Our New Jersey disability lawyers can assist you with questions you have regarding your claim, no matter what insurance company is administering your case. Use the contact form located on our website to tell us about your claim and we will respond within 24 hours. Or, you may call us to give us the information over the telephone. Our sensitive, caring staff is eager to provide assistance. Disability lawyer Bonny Rafel handles ERISA(group)long term disability and individual disability insurance cases filed throughout the country. She is nationally recognized by her peers for her outstanding knowledge and experience in this specialty of law. Her high demand as a lecturer demonstrates her talent, see Articles and Engagements Section for some of her appearances and papers published on disability issues.

The Consumer Fraud Act and Its Application to First Party Insurance Claims
ATLA Mid Winter Conference, 2007
Bonny G. Rafel, LLC
570 W. Mt. Pleasant Ave.
Suite 106
Livingston, NJ 07039
Disabilitycounsel.com
(973) 716-0888

The sale of insurance is heavily regulated. Each state has statutes prohibiting unfair insurance practices; but most of the statutes only provide the insurance commissioner or attorney general the right to bring an action for violation of the statute.  The development of bad faith statutes and case law has provided some important remedies to individual consumers, but vary state to state.  Another, often overlooked theory to pursue involves the general consumer protection statutes.  Especially in states without solid law on bad faith, counsel should review the state’s consumer protection law for it may provide a remedy afterall.  Keep in mind that an action for damages related to fraud committed by an insurance company in the sale or marketing of a product would be in addition to the contractual losses sustained by the consumer at the hands of his insurer. 

While every state has codified some form of consumer protection, many states still leave the enforcement of fraudulent or deceptive acts to the Attorney General.  Most consumer fraud statutes are based in part on the Uniform Deceptive Trade Practices Act, the Uniform Consumer Sales Practices Act, or the Federal Trade Commission Act. An article appearing in the Federation of Defense and Corporate Counsel, titled, “Comparison of Consumer Fraud Statutes Across the Fifty States” by Alan S. Brown and Larry E. Hepler, Vol. 55, No.3 Spring, 2005 sets forth a comprehensive analysis of the particular statutes of each state. 

The authors of the above article, did an admirable job of providing the states and applicable consumer fraud statutes which provide a private cause of action.  Rather than duplicating their efforts, I quote a paragraph from their paper with footnotes and invite you to perform your own research of the law of the states in which you practice law.
While some consumer protection statutes can be enforced only by the Attorney General, (see A) many statutes explicitly allow a litigant to bring a private cause of action.(see B) Some consumer protection statutes allow private claims only for procuring injunctive or other equitable relief; (see C) however, many statutes allow private claims for the recovery of damages.(see D)Some of these states in turn allow a consumer to bring a private cause of action for the recovery of damages only in particular circumstances.(see E) Arizona is unique in that no statutory provision exists for a private cause of action, yet the courts have implied one.(see F) Thus, in each jurisdiction, a court must first determine at the outset whether any private claim for relief exists within the framework of that particular state’s consumer protection act.
Footnotes to the above quote:
A. IOWA CODE § 714.16(7) (2004); VA. CODE ANN. § 18.2-245(b) (Michie 2004); Molo Oil v. River City Ford Truck Sales, 578 N.W.2d 222, 228 (Iowa 1998).
B. See, e.g., CAL. BUS. & PROF. CODE § 17070 (West 2004); FLA. STAT. ANN. § 501.211 (West 2004); N.J. STAT. ANN. § 56:8-2.12 (West 2004); OR. REV. STAT. §§ 646.150, 646.638 (2004).
C. CAL. BUS. & PROF. CODE § 17203 (West 2004); GA. CODE ANN. § 10-1-370 (2004); HAW. REV. STAT. ANN. § 481A-3 (2004); ME. REV. STAT. ANN. tit. 10, § 1213 (West 2004); NEB. REV. STAT. § 87-303.10-11 (2004).
D. See, e.g., ALA. CODE § 8-19-5 (2004); ALASKA STAT. § 44-1522 (Michie 2004); CAL. BUS. & PROF. CODE  § 17070 (West 2004); COLO. GEN. STAT. ANN. § 42-11g (West 2004); 815 ILL. COMP. STAT. 510/3; KAN. STAT.ANN. § 50-623 (2004); LA. REV. STAT. ANN. 51 § 1405 (West 2004); ME. REV. STAT. ANN. tit. 5, § 213 (West 2004); MICH. COMP. LAWS. ANN. § 445.911 (West 2004); NEB. REV. STAT. § 59-1609 (2004); N.M. STAT.ANN. § 57-12-10(B) (Michie 2004); OHIO REV. CODE ANN. § 1345.09 (West 2004); OR. REV. STAT. §§646.150, 646.638 (2004); PA. STAT. ANN. tit. 73 § 201-3 (West 2004); TEX. BUS. & COM. CODE ANN. § 17.46 (Vernon 2004); V74 See, e.g., FLA. STAT. ANN. § 501.211 (West 2004) (if suffered a loss as a result of a violation); GA. CODEANN. § 10-1-399(a) (2004) (if damaged or injured); 815 Ill. Comp. Stat. 505/10(a) (2004) (if damaged);KY. REV. STAT. ANN. § 367.220(1) (if suffered ascertainable loss); IND. CODE ANN. § 24-5-0.5-4(a) (Michie2004) (if relied upon an uncured or incurable deceptive act); MINN. STAT. ANN. § 325F.71 (West 2004) (if elderly or handicapped); MO. ANN. STAT. § 407-025(1) (West 2004) (for ascertainable loss); MONT. CODE ANN. § 30-14-133(1) (2004) (for ascertainable loss); NEB. REV. STAT. § 598.0977 (2004) (if elderly ordisabled and injured); NEB. REV. STAT. § 598.0993 (2004) (if injured after determination that violation has occurred); N.H. REV. STAT. ANN. § 358-A:1) (2004) (if injured);
E See, e.g., FLA. STAT. ANN. § 501.211 (West 2004) (if suffered a loss as a result of a violation); GA. CODEANN. § 10-1-399(a) (2004) (if damaged or injured); 815 Ill. Comp. Stat. 505/10(a) (2004) (if damaged);KY. REV. STAT. ANN. § 367.220(1) (if suffered ascertainable loss); IND. CODE ANN. § 24-5-0.5-4(a) (Michie2004) (if relied upon an uncured or incurable deceptive act); MINN. STAT. ANN. § 325F.71 (West 2004) (if elderly or handicapped); MO. ANN. STAT. § 407-025(1) (West 2004) (for ascertainable loss); MONT. CODE ANN. § 30-14-133(1) (2004) (for ascertainable loss); NEB. REV. STAT. § 598.0977 (2004) (if elderly or disabled and injured); NEB. REV. STAT. § 598.0993 (2004) (if injured after determination that violation has occurred); N.H. REV. STAT. ANN. § 358-A:1) (2004) (if injured);
F. Holeman v. Neils, 803 F. Supp. 237 (D. Ariz. 1992); Sellinger v. Freeway Mobile Home Sales, Inc., 521P.2d 1119, 1122 (Ariz. 1974); Maurer v. Cerkvenik-Anderson Travel, 890 P.2d 69 (Ariz. Ct. App. 1994).A. CODE ANN. 59.1-204(A) (Michie 2004); WIS. STAT. § 426.110 (2004).
Of interest to a plaintiff’s litigator is those statutes that provide a private cause of action, and states that have determined that statute applies to insurance. There are several states which have developed some law which supports the application of their Consumer Fraud Acts to insurance settings. Some states with a unfair insurance practices statute still permit the consumer to proceed simultaneously with his consumer fraud count.  We illustrate how we have been using the New Jersey Consumer Fraud Act to gain access to treble damages and attorneys fees.   

The New Jersey Consumer Fraud Act was enacted in 1960 to protect a consumer against loss as a result of fraud and fraudulent practices by persons engaged in the sale of goods and services. It was amended in 1971 to permit private parties a cause of action.  Scibek v. Longett, 339 N.J. Super 72 (A.D. 2001).  The purposes of the Consumer Fraud Act are threefold: (1) To compensate the victim for his or her actual loss; (2) to punish the wrongdoer through the award of troubled damages; and (3) to attract competent counsel to counteract the “community scourge” of fraud by providing an incentive for an attorney to take a case involving a minor loss to the individual.  Id.  The Consumer Fraud Act is aimed at promoting truth and fair dealing in the market place.  Id. 

The New Jersey Consumer Fraud Act prohibits: “The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression or emission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been mislead, deceived or damaged thereby.” 

Several courts have found that the “sale” or “purchase” of insurance is the sale or purchase of “merchandise” (or a “service” where that word is used instead in the statute) It may be useful to examine the way the insurance was marketed or advertised to the consumer because that would aid in establishing the insurance product as “merchandise “ or a “service”.  In ongoing contracts where the premiums are due each year, review the letters from the insurance company, where in effect, they are re-marketing the insurance product each year to convince their insured to “pay” for coveage once again. Some courts have held that acts of an insurance company or its agent after the sale of an insurance policy can be the basis of a claim under a state consumer protection statute, such as failing to settle the claim, or disclose the availability of coverage.

The remedy for violation of the Consumer Fraud Act is reasonable counsel fees, filing fees and costs if that plaintiff can prove that the defendant committed an unlawful practice, even if the victim cannot show any ascertainable loss and thus cannot recover treble damages. Sema v. Automall 46 Inc. (CITE) (NJ App. Div. 2006)  Counsel fees are recoverable only for work attributable to pursuit of the consumer fraud claim, as opposed to other distinct theories of recovery. Siva v. Autos of Amboy, 267 N.J.Super 546, 556 (App. Div. 1993)

    The Consumer Fraud Act is remedial legislation that [courts] construe liberally to accomplish its broad purpose of safeguarding the public.  Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 11–12 (2004).  New Jersey’s Consumer Fraud Act, N.J.S.A. 56:8-2, protects consumers from the following unconscionable commercial practices:  “deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact.”  Judge v. Blackfin Yacht Corp., 357 N.J. Super. 418, 435 (App. Div. 2003).  “An offense arises under the Act from an affirmative act, an omission, or a violation of an administrative regulation.”  Gennari v. Weichart Co. Realtors, 148 N.J. 582, 604 (1997).  See also Cox v. Sears Roebuck & Co., 138 N.J. 2, 17 (1994); Feinberg v. Red Bank Volvo, Inc., 331 N.J. Super. 506, 510 (App. Div. 2000).  While omissions require the consumer to prove intent by showing that the defendant acted with knowledge, it is not necessary to prove intent in the case of an affirmative misrepresentation.  Genarri v. Weichart Co. Realtors, supra; Feinberg v. Red Bank Volvo, Inc., supra.   “The history of the Act is one of constant expansion” to protect “consumers from deception and fraud, even when committed in good faith.”  Gennari v. Weichart Co. Realtors, supra, 148 N.J. at 604; Furst v. Einstein Moomjy, Inc., 182 N.J. at 12 (“It also protects consumers from unfair practices ‘even when a merchant acts in good faith”).  “The language of the CFA evinces a clear legislative intent that its provisions be applied broadly in order to accomplish its remedial purpose, namely, to root out consumer fraud.”  Lemelledo v. Beneficial Management Corp., 150 N.J. 255, 265 (1997).

    The CFA instructs that it should be applied in conjunction with other statutes or common law.  Perez v. Rent-A-Center, 186 N.J. 188, 219 (2006).   Thus, New Jersey courts have applied the Consumer Fraud Act to cases involving the sale of insurance policies where there are allegations of concealment, suppression or omission of a material fact, although the insurance industry is subject to other regulations.  See Lemelledo, supra; Yourman v. People’s Security Life Ins. Co., 992 F. Supp. 696, 701 (D.N.J. 1998). 

    In a pending claim in our office, “S”, the consumer fraud and common law fraud claims are premised on Monarch Insurance Company’s failure to market, advertise or disclose that the disability policy sold to “S”  gave Monarch the right to pay benefits under a reservation of rights.  “S” alleges that he would not have acquired the policy if he had been advised that there was a reservation of rights available under the policy.  “S”s Counterclaim specifically alleges, inter alia, the following acts by Monarch in connection with the marketing, advertisement and sale:
a)    Misrepresenting the proofs necessary for entitlement to benefits under Policy #;
b)    Misrepresenting and falsely advertising the terms of the Policy;
c)    Publicizing general false information and engaging in general false advertising;
d)    Misrepresenting pertinent facts or provisions of the Policy relating to the coverage at issue;
e)    Failing to include a term in its policy establishing the right to pay S benefits under a reservation of rights;
f)    Failing to inform S during the marketing, advertisement or sale of the policy that MONARCH may pay benefits under a reservation of rights;
g)    Failing to provide any details other than a form paragraph in letters to S to explain to him that his benefits were being paid but could be later reclaimed by MONARCH;

NN&R, Inc. v. One Beacon Ins. Group, supra, later proceeding, 2005 U.S. Dist. LEXIS 12542 (D.N.J. June 28, 2005), involved a consumer fraud claim asserted against an insurance agent based upon misrepresentations made when the insurance policy was sold, that incremental premium increases would result in increased insurance coverage. The plaintiff instituted suit after his building collapsed and the insurance company offered the amount of replacement cost available under the original policy, with no increase corresponding to the increased premiums paid.  In determining whether the insured had adequately pled that the insurance company engaged in an unconscionable commercial practice, the court stated as follows:
An unconscionable commercial practice necessarily entails a lack of good faith, fair dealing, and honesty.  The capacity to mislead is the prime ingredient of all types of consumer fraud.

362 F. Supp.2d at 523.  The court dismissed the consumer fraud claim against the insurance company, because the plaintiff had not alleged that the insurance agent was an agent of the insurance company. 

    “An essential element of common law fraud is the misrepresentation of a material fact.”  Rodio v. Smith, 123 N.J. 345, 352 (1991)(citations omitted).  One has to allege more than simply a denial of insurance coverage on a claim in order to succeed. Pierzga v. Ohio Casualty Group, 208 N.J. Super. 40 (App. Div. 1986) and Nikiper v. Motor Club of America, 232 N.J. Super. 393 (App. Div. 1989) both involve a decision to deny benefits, not an allegation regarding the sale of an insurance policy.  Similarly, Van Holt v. Liberty Mutual Ins. Co., 163 F.3d 161 (3rd Cir. 1998), raised a question of whether property damage claimed by the plaintiff had been caused by a prior flood, again, wholly unrelated to the marketing, advertisement or sale of the policy. 

    The timing of the filing of the Consumer Fraud Act claim. 

    Defendants may argue that the six year statute of limitations for a Consumer Fraud action under the statute bars a claim based on a sale of the insurance years earlier. But that defense is without merit.  “A cause of action for fraud ‘accrues when a plaintiff knows or should know if its existence.’”  NN&R, supra, 362 F. Supp.2d at 521 (quoting Southern Cross Overseas Agencies, Inc. v Wah Kwong Shipping Group Ltd., 181 F.3d 410 (3d Cir. 1999)).  As the district court noted in NN & R, supra,

The plaintiff must be aware of an injury and a causal relationship between the injury and an actor, but need not know that the conduct is tortuous or legally wrongful.  When the gist of the action is fraud concealed from the plaintiff, the statute begins to run on discovery of the wrong or of facts that reasonably should lead the plaintiff to inquire into the fraud.

    The Consumer Fraud Act typically requires a person to suffer an “ascertainable loss,” so that a claim is not ripe until a person has suffered an injury.   See N.J.S.A. 56:8-19.  (Sema v.Automall, 2006 N.J.Super LEXIS 83 (App. Div.  3/24/06) notwithstanding, see discussion below.)The requirement that there be an “ascertainable loss” means that a fraudulent act is not actionable under the consumer fraud statute until the wronged party has realized an injury from the unconscionable commercial practice.   Thus, in NN&R, supra, the court held that the consumer fraud six year statute of limitations did not bar the plaintiff’s claim arising out of a policy sold in 1989, because the injury did not occur until 2000 when the building collapsed.  It is when the loss occurs that the claimant develops a cause of action. In our case, it was Monarch’s position that “S” had a duty to read the terms of the Policy and that he “is chargeable with the terms of the Policy as of that date,” But S did not have a cause of action against Monarch until the company took steps to enforce the reservation of rights that had never been made known.  Based on these facts, S timely asserted his consumer fraud claim when he became aware that he could suffer an “ascertainable loss” from Monarch’s unconscionable commercial practice.  

    The Court in our case recently held in favor of the claimant on whether he had a viable cause of action under the Consumer Fraud Act.  Defendant moved for Dismissal of the Counterclaim for violations of the CFA, and the Court held “if the claimant  establishes a misrepresentations or omission made in connection with the sale, marketing or advertising of the Policy, a NJCFA may lie.”

ATTORNEYS FEES
   
    Sema v. Automall, 2006 N.J. Super. LEXIS 83 (App. Div. 3/24/2006)  consumer fraud plaintiff can recover reasonable attorneys fees, filing fees, and costs if that plaintiff can prove that the defendant committed an unlawful practice, even if the victim can not show any ascertainable loss and thus can not recover treble damages.  Plaintiffs should be able to pursue consumer-fraud actions without experiencing a financial hardship, and should be able to attract competent counsel.  A plaintiff must, however, demonstrate a bona fide claim of ascertainable loss related to the CFA violation that raises a genuine issue of fact requiring decision by fact-finder.  Here, the plaintiff has asserted a bona fide claim for an ascertainable loss, and although she was ultimately unsuccessful in proving an ascertainable loss, she is entitled to fees and costs.