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Common Law Bad Faith Claims and Claims Under the Insurance Fair Conduct Act Should, In Many Cases, be Deferred Until After Resolution of Underinsured Motorist Claims


Bruce Greenberg
Posted byBruce GreenbergApril 29, 2026

Tenenbaum v. Allstate Ins. Co., ___ N.J. Super. ___ (App. Div. 2026). Judge Natali’s opinion for the Appellate Division in this matter today involved two matters that were before the court on leave to appeal. The issue in both cases was whether and when “common law bad faith claims under Pickett v. Lloyd's, 131 N.J. 457, 467 (1993), and those brought under the recently adopted Insurance Fair Conduct Act (IFCA), N.J.S.A. 17:29BB-1 to -3,” should be stayed until resolution of all disputes relating to underinsured motorist (“UIM”) claims brought in the same action.

As Judge Natali explained, one of those appeals had become moot. The court addressed the other matter and determined that although decisions as to severance of claims invoke the abuse of discretion standard on appellate review, the trial court had misapplied its discretion in denying the insurer’s motion to sever.

In cases that pre-dated the IFCA, Wacker-Ciocco v. Gov't Emps. Ins. Co., 439 N.J. Super. 603, 611 (App. Div. 2015); Procopio v. Gov. Employees Ins. Co., 433 N.J. Super. 377 (App. Div. 2013), and Taddei v. State Farm Indem. Co., 401 N.J. Super. 449 (App. Div. 2008), the Appellate Division had held that common law bad faith cases could be dismissed without prejudice pending resolution of UIM claims. The Law Division here, however, allowed both the common law bad faith claim and the IFCA claim to go forward rather than waiting for disposition of the UIM claim.

The Appellate Division disagreed that “the new [IFCA] claim automatically trumps the considered and principled reasons supporting a stay of discovery and severance in this case for the reasons detailed in Procopio, Taddei, and Wacker-Ciocco..” Judge Natali cited “practical issues” attendant to cases in which UIM and both a common law and a statutory claim are presented. The Law Division’s ruling “fails to address notions of judicial economy, efficiency, and prejudice underlying such highly fact-sensitive discretionary decisions, and permits a common law bad faith claim to proceed without first establishing an insured is entitled to coverage, contrary to New Jersey law.”

The panel emphasized that its decision was based on the particular facts, and that a different scenario might produce a different result. “Some UM/UIM cases are complicated, involving disputed medical and liability issues requiring a fact finder to resolve, for example, permanency and causation questions. Other cases are substantially less complex and support expedited proceedings. Additional considerations may include whether a common law and IFCA claim are pled together, or if an IFCA claim is pled alone, the complexity of any coverage related issues, and the discovery requested by plaintiff in support of its bad faith claim, by way of example only.”

Here, “where plaintiff has pled a Pickett-based claim as well as an IFCA claim, and propounded discovery near certain to lead to discovery disputes, in what appears to be a disputed UIM claim, the better course was to abide the resolution of the UIM case.” The panel thus reversed and remanded the non-moot case for further proceedings.