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Claims Practices

Insureds and Their Public Adjuster Nephew Punished for Adding to Damage after Legitimate Loss

Barry Zalma | June 1, 2010

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No insured should be allowed to profit from insurance fraud. When the fraud committed is stupid, the insured attempting insurance fraud should be punished both civilly and criminally.

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:

  1. The appropriate standard of proof was by a heightened "clear and convincing" evidence, not the preponderance standard that had been charged to the jury;
  2. Plaintiff's counsel made improper comments in his summation that had the capacity to unduly influence the jurors; and
  3. 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.


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.

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He 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.