the reserve entries, the correspondence retaining the expert, the claims manual, and the supervisor’s communications. What the file shows and what the letter says are not always the same.

We take the depositions of the adjuster, the supervisor, and the retained expert, on what they actually did and when they did it.

We hire our own experts: engineers, contractors, forensic accountants, and physicians, depending on the loss.

And in New Jersey, we preserve the bad faith claim by thinking about the entire controversy doctrine when we plead, not after judgment.

We also handle appraisal, mediation, and pre-suit resolution. A good share of these claims get paid without a lawsuit once the carrier understands that someone is actually reading the file.

If Your Policy Is From Somewhere Else

Two things make this practice less tied to a state than it looks. ERISA claims are federal, so the law is the same in Newark as in Houston, and the administrative appeal is governed by federal regulation. And policies travel in ways people do not: a homeowner’s policy issued in one state, a commercial program covering several, an accident across a state line. Those present a choice-of-law question before they present a coverage question, and answering it is part of the job.

The firm’s attorneys are admitted in New Jersey, New York, Texas, and Arizona, and in the federal courts for the District of New Jersey and the Southern District of New York, which matters here more than in most practices because an ERISA case belongs in federal court and a coverage suit against an out-of-state carrier often ends up there on diversity. Where a case has to be filed somewhere the firm is not admitted, we bring in local counsel or refer to a firm we would use ourselves. Call and describe the denial. The jurisdiction question sorts itself out fast.

If You Have Been Denied

Bring the denial letter, the policy, and your correspondence with the carrier. A denial is the insurance company’s position. It is not the last word.

Call (201) 431-6199 or email info@wenstrandlaw.com. Offices in Cranford, New Jersey and on Madison Avenue in Manhattan.