Liberty Mutual Insurance v. Land

892 A.2d COMPANY, PLAINTIFF-APPEL- INSURANCE

LIBERTY MUTUAL DEFENDANTS, LAND, LANT, LAND AND FRANK v. ROSE BUDGE, DEFENDANT-RESPONDENT. AND STEVEN 24, 2005 Argued 2006. Decided March October (Mr. appellant argued the for Mauro cause C. Casci Casci brief). Macnow, attorney; Russell on the Budge, respondent, pro argued the se. Steven A. cause General, Grady, Attorney argued Deputy the cause for John C. (Peter Attorney Jersey Harvey, of New C. amicus curiae General General, DeAlmeida, Attorney attorney; Patrick Assistant Attor- Caccese, General, counsel; ney Grady Jeffrey R. Mr. brief). General, Deputy Attorney on the Hille, Jersey argued cause amicus New Robert B. the for curiae (Stuart Hoberman, A. Bar Association President Mr. State Hoberman, counsel; Hille, Hille, attorneys; Mr. Mr. Mr. Roberts, Hoberman, Megan A. M. on the McFaul and James brief). the opinion the Court.

Justice ZAZZALI delivered appeal, appropriate this we the standard of In must determine (IFPA), the Insurance Fraud Prevention Act under In a tree fell onto the cabin of 17:33A-1 to -30. December accident, Following the Rose and Frank Land. defendants Budge, nephew who the Lands’ Lands and co-defendant Steven plaintiff public adjuster, a claim and a licensed submitted of loss Mutual). (Liberty Liberty Company Based on Mutual Insurance defendants, part suggesting activity on the evidence fraudulent including videotape Budge and depicting a two other men re- slamming portion against a peatedly 600-pound of the fallen tree roof, Liberty against suit Mutual filed defendants cabin’s trial, jury asserting a IFPA violations. At conclusion ruled Liberty Mutual, concluding proven in favor of that it had its claims appealed, clear and evidence. Defendants Liberty cross-appealed, asserting Mutual that the trial court applied preponderance should have of the evidence standard. Appellate trial, Division reversed remanded for a new finding Liberty prejudicial that counsel Mutual’s committed er- panel, however, agreed rors. The with court the trial that IFPA proven by violations must be evidence. Liberty certification, granted petition limiting We Mutual’s solely our proper proof. review to the standard of For the below, reasons forth that set we hold the standard of the Insurance Fraud Prevention Act is a evidence.

I. owns a Highland Rose Land small cabin at 32 Road in Cohoeton Lakes that she and her husband Frank use as vacation home. arose, At the dispute Liberty time Mutual insured the property damage. cabin for morning On the of December Rizzo, property located on of Joseph tree the Lands’ neighbor Road, next-door at 30 Cohoeton fell onto the roof of personally Lands’ cabin. After Rizzo informed Frank Land of the accident, telephoned nephew, Budge, Land his Steven a licensed public adjuster Jersey, in the State of New damage assess the informing Land, secure structure. In addition to Rizzo company, agent called his insurance which inspect sent an damage day. During later that inspection, Rizzo and the representative “significant[ly] observed the tree damagefd]” portion of the Lands’ roof. thereafter,

Shortly Rizzo’s wife informed him that she saw Budge top and two other “doing men on the cabin the some [himjself” damage.” protect against additional “To increased claims, damage videotaped Rizzo Budge then his and associates working on the videotape depicts cabin’s roof. The the three men taking tree, portion a of the fallen to be estimated about 600 roof, against the slamming it at ten times pounds, least and skylight. shattering creating damage to roof and a further ground gesturing to Frank Land on the videotape also shows provide jacket climbing a Budge and ladder and his associates trial, Budge explained conduct on At his to one of the workers. “perform[ing] emergency on the home.” videotape as service subsequently preparing filing Lands in Budge assisted the Liberty Mutual for claim on their behalf with an insurance claim, Budge $69,338. the Lands and In connection with that that, recovery, fifteen agreed Budge if would receive there was Liberty proceeds. At Mutu- percent insurance settlement of the proofs request, separate four of loss. the Lands submitted al’s letterhead, Budge’s loss on bore his Each was submitted provision in swore signature, which insured and included Liberty attempt to Mutual. Rose Land no deceive there was appeared oath her for an examination under as husband also process. part of the claims Joseph Hamtil, adjuster, Liberty insurance

Anne Mutual’s company, inspected cabin Balinski, employed by the a builder inspection, days on that Balinski after incident. Based ten loss, damage conclud- prepared a for the December estimate only $9,291.23 necessary make the ing that it would cost trial, previously pre- that he had repairs. At Balinski testified damage insurance pared a connection with estimate falling on a tree claim Rose Land that also involved filed estimates, two Balinski found that some comparing cabin. In damage in the 1999 claim had been of the documented support repaired and was included the estimate submitted that, opinion, in his claim. Balinski stated December unnecessary. many repairs in the estimate were of the claim, Liberty Lands’ suspect nature of the Because coverage against suit Lands and filed Mutual denied The Lands counterclaimed Budge, alleging IFPA violations. their Liberty seeking to enforce homeowners’ against Mutual Liberty acted in asserting that Mutual policy claim and denying counterclaimed, faith in Budge bad that claim. also alleging part Liberty six-day bad faith on the Mutual. After trial, jury the Liberty Mutual, returned a verdict favor finding proven by convincing that it had clear and evidence that all “knowingly misrepresented, concealed, three defendants or failed any concerning property to disclose material fact loss.” The jury Budge “intentionally further concluded that or eon- cause[d] Liberty trial tribute[d] the loss.” The court awarded Mutual fees, damages, investigative treble totaling counsel and costs $82,412.64 Budge’s and denied motion for reconsideration. appealed, asserting

Defendants that the trial court committed prejudicial during Liberty cross-appealed, errors trial. Mutual claiming charging that the trial jury court erred in IFPA proven violation must be clear and evidence. unpublished opinion, Appellate In an Division reversed and reasons, remanded for a new trial including prejudicial for various by Liberty statements made during Mutual’s counsel summation. panel concluded, analysis, without that it was “satisfied proper burden of [under is clear IFPA] certification, granted solely evidence.” We limited determining appropriate proof. 183 standard of (2005). Attorney A.2d also allowed We General Jersey Bar participate New State Association to as amici curiae.

II. our analysis We commence with a review the standards of proof at appeal. issue in this look plain We then to IFPA’s language, statutory purpose, penalties to determine whether question. Finally, addressed the we examine prior addressing case law the issue.

A Jersey The New Rules of Evidence set forth three proof: standards of preponderance evidence, of the convincing evidence, beyond a reasonable doubt. 101(b)(1). rule, general As N.J.R.E. Thou applies civil actions. State Seven

evidence standard (1994) (“In Dollars, 223, 238, 967 civil 136 N.J. 642 A.2d sand evidence.”); cases, proof see preponderance is a the standard 1999) ed., (Strong § 2 339 5th ed. also McCormick on Evidence controversies,” that, prepon exceptional (stating except “in certain cases); in typically applies civil 9 of evidence standard derance (3d 1940) (same). preponder § A Wigmore 2498 ed. on Evidence proof for ance is also “the usual burden of evidence agencies contested administra establishing before state in claims Revocation, 550, adjudications.” In re License 90 N.J. tive Polk (1982). 560, A.2d 7 449 standard, litigant “a must estab preponderance

Under probable If more than not. lish that a desired inference is Biunno, in has not been met.” equipoise, evidence is burden 101(b)(1) Evidence, comment 5a on N.J.R.E. Current N.J. Rules of Evidence, (“The § (2005); supra, most on 339 see McCormick by acceptable given expression, proof meaning to be jury find preponderance, to be which leads the seems probable fact is more than its of the contested existence nonexistence”). Application of the standard re judgment parties should “share the risk flects a societal that both Texas, Addington v. 441 roughly equal fashion.” U.S. of error in (1979). 1804, 323, 418, 423, 1808, 329 60 L.Ed.2d 99 S.Ct. proof “expresses prefer apply any other standard of decision to Herman & MacLean v. Huddle ence for one side’s interests.” 683, 548, ston, 390, 691, 375, 74 L.Ed.2d 561 103 S.Ct. 459 U.S. (1983). evidence, standard, convincing is a clear

The second preponderance of the higher standard of than proof beyond a reasonable standard than evidence but lower 162, 165 A.2d Club, 156, N.J.Super. v. 64 doubt. Aiello Knoll Golf “should (App.Div.1960). The 531 clear conviction produce of fact a firm belief or mind trier In allegations sought be established.” re as to truth of the 170 (1993) (internal

Purrazzella, 228, 240, 134 A .2d 507 omitted). quotation marks and citation have Courts called evidence civil cases more is when at stake See, Kramer, money. 745, e.g., Santosky than loss of v. 455 U.S. 747-48, 102 1388, 1391-92, (termi 599, S.Ct. 71 L.Ed.2d 433, parental rights); supra, nation Addington, U.S. 1813, (involuntary S.Ct. at 60 L.Ed.2d at 335 civil commitment to Woodby INS, 277, hospital); 483, mental 385 U.S. 87 S.Ct. (1966) (deportation); 17 L.Ed.2d Chaunt v. United States, 147, 149, 364 U.S. 81 S.Ct. 5 L.Ed.2d (1960) (denaturalization). cases, In such loss “the threatened resulting proceedings comparable from civil consequences to the of a proceeding away liberty criminal that it sense takes or permanently deprives clearly individuals of interests are Polk, significant personal fundamental welfare.” N.J. at 449A.2d 7. applies heightened Court proof

This standard evidentiary cases in intrinsically which are complex matters or prone See, e.g., Trust, to abuse. Morton v. Orchard Land 180 4 (oral 118, 129-30, (2004) N.J. 849 A.2d 164 agreements implicating land); Haynes interests in v. First Nat’l Jersey, Bank New 87 163, 182-83, (1981) (undue N.J. 432 A.2d 890 influence on testa tor). necessary Clear and evidence is because those cases “involve circumstances or issues that are so unusual difficult, proof by generate a lower standard will not serve to Polk, confidence in the ultimate factual determination.” 90 568, Finally, standard, N.J. at 449 highest A.2d 7. proof doubt, beyond primarily applied reasonable in criminal eases. Biunno, 101(b)(1). 7 supra, comment on N.J.R.E.

B. mind, With those considerations in we first plain examine the language legislative of the history. statute its Because both language legislative history the statute and its are silent concerning applicable proof, attempt standard of we to discern

171 473, N.J. 466, Belafsky, v. 766 intent. Burns Legislature’s 166 (‘When (2001) ambiguous ... is silent or A.2d 1095 statute light Legislature’s interpret the statute Court must omitted)). (internal quotation To do marks and citation intent.” purpose promul so, by considering Legislature’s begin we Tischio, 511, N.J. 504, v. A.2d 388 State gating Act. 107 527 dismissed, 1038, 768, 108 S.Ct. (1987), L.Ed.2d appeal U.S. 484 98 (1988). penalties pre violations and then review the 855 We insight gain into the standard of by the Act to further scribed Maglaki, Merin v. See apply. proof intended (1992) (“The N.J. Court fulfills its 126 construing with the a statute in a fashion consistent role appears.”).1 it statutory context in which enacting IFPA Legislature’s purpose in was The stated 1 prescribe bright-line rule that this Court must seeks establish dissent forth, evidentiary proof set rather a statute does not one standard of when 183-84, Legislature’s Post 892 A.2d at 1252. intent. than seek to discern the disagree province Court to determine the do that it is this We however, doing, look evidentiary courts often standard in this matter. In so See, Garner, 279, 654, 286, Grogan legislative e.g., 498 111 S.Ct. v. U.S. intent. 755, 659, (1991) inquiry appropriate (beginning into 112 L.Ed.2d 764 intent); by examining legislative proof § 523 Carlson & 11 U.S.C. under Yards, 905, (1995) Lampert N.W.2d 908 v. 190 Wis.2d 529 Erickson Builders ("The must the burden of in antitrust cases....We statute is silent about intent.”); legislative People ex Allstate Ins. to other rel. therefore look indicia (2003) 604, Cal.Rptr.3d (discussing Cal.App.4th Muhyeldin, 496 Co. v. concerning legislative appropriate California standard of under intent Act, 1871.7); § Gennari Weichert Insurance Frauds Prevention Cat Ins.Code Realtors, aff'd, (App.Div.1996), N.J.Super. A.2d Co. concerning (discussing legislative appropri intent 691 A.2d Act, Jersey N.J.S.A. 56:8-1 New Consumer Fraud ate standard of -20). interpret approach. analysis We do not Our is not limited to an either/or exercising judgment applying Legislature’s and intent in a vacuum without regard impose interpretive to do we our view on the matter without rules. Nor design. process, to reasonable efforts deter- In that we undertake the drafter's appeal. Legislature this intended. That is what we have done in mine what the issue, directly though may speak Accordingly, to the canons of even a statute sense, construction, probable public policy us to determine common and enable legislative intent. aggressively to confront fraud in insurance New problem Jersey by facilitating eliminating the detection insurance the occurrence of such fraud, through programs, requiring fraud of fraud development prevention reducing restitution of obtained insurance amount of fraudulently benefits, to dollars used fraudulent claims. premium pay [N.J.S.A. 17:33A-2.] acknowledged As Justice Garibaldi fraud is a “[i]nsuranee problem proportions currently massive results in substan unnecessary general public tial and costs to the form of Merin, increased rates.” 126 N.J. at 599 A.2d 1256. such, comprehensive As “the Act is a designed help statute to remedy high premiums Legislature insurance which the deemed Sailor, significant problem.” be a State v. N.J.Super. (App.Div.2001). 810A.2d 564 end,

To that range IFPA interdicts a broad of fraudulent example, conduct. “person practitioner” For or violates the Act or if he she or [p]resents causes be written or presented any of, oral statement as or in part of or a claim for support to, or other benefit to an opposition payment pursuant knowing misleading ... that the statement contains policy false or any concerning thing

information fact or material to any the claim. 17:33A—4(a)(1).] [N.J.S.A. Other violations the Act include but are not limited to conceal ing or knowingly failing concerning to disclose information person’s or right benefit, initial continued or entitlement to a 17:33A-4(a)(3); presenting any knowingly N.J.S.A. or false mis leading application, statement an insurance N.J.S.A. 17:33A- 4(a)(4)(b); knowingly assisting, with, conspiring or urging any or person practitioner any provisions, violate of the Act’s 17:33A—4(a)(5)(b). N.J.S.A. punish

To violations, deter such created a number of penalties. First, enforcement mechanisms and 17:33A-5a(1) Depart authorizes the Commissioner of the Banking ment of bring seeking Insurance a civil action monetary penalties. penalties range Those from than “not more $5,000 violation, $10,000 violation, for first for the second $15,000 subsequent violation,” plus each court costs and rea- Alternatively, attorneys’ IFPA N.J.S.A. fees. 17:33A-5b. sonable levy administrative to identical civil authorizes the Commissioner N.J.S.A. 17:33A-5c. A with administra penalties. party assessed N.J.S.A. 17:33A-5c. hearing. to a penalties tive is entitled seek occurred, the hearing upon finding a that a violation After statutory penalties as may impose the as well Commissioner N.J.S.A. prosecution. 17:33A-5c. attorneys’ the costs of fees and may to payment order the restitution The Commissioner as a any company person who has suffered loss insurance result of an IFPA violation. N.J.S.A. 17:33A-5e. any company that has been allows insurance

The Act further bring statutory a civil action damaged of a violation as result damages, including investiga compensatory reasonable to recover fees. N.J.S.A. attorneys’ 17:33A-7a. A successful tion costs and company damages if the court shall recover treble insurance pattern of violations engaged that the in a defendant determines addition, permits In the Act the Act. N.J.S.A. 17:33A-7b. civil join in such action recover the Commissioner prevails, the penalties. N.J.S.A. 17:33A-7d. “If the commissioner attorney[s’] fees may and reasonable court also award court costs Fi the commissioner.” N.J.S.A. actually 17:33A-7d. incurred any insurance fraud nally, person is found to have committed who And, $1,000 surcharge. 17:33A-5.1. in the pay a must here, present insurance fraud—a context context of automobile 1250, 4, infra, see note 186 N.J. at at —a violator of 892 A.2d privileges. subject mandatory one-year driving to a loss IFPA is N.J.S.A. 39:6A-15. sanctions, statutory Court has reviewing

In IFPA’s this penalties by the remedial in authorized Act are held that “the civil Merin, 432-33, 126 N.J. at nature,” A.2d as a result of “compensate the State the costs incurred serve to fraud,” id. investigating prosecuting provisions Consequently, the Act’s we must construe A.2d 1256. goals. Legislature’s remedial liberally accomplish the broad See, Schering Corp., e.g., Young 141 (‘Where remedial, Legislature’s intent is a court should liberally.”). construe statute

C. only reported addressing The decision the standard of litigant satisfy a that must a establish violation of IFPA is Diamond, Harleysville N.J.Super. Co. v. Insurance (Law Div.2002). ease, A.2d 354 In that the Law Division held that party seeking a “satisfy relief under the Act must the burden of proof by convincing clear and evidence.” at Id. 818 A.2d 354. exclusively The court relied almost on the fact that the clear and applies standard in common law fraud Id. actions. at 38-39, curiae, 354. A.2d Defendants and amicus the New Jersey Association, State Bar assert that this Court should follow reasoning Harleysville, espoused claiming in “no that material distinctions are noted between IFPA and fraud.” [common law] contrast, Liberty Harleysville In Mutual maintains that was wrongly decided because common distinguishable law fraud is statutory from fraud.2 agree Liberty

We with Mutual that the necessarily common law fraud not apply does under IFPA. As by Huddleston, noted the United Supreme supra, States Court statutory comparing fraud to common law fraud “can be mislead 388, 103 ing.” 459 U.S. at at S.Ct. 74 L.Ed.2d at 559. In this matter, enacting codify IFPA did not common supplemented because, law fraud but rather that action standing alone, proven it had combating deterring be insufficient in insurance (enacting fraud. See N.J.S.A. 17:33A-2 IFPA con “to aggressively front problem of insurance fraud in New Jer sey”). In purpose, of that requires plaintiffs furtherance the Act alleging prove IFPA violations required fewer elements than 2 The author of has since a Harleysville different view in two expressed and has as subsequent unpublished concluded, here, we do that the opinions, standard of is a under IFPA proper evidence, not evidence. Indeed, common law fraud proof of law fraud. for common misrepresen a material of five elements: requires the satisfaction fact; past existing presently fact by the defendant tation falsity; of its an intent that by the defendant knowledge or belief statement; rely on reasonable reliance plaintiff Gennari, plaintiff. supra, damages to the resulting plaintiff; 610, 691A.2d 350. at contrast, require statutory of IFPA does not language In damages. See on false or resultant proof of reliance statement (“Nor Merin, do find 599 A.2d 1256 we 126 N.J. was not successful secur- defendant] the fact [the decisive permitted by the Act penalties are ing proceeds. insurer.”); monetary damage remedy to the designed to direct Sailor, (stating N.J.Super. at supra, 355 seeking damages, as in common “the State is not under IFPA action, seeking statutory penalty de- but rather is law fraud fraud”). of Because of signed reduce the incidence to proof in distinctions, applied of find that the standard those we dispositive proof of of the standard law fraud case common IFPA. applicable under

III. statutory prior language and Although to IFPA’s reference issue, analogous fraud a review law does not resolve the case construction, statutory statutes, and related consider rules prepon is a proper us that the persuade ations of the evidence. derance

A. interpreting question, review the statute we For assistance By referring proof applied under statutes. similar the standard only give legislation, is able to effect to “the court not to similar to a more probable legislature, of the but also establish intent system Singer, 2B of law.” Norman J. uniform and harmonious Sutherland, (6th 53:03, Statutory § Construction at 328-29 ed. 2000). statutory analogue Jersey

The closest to IFPA New is the (CFA), -20, Consumer Fraud Act N.J.S.A. 56:8-1 to which also is legislation remedial that warrants liberal construction. Letten Connection, Inc., maier v. Lube 162 N.J. 741 A.2d 591 (1999). IFPA, provides any Like the CFA that action ... “[i]n shall, any court appropriate legal in addition to other relief, equitable damages by any award threefold the sustained person in interest.” 56:8-19. pro The statute further fees, attorneys’ vides for the award of filing “reasonable fees and reasonable costs of suit.” N.J.S.A. 56:8-19. As we have ex plained, provisions those compensate serve “to the victim for his loss; punish or her actual wrongdoer through the award of damages; by way provision, treble of the counsel fee competent attract community scourge counsel to counteract the Lettenmaier, (inter fraud.” supra, 162 N.J. at 741 A.2d 591 omitted). requisite nal citation discussing In standard of CFA, Appellate under the Division has stated: “We find no indication impose any greater intended usually required burden than [under CFA] in a Gennari, supra, N.J.Super. civil action.” 672 A.2d 1190; Inc., Hyland Aquarian 2,000, see Age N.J.Super. (Ch.Div.1977) (“[S]ince is a [the CFA] civil action, preponderance evidence, of the the usual civil standard of proof, standard.”). applicable should be the statutory IFPA, counterpart federal the False Claims (FCA), 3729(a)(2), similarly § Act 31 U.S.C. requires proof by a 3731(c). § evidence. U.S.C. As with IFPA, provides penalties, FCA for civil some cases damages, against “any person makes, uses, knowingly treble who used, or get causes to be made or a false or record statement to paid approved by false or claim fraudulent the Government.” 3729(a)(2). § 31 Although initially U.S.C. the federal courts held that the standard in such actions of was that

177 Inc., see, evidence, States v. Ekelman & Associates e.g., United (6th Cir.1976), 545, Congress that line of overruled F.2d only require prepon amending the FCA to in 1986 cases 3731(e). standard, preponderance § stan U.S.C. derance proceedings to enforce applies in and administrative also civil dard provisions of laws. Huddle anti-fraud the federal securities 388-90, 103 ston, 691, at 74 L.Ed.2d at 560 supra, 459 S.Ct. U.S. SEC, (§ 10(b) 91, 1934); 450 U.S. Act Steadman v. of Securities denied, 69, 79, 102, 999, 1008, 67 L.Ed.2d reh. U.S. 101 S.Ct. (§ 9(b) of Investment 68 L. Ed.2d 318 101 S.Ct. 1940); Leasing Corp., 320 Joiner Company Act of SEC v. C.M. (1943) (§ 17(a) 120, 125, 88 L.Ed. S.Ct. U.S. 1933). Act of Securities

B. applica reinforce our conclusion Additional considerations sensible and fair. preponderance standard is both tion statutes, prepon it that the Although persuasive we find not fraud applied to of other statutes New is violations derance standard monetary rou Jersey provide penalties. We substantial tinely proceedings in civil require preponderance of evidence Jersey Attorney the New seeks to enforce in which the General Discrimination, -42, pre Against 10:5-1 to which Law $50,000 $10,000 for violations penalties ranging from scribes Ctr., 174 N.J. Developmental Shepherd Act. v. Hunterdon See (2002). 1, 24, Our 803 A.2d 611 courts use brought by proceedings the State to recover in civil See, v. Concrete e.g., Department Health statutory penalty. Inc., (App.Div. N.J.Super. Specialties, 1970).

Moreover, proven requirement must be that IFPA violations may lead inconsistent results. by clear and evidence law, long that when an have held our common courts Under against insurance company defending payment fraudulent, only company prove need it to be claim that deems 178 of affirmative defenses arson and that of fraud and false

swearing by preponderance a evidence. Italian Fisherman Co., N.J.Super. 278, 282, v. Commercial Union Assurance 215 521 denied, 152, (App.Div.), A.2d 912 107 N.J. certif. (1987). Attorney argues, As the it General is doubtful that the Legislature envisioned that an affirmative defense of fraud would governed by preponderance be of the evidence but that a counterclaim require based on the same fraudulent conduct would heightened Lewis, proof. standard See State v. 185 (2005) (“[A] 369, 886 A.2d 643 court should strive to avoid statuto ry results.”) interpretations that lead to absurd or unreasonable (internal omitted). quotation marks and citation

Finally, Legislature we note that the is ability well aware of its impose higher See, to e.g., standard when it so desires. plaintiffs N.J.S.A. 2A:15-5.12 (requiring prove punitive to dam ages by evidence). clear As this Court stated in discussing proof applied agency the standard of adjudications - Act, under the Administrative Procedure N.J.S.A. 52:14B-1 to 24: long together Given the of the history standard, with the total lack preponderance language legislative any indication or in statute its of an history Legislature

intent alter that it is standard, reasonable to infer that was content to continue the “traditional standard”.... preponderance-of-the-evidence (quoting [Polk, n. 90 N.J. at 561 449 7 supra, Steadman, A.2d 450 U.S. at 79).] S.Ct. at 102, 101 1008, L.Ed.2d at Grogan, supra, See also U.S. 111 S.Ct. at congressional L.Ed.2d at (noting that silence on standard of proof issue is Congress “inconsistent with the view intended require special, heightened proof’); standard State Prods., Inc., Humphrey Alpine Air 500 N.W.2d (Minn.1993) (“When legislature says nothing about the stan used, dard of regarded be signal this as a that the legislature intended the of the evidence stan dard.”); Co., supra, Cal.Rptr.2d Allstate (“Clearly, Ins. at 496 if impose higher had wished to evidentiary [a] standard on an action to damages recover [the California Act], stated.”). Insurance Frauds Prevention it would so have We Legislature’s silence as interpret decline therefore customary depart it from the intended to indication Rather, conclusion is the more reasonable in civil cases. evidentiary prepon- that a an standard indicates of that absence traditional, standard—ap- default the evidence—the derance of plies.

C. contrary, authority the the dissent Despite substantial damages attorneys’ fees the of treble argues that combination Although convincing of clear and evidence. application warrants monetary can not the that such sanctions do minimize effect we ordinarily defendant, proceedings a civil do involve on have Indeed, sought in monetary damages. damages certain risk by As may penalties prescribed IFPA. exceed the civil actions damages such, persuaded presence of a that the treble we are by provision mandates clear or counsel fees above, evidence is explained preponderance evidence. As CFA, which, IFPA, provides like applied proceedings Gennari, recovery supra, types of sanctions. See for the both 541, federal FCA also N.J.Super. at 672 A.2d 1190. The 288 damages yet applies preponderance stan for allows treble 3731(e).3 § 31 dard. U.S.C. Supreme

Moreover, the United States research reveals rejected application of stan- has Court damages. Ramsey v. anti-trust actions treble dard civil 311, Workers, 302, 28 S.Ct. 401 U.S. 91 United Mine (1971). by 64, have Courts also held L.Ed.2d 71 preponderance of evidence is sufficient for award treble 3 suggested Court that the "[n]ot submits that until has this The dissent today Fraud Act is in cases under the Consumer burden prosecuted However, 2. 2, at 174 892 A.2d at 1246 n. of evidence.” Post n. preponderance ruling Gennari, 288 N.J.Su Division's since supra, years Appellate 541, 1190, this at 672 A.2d Court has never questioned application per. CFA standard to violations. preponderance

180 damages under both federal and state Racketeer Influenced (RICO) See, Corrupt Organizations e.g., statutes. v. Fleischhauer (6th Feltner, 1290, Cir.1989); Liquid 879 F.2d Corp. Air v. (7th Rogers, 1297, 1303 Cir.1987); Corp. F.2d Gen. v. Williams Stone, (2005). addition, 279 Ga. S.E.2d In courts jurisdictions rejected application other have of clear and con See, vincing statutory provisions damages. evidence with treble Williams, e.g., Group, (Colo. Farmers Inc. 805 P.2d 1991) (applying preponderance of evidence standard to treble damages provision Act, under Colorado No Fault Colo.Rev.Stat. 10-A-708(1)); Builders, § Carlson & Erickson 529 N.W.2d at 912 (applying of evidence standard to treble laws); damages provision under anti-trust Wisconsin Rorrer v. Club, Inc., P.J. (Ct.App.2001) S.C. 556 S.E.2d (applying preponderance damages of evidence standard to treble 32-1-20). provision § Although under S.C.Code Ann. the dissent penalties “severe,” imposable labels the post under IFPA as 184-85, recognize A.2d at it application fails to that the of convincing typically the clear and evidence standard is reserved protection “particularly important of the individual interests” money.” that are than Addington, “more substantial mere loss of at at U.S. S.Ct. at L.Ed.2d 330.4 IV. Appellate evidentiary

We reverse the on Division the in issue appeal this hold and that the standard of under the New Jersey preponderance Insurance Fraud Prevention Act is a contrary evidence. To extent the that the Law Division reached holding in Harleysville, we overrule that The decision. matter is recognize that, We in the context of fraud, automobile insurance the of loss driving privileges might under N.J.S.A. 39:6A-15 such interests. As a implicate involving result, case fraud, in automobile be insurance there may question concerning the standard of however, That is not the question, before proof. driving Court. None of the defendants in this face a of appeal suspension privileges, nor have briefed that issue. they for further and to the trial court part remanded reversed opinion. this proceedings consistent with ALBIN, dissenting. Justice of proof— the burden majority has lowest

The determined apply in cases standard—should preponderance evidence companies Fraud by under Insurance prosecuted -30, (IFPA), despite lack 17:33A-1 to Act Prevention The suggests such a standard. any language in the IFPA that unnecessarily vainly by search majority that standard divines when, apparently, Legislature did ing legislative for a intent subject. thought to the “Because both give not a second legislative history are silent language of the statute its proof’ prosecuted concerning applicable eases IFPA, not ante A .2dat this Court has power, duty only equitable but the to set the constitutional and the IFPA is A is found liable under standard. defendant who mandatory damages, subject compensatory damages, treble costs, attorneys’ investigation expenses, fees and assessment of fraud, and, mandatory if the automobile insurance case involves penalties their suspension. Those one-year driver’s license damages, which totality equivalent punitive than are more The by proved by evidence. must be clear statute judicial significant consequences that from a determination flow accuracy. heightened liability degree of IFPA should warrant a low. sets the bar too of evidence standard companies why insurance should is no sound reason There proving an IFPA violation clear bear the burden respectfully I therefore dissent. evidence. I. requires has a law that factfind-

When the enacted ing expressed preference particular burden has not but required not to establish proof, our courts have hesitated law, than by looking and rather statutes decisional burden other 182

engaging enigmatic legislative in the search for intent. Watkins Nelson, (2000) (“Because v. 163 N.J. 748 A.2d 558 [child-custody] provide proof], statute does a standard [of we statutory concerning custody must look to our and decisional law case.”). decipher appropriate applied standard be in this See, e.g., V.K., Family N.J. Div. & v. Youth Servs. 236 N.J.Su 243, 261-62, per. (App.Div.1989)(applying 565 706 A.2d convincing parental-rights standard to termination under N.J.S.A. 30:4C-20), denied, 614, (1990); 121 N.J. 583 A.2d 315 State certif. Cestone, 139, 142-43, 147-48, v. N.J.Super. 38 118 A.2d 416 “beyond (App.Div.1955)(applying a reasonable doubt” standard to line, violation of motor prohibiting crossing vehicle statute center currently 39:4-86); codified at Kinsley, N.J.S.A. v. State 103 N.J.Super. 190, 191-92, (Cty.Ct.1968) (holding preponderance of proper evidence was standard under environ N.J.Super. protection statute, 23:5-28), o.b., mental 105 aff'd curiam). 347, (App.Div.1969)(per A.2d 224 jurisdictions Courts other appropriate also determine the apply statutory to a legisla burden scheme when the See, spoken subject. ture has not on e.g., County Attorney 912, Kaplan, 124 Ariz. (Ct.App.1980) (applying 605 P.2d clear provision and standard to in mental health statute defining disabled”); “gravely State, Swanson v. 83 Idaho P.2d (applying satisfactory” “clear standard statute); Rosenbloom, possession under adverse In re Welfare of (Minn.1978) curiam) (per N.W.2d (imposing 889-90 clear parental rights to termination of in face statutory proof). silence on burden of judicial power evidentiary The to fashion and allocate burdens is a familiar one derived from this Court’s rule-making authority practice constitutional proce over ¶ VI, dure of our § courts.1 See N.J. art. power Const. 3. It is a heightened of a standard of in certain civil imposition cases also § derives from courts’ See McCormick on equitable Evidence 340 & n. powers. 1999). (Strong ed., 5th ed.

183 See, e.g., Haynes v. routinely First Nat’l State that is exercised. (1981) 163, 182, (requiring A.2d clear of N.J., 87 N.J. 432 890 Bank of convincing presumption to undue influence evidence rebut and will); Hurd, 86 432 A.2d 86 respect N.J. of State (1981) convincing and evidence for (setting standard of clear B.F., testimony); ex hypnotically State rel. of refreshed admission 153, 158-59, (App.Div.1989) (setting A.2d 40 N.J.Super. admissibility proof for of closed-circuit-television standards of prosecutions testimony under N.J.S.A. 2A:84A- in certain criminal 32.4). say Legislature create civil

That is not to cannot the assign prosecution of of of and a burden cause action Many specifically provide for the stan matter. civil statutes See, by plaintiff. e.g., proof that be met N.J.S.A. dard of must 2A:15-5.12(a) (requiring convincing for award evidence damages); (requiring clear and con punitive of N.J.S.A. 2A:81-2 3B:3-15(b) statute); vincing dead man’s N.J.S.A. evidence under will); revoked (requiring evidence revive clear 25:1-13(b) (requiring clear evidence N.J.S.A. frauds); (requiring and convinc of 37:2-38 clear statute only setting agreement). premarital We ing evidence before aside concerning of legislative the burden with a determination interfere satisfy by Legislature does not proof if established the burden See, process. Cummings, principles e.g., State v. of due 95-96, civil (holding A.2d that violation under breathalyzer quasi-criminal in nature refusal statute was doubt, not process required proof beyond reasonable due therefore statute). by merely provided as preponderance of evidence Thus, expression legislative ordinarily to an of we would defer respect coequal for a authority spirit comity of and out of in the G.G.N., re government. See In Civil Commitment branch (App.Div.2004) (finding “no N.J.Super. which is set out in the from that basis alter burden Court”). Supreme But approved our which was statute and subject, as in this spoken has to the when case, readily expected courts, we can as conclude that it which experience expertise, appropriate have the set burden proof. legislative enunciating In the absence directive persuasion applied statutorily burden of to be to a created cause action, I no see need this Court to ascribe to the Nothing imaginary history intention. in text the of the Legislature gave any thought IFPA intimates the that to the proof prosecution apply burden of that should of matters arising Accordingly, under the Act. Court this should exercise its equitable powers constitutional and and determine the burden of applies that to IFPA cases.

II. determining In appropriate proof, of burden the Court must consequences finding liability. look at the that follow from a of system justice imperfect Our of is judgments and erroneous are inevitable. The that plaintiff burden we set for a to meet proving expression degree in a cause of action is an of error willing system justice. that we are tolerate our See Texas, 418, Addington 423, 1804, 1808, 441 99 U.S. S.Ct. 60 (1979) 323, (observing L.Ed.2d 329 that burdens of serve “ concerning degree ‘instruct the factfinder of confidence our society thinks he should have in the of factual correctness conclu ” particular adjudication’ type (quoting sions for a In re Win 358, 370, 1068, ship, 1076, 397 U.S. 90 S.Ct. 25 L.Ed.2d 379 (1970) (Harlan, J., Oliver, concurring))); State v. 162 N.J. (2000) same). cases, (stating In criminal where the greatest, judicial system

stakes are the our high demands a degree outcome, confidence correct and therefore the prove guilt burden on the is to beyond State a reasonable doubt. 423-24, Addington, supra, 441 at See 99 at U.S. S.Ct. 329; 369-72, Winship,

L.Ed.2d at at U.S. S.Ct. 1075-77, (Harlan, J., concurring). 25 L.Ed.2d at 378-81

The stakes in an IFPA greater case are far typical than compensatory damages only civil ease in which are form to have the IFPA face severe Those determined violated relief. company damaged consequences. An “insurance as result of a may compensatory damages, of’ the IFPA “recover violation investigation expenses, shall include reasonable costs of suit which 17:33A-7(a). addition, attorneys In a suc- fees.” company damages “shall if the cessful insurance recover treble engaged in a pattern defendant has court determines 17:33A-7(b). Moreover, violating if a viola- [the] act.” N.J.S.A. fraud, then the tion of act involves automobile subject mandatory one-year suspen- driver’s license violator to a sion. N.J.S.A. 39:6A-15. only punish, partly to damages are intended to

Treble punitive compensate, have all the hallmarks of and therefore (stating 892 A. 2d at 1247-48 damages. See ante at damages provision to ... Fraud Act’s treble “serve[s] Consumer (internal omitted)); quotation punish wrongdoer” marks Furst Inc., A.2d Moomjy, v. Einstein against (“Among legal available viola equitable and remedies damages, Act treble [Consumer Fraud] tors of the are reasonable fees, attorneys purpose of suit. of those remedies and costs loss, only punish also to whole the victim’s but is make engaging in fraudu wrongdoer and to deter others from similar (citation omitted)); Cohen, practices.” In re lent “punitive an (alluding A.2d 985 nature of award for 22-3225.05(b) damages”); (providing § treble see also D.C.Code mandatory convincing damages upon clear and for award of treble showing pattern practice” of violation of insur “established act); § (requiring fraud 772.104 clear and convinc ance Fla. Stat. damages in civil ing award for treble action evidence before Attractions, statute); deceptive practices Buddy Inc. v. Lee Wil Inc., (Tenn.Ct.App. Agency, Morris S.W.3d 359-60 liam 1999) (holding statute, trebling damages treble are that under evidence). showing by convincing “automatic” on statutory comparisons, analogue to If we are to the closest make - Damages Act, 2A: 15-5.9 to the IFPA is the Punitive N.J.S.A. Act, Damages 5.17. plaintiff Under the Punitive prove by must clear evidence that the defendant with acted actual malice or in disregard willful and wanton might the harm that 2A:15-5.12(a). be caused to others. N.J.S.A. In most cases that statute, fall punitive damages under that capped are at “five times liability compensatory [the] defendant for damages or $350,000, greater.” 2A:15-5.14(b)-(c). N.J.S.A. whichever is Damages

The Punitive Act compensatory damages defines as “damages good intended to make injured party, the loss of an more,” punitive damages no damages as penalize intended “to provide and to against additional deterrence a defendant to dis courage similar conduct in the future.” N.J.S.A. 2A:15-5.10. By definition, only part damages one of a treble award covers compensatory damages whereas parts the other two comprise punitive damages. majority’s Under the ruling, an insurance company $1,000,000 that suffers a loss will be awarded trebled damages $3,000,000—$1,000,000 compensatory which is $2,000,000 punitive. of which circumstances, In such majori ty opinion company $2,000,000 allows punitive damages by merely satisfying award hand, evidence standard. case, On the other in a non-IFPA plaintiff satisfy must the clear and evidence standard $2,000,000 punitive the same damages award under the Puni Damages Significantly, tive Act. damages absent from the treble any scheme of the IFPA is safeguard mechanism to a defendant from an punitive damages. excessive award of example, For determining punitive an award of damages under the Punitive Damages Act, the factfinder must consider profitability “[t]he the misconduct to the defendant” and “[t]he financial condition of (4). defendant.” 2A:15—5.12(c)(2), There is no simi provision lar in the IFPA that allows the factfinder to award damages only proportionate trebled to a defendant’s financial means.2 subjects Act, Consumer Fraud like IFPA, violators to costs, court damages. fees, and treble N.J.S.A.

attorneys' 56:8-19. Not until has this today reasons, imagine that the it is difficult to those For punitive dam- convincing standard for a clear and would intend evidence standard only preponderance of the ages, but top of damages are on particularly when those damages, trebled investiga- company’s pay insurance an requiring the defendant fees, attorneys’ and an automatic expenses, costs of suit tion license driver’s one-year suspension of the defendant’s fraud ease. insurance automobile in the regard, important to note it is

In that latter violation, including those vehicle prosecution of a Title 39 motor guilt prove suspensions, the State must involving potential license 92-93, Cummings, supra, 184 N.J. at doubt. beyond a reasonable 576, 577, 585, 906; Dively, 92 N.J. v. 875 A.2d State Rosenblatt, (1983); Rodriguez 58 N.J. A.2d 502 see driving (describing loss of “substantial Although present case consequence”). privileges” as “serious fraud, clearly heightened automobile insurance not involve does suspension is added to required license proof when standard IFPA that attach to an violation. penalties list of totality, under the sanctions available in their Viewed 17:33A-7(b); mandatory assess damages, N.J.S.A. IFPA—treble fees, costs, costs, attorneys’ investigation court ment 17:33A-7(a); mandatory revocation driver’s license N.J.S.A. fraud, sufficient 39:6A-15—are N.J.S.A. for automobile magnitude, to consequences of sufficient ly involve punitive, and typical preponderance higher than the require a burden of why insurance good no reason cases. There is civil convincing evidence to the clear and not be held companies should 15-5.12(a). Act, 2A: Damages Punitive standard of the under the Consum- suggested in cases that the burden of prosecuted Court at 176-77, 892 A.2d evidence. See ante er Fraud Act is by preponderance defining Consumer (citing burden of Court decisions Superior evidence). Fraud Act as preponderance III. require I companies

Because would in IFPA cases to prove liability by evidence, the standard I respectfully dissent. joins opinion.

Justice LONG in this part For reversal in and remandment—Chief Justice PORITZ LaVECCHIA, ZAZZALI, and Justices WALLACE and RIVERA-SOTO—5.

Dissenting—Justices LONG and ALBIN—2. PEREZ, HILDA ON BEHALF OF HERSELF AND ALL OTHERS SITUATED, PLAINTIFF-APPELLANT, SIMILARLY v. RENT- A-CENTER, INC., DEFENDANT-RESPONDENT. 7, 2005

Argued November Decided March 2006.

Case Details

Case Name: Liberty Mutual Insurance v. Land

Court Name: Supreme Court of New Jersey

Date Published: Mar 14, 2006

Citation: 892 A.2d 1240

Court Abbreviation: N.J.