In New Jersey, not only did the persons insured add to their damages by beating
on their building with broken pieces of a fallen tree, they added to their crime
by allowing their conduct to be videotaped. Liberty Mutual found the tape and
proved that their insured inflated the claim. The insurer recovered all of its
investigative costs and attorney fees, which were then trebled.
In Liberty Mut. Ins. Co. v. Land, No. A–6126–06T2
(N.J. Super. App. Div. Jan. 14, 2010), the court of appeal in New Jersey affirmed
a trial court judgment in a second trial between an insurer and its insureds.
In the New Jersey case, Liberty Mutual established that its insureds, Rose Land
and Frank Land (collectively, the Lands) engaged in statutory insurance fraud.
The jury's verdict not only destroyed the Lands' entitlement to collect insurance
proceeds for their putative property losses, but additionally exposed them to
a judgment in favor of Liberty Mutual. The trial court ultimately determined
the Lands' total monetary obligation to Liberty Mutual was $175,302.88.
The Facts
The litigation arose after a seemingly innocuous property loss. After a neighbor's
tree toppled onto the roof of the Lands' cabin in Highland Lakes in December
2000, defendants filed a property damage claim with their homeowners' insurer.
During its investigation of the Lands' claim, the insurer uncovered a videotape
that depicted Budge,1 the Lands' nephew and a public
adjuster, and several others working on the cabin's roof shortly after the tree
fell onto the cabin. The videotape showed three men taking a heavy portion of
the fallen tree—estimated to be 600 pounds—and slamming it against the roof,
in an effort to create further damage and shatter a skylight.
Although adamantly denied by defendants, they had apparently gone onto the
roof after the tree fell and attempted to increase the physical damage to the
Lands' cabin. Among other things, defendants argue that it was logically impossible
to increase the physical damage to the cabin because it already was a total
loss. Similarly stated, defendants claim that they could not do further damage
or injury to a structure that was already damaged beyond repair, and which would
need to be totally replaced.
In furtherance of their claim of property damage, the Lands submitted a "Sworn
Statement in Proof of Loss," which was on Budge's letterhead. Their losses were
claimed to total $69,338. As an additional part of the claims process, defendants
appeared for an oral examination several months later, at which they testified
under oath about the circumstances of the tree-falling incident without disclosing
the damage-enhancement activities.
The Decision
The matter was initially tried to a jury in 2002. That trial resulted in
a jury verdict in the insurer's favor against the Lands and Budge, finding that
each defendant had violated the Insurance Frauds Prevention Act (IFPA). The
trial court then issued a consequential judgment awarding compensatory damages.
On the ensuing appeal, this court set aside the initial judgment on three distinct
grounds:
- The appropriate standard of proof was by a heightened "clear and convincing"
evidence, not the preponderance standard that had been charged to the jury;
- Plaintiff's counsel made improper comments in his summation that had
the capacity to unduly influence the jurors; and
- Budge, who represented himself, should have been permitted to testify
at trial in narrative form.
The court of appeal sent the case back to the trial court for a new trial.
The matter was tried anew before a second jury in November and December 2006.
Budge again appeared pro se, as his own lawyer, but this time was permitted
to testify in narrative form. This jury also returned a verdict in Liberty Mutual's
favor, again finding that all defendants had violated the IFPA.
The Damages
The jury was neither presented with direct evidence of precise losses or
damages suffered by plaintiff, nor did it render a verdict as to the exact amount
of plaintiff's compensatory damages. As a result, the trial court entered an
order for final judgment on April 19, 2007, in which it determined the amount
of compensatory damages suffered by plaintiff, applied the trebling pursuant
to the IFPA, and dismissed the Lands' counterclaim that had sought payment for
their property losses in accordance with Liberty Mutual's policy.
The order first awarded Liberty Mutual $5,157.41 in investigative costs,
plus $52,576.78 in counsel fees. The court then trebled those amounts, yielding
a total of $173,202.57. Thereafter, the court further specified that Lands and
Budge were responsible for reimbursing Liberty Mutual for an additional $2,100.31
in expenses. The total monetary judgment, on which Lands and Budge are jointly
and severally liable, amounted to $175,302.88.
Because of the close connection between the facts that Liberty Mutual alleged
as grounds for a rescission of insurance coverage and a determination of insurance
fraud, the court held it was entirely appropriate to join all of the claims
into a single complaint. An insurance company's proof of resultant damages from
insurance fraud pursuant to the IFPA is not an element of the cause of action
that is required to be submitted to a jury. The penalties permitted by the IFPA
are not designed to remedy direct monetary damage to the insurer.
In this case, the court was convinced that the trial judge's findings were
supported by "competent, relevant or reasonably credible evidence." Judge Dumont
reviewed the wealth of evidence presented at trial, in addition to the affidavits
and other submissions of the parties in determining the amount of Liberty Mutual's
statutory compensatory damages. In a written opinion, he concluded that Liberty
Mutual's statements of fees and costs should be truncated to include only those
"for the work done prior to the first trial and in connection with the second
trial," and not including fees and costs attributable to the appeals. His ultimate
determination of the compensatory damages as amounting to $57,734.19 was readily
supportable by the credible evidence that was presented to him.
The judge further determined that the Lands engaged in a distinct pattern
of violating the act by committing at least five or more related violations
of the IFPA. The trial court's written opinion carefully explained the specific
instances of the Lands' multiple statutory violations, including submission
of proofs of loss that contained false or misleading information and their false
testimony given during oral examination. Accordingly, the trebling effect that
increased the compensatory damages to $173,202.57 was also supported by the
evidence.
Conclusion
This case proves that not only does crime not pay, if caught committing fraud
in New Jersey, you will find that you must pay three times the damages your
insurer incurred. After 10 years of fighting the insurer—who had the courage
of its conviction and a willingness to refuse to pay off an insurance fraud
perpetrator—Liberty Mutual was honored with a judgment recovering all of its costs and a bonus
by the court trebling the damages.
1He has since been stripped
of his license to be a public adjuster and, as a consequence of the events of
this case, was indicted by a grand jury in February 2003 and charged with theft
by deception.
© 2010 Barry Zalma, Esq., CFE