In a pair of rulings , the New Jersey Appellate Division denied efforts to expand the doctrine of Rova Farms v. Investors Ins. Co., 65 N.J. 474 ( 1974), to allow recovery for damages in excess of policy limits for a carriers bad faith handling of uninsured and underinsured motorist claims. In both Taddei v. State Farm and Accisano v. Allstate, the Appellate Division affirmed lower court rulings that molded excess verdicts to the UM/UIM policy limits, plus prejudgment interest.
The plaintiff’s had argued that without a first party bad faith remedy, insurers have no incentive to settle claims in a timely manner since their exposure cannot exceed policy limits. The jury in Taddei awarded $2.5 million and State Farm had $100,000 UM coverage limits. In refusing to apply the bad faith rationale of Rova Farms to these claims, the Appellate Division noted that UM/UIM claims are different from third party claims since the carriers failure to settle within policy limits does not place the insureds assets at risk.
The Court did leave open the possibility of a claim against the insurer for breach of the covenant of good faith and fair dealing, or punitive damages in an exceptional and particularly egregious case.