A bill proposed in Trenton would give New Jersey victims of disasters like Hurricane Sandy a private right of action against their insurance companies over improper handling of their claims.

Individuals as well as businesses and other legal entities would be entitled to sue over a direct or assigned right to payment for a contingency or loss covered by an insurance policy.

The bill, A-4382, filed Sept. 9, would cover not only natural disasters but also technological or civil calamities that result in a declared state of emergency by the governor or president.

Insureds would be able to recover their full damages, regardless of coverage limits, as well as legal fees, expenses and punitive damages.

The claims would be based on the kind of conduct that is already defined in the state insurance law as “unfair claim settlement practices,” which include:

• misrepresenting pertinent facts or policy provisions concerning coverage;

• failing to respond “reasonably promptly” to claims-related communications;

• failing to adopt and implement reasonable claims investigation standards;

• compelling insureds to sue for coverage by offering substantially less than the amounts ultimately recovered in litigation; and

• failing to make a good-faith attempt “to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.”

Those seeking punitive damages would have to show, by clear and convincing evidence, that the carrier’s actions demonstrate “actual malice or wanton and willful disregard.”

The bill would apply to all insurance claims filed on or after Oct. 1, 2012, and thus sweep in everything related to Sandy, which walloped New Jersey with wind and water late last October.

Further, the bill expressly states that the new right of action is independent of any steps that might be taken by state regulators over the same problems and that it does not narrow or limit existing rights to sue insurers.

Thus, it would preserve the Rova Farms doctrine, which allows an insured to recover the full amount of a verdict above the policy limits from an insurer that, in bad faith, refused to settle.

The Assembly Democrats, in a Sept. 20 press release, said the bill would “strengthen the case of policy holders who sue their insurance companies in civil court for not properly handling their insurance claims, by making the expectation that insurance companies act in good faith actual law.”

Assembly sponsor Reed Gusciora, D-Mercer, said in the press release that the bill was prompted by stories of the difficulties many homeowners encountered in seeking reimbursement for losses from Sandy, such as insurers ignoring their claims or offering them too little.

In January, a nearly identical bill, S-2460/A-3710, dubbed the “Consumer Protection Act of 2012,” was introduced in both chambers. Unlike the latest bill, it was not limited to disaster-related insurance claims.

That bill, sponsored by Sens. Nicholas Scutari, D-Union, and Jennifer Beck, R-Monmouth, and Assembly members Linda Stender, D-Union, and Timothy Eustace, D-Bergen, has not yet received a committee hearing.

Gusciora says that some years ago he sponsored a similar measure creating a right of action for all insureds but saw it falter in the face of opposition from the insurance industry.

Christine O’Brien, president of the Insurance Council of New Jersey, says that it opposes the bill and that policyholders already have avenues to pursue claims against carriers.

Gusciora hopes the Scutari-Stender bill will win passage, but if it does not, he sees the new bill as “a good fallback alternative.”

The “horror stories” related to attempts to win coverage for Sandy damage have created “an opportunity to seize the day,” he says.