New Jersey District Court Recognizes Claim under the New Jersey Consumer Fraud Act in Insurance Coverage Dispute
The United States District Court for the District of New Jersey recently denied, in part, a motion to dismiss filed by Liberty Mutual Insurance (“Liberty”) with respect to the Plaintiff insureds’ suit for breach of contract, breach of the implied covenant of good faith and fair dealing, violations of the New Jersey Consumer Fraud Act (“NJCFA”). Robert J. v. Liberty Mut. Ins., No. CIV. 14-06308 WHW (D.N.J. July 8, 2015). Plaintiffs’ suit stems from the adjustment of Plaintiffs’ claim for property damage sustained by their home during Superstorm Sandy. Plaintiffs allege that in addition to breaching the contract of insurance by underpaying their benefits, Liberty acted deceptively and fraudulently when investigating their property damage claim. Liberty moved to dismiss Plaintiffs’ NJCFA claim on the grounds that the NJCFA does not apply to disputes about insurance benefits or coverage. The Court disagreed, and declined to dismiss Plaintiffs’ NJCFA claim.
In so holding, the Court recognized that the New Jersey Supreme Court has yet to rule definitely on this precise issue and, therefore, it must predict how the Supreme Court would rule given the existing decisions by the Appellate Division and the federal courts interpreting New Jersey law. After weighing and evaluating the existing decisions from those courts, the Court reasoned that the NJCFA has three elements: 1) unlawful conduct by the defendant; 2) an ascertainable loss by the plaintiff; and 3) a causal relationship between the unlawful conduct and the ascertainable loss; Plaintiffs sufficiently pled each element, and that based on the Third Circuit’s holding in Weiss v. First Unum Life Insurance Company, 482 F.3d 254 (3d Cir. 2007), it could reasonably predict that the New Jersey Supreme Court would extend the NJCFA to the present dispute regarding Liberty’s performance in providing benefits. Key to its holding was the fact that Plaintiffs did not merely claim that Liberty underpaid their benefits, which would amount only to breach of contract, but instead assert that Liberty acted deceptively and fraudulently when investigating their claim, thereby distinguishing their claim from the type of underpayment claims the Appellate Division previously held did not fall within the ambit of the NJCFA.