- A Complaint Alleging Bad Faith Must Contain Factual Allegations of Knowing or Reckless Conduct (New Jersey Federal)
- April 1, 2017
In our post earlier today, we noted a Pennsylvania Federal Court dismissing bad faith claims for conclusory pleadings, without prejudice. Below is a New Jersey Federal Court doing the same.
Plaintiffs are homeowners who purchased an insurance policy, which they alleged entitled them to coverage for property damage sustained by their home. After the Insurer denied coverage, the Plaintiffs brought suit alleging breach of contract and bad faith. The Insurer later filed a Motion to Dismiss as to the bad faith claim.
The Court granted the motion and agreed that Plaintiffs had failed to state a cognizable bad faith claim. The Court recognized that New Jersey defines bad faith as: (1) the lack of a “fairly debatable” reason for failing to pay a claim, and (2) knowing or reckless disregarded for the lack of a reasonable basis in denying the claim. The lone allegation in the Complaint as to the second element was Plaintiffs’ assertion that the Insurer had “reckless disregard for the rights of the Plaintiffs.”The Court held that this conclusory allegation was insufficient to state a claim because it left “the Court to infer reckless indifference from the fact that Defendant denied coverage.” The Court declined to take such a leap. The Complaint lacked any allegations explaining how the Insurer acted recklessly, and the Court refused to infer bad faith conduct simply because the Insurer had denied coverage. As the Court explained, this was they very type of speculative pleading forbidden by Twombly and Iqbal. Thus, the Court dismissed the claim, without prejudice.