Case Title: Liberty Mutual Insurance Co. v. Land

Citation: 

Docket Number: a-125-04

State: new-jersey

Court: New Jersey Supreme Court

Date: 2006-03-14T00:00:00Z

Document:
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). Plaintiff-Appellant, v. ROSE LAND and FRANK LAND, Defendants, and STEVEN BUDGE, Defendant-Respondent. Argued October 24, 2005 Decided March 14, 2006 On certification to the Superior Court, Appellate Division. Mauro C. Casci argued the cause for appellant (Mr. Casci, attorney; Russell Macnow, on the brief). Steven A. Budge argued the cause for respondent, pro se. John C. Grady, Deputy Attorney General, argued the cause for amicus curiae Attorney General of New Jersey (Peter C. Harvey, Attorney General, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel; Mr. Grady and Jeffrey R. Caccese, Deputy Attorney General, on the brief). Robert B. Hille argued the cause for amicus curiae New Jersey State Bar Association (Stuart A. Hoberman, President and Mr. Hille, attorneys; Mr. Hoberman, of counsel; Mr. Hille, Mr. Hoberman, James A. McFaul and Megan M. Roberts, on the brief). JUSTICE ZAZZALI delivered the opinion of the Court. In this appeal, we must determine the appropriate standard of proof under the Insurance Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-1 to -30. In December 2000, a tree fell onto the cabin of defendants Rose and Frank Land. Following the accident, the Lands and co-defendant Steven Budge, who is the Lands nephew and a licensed public adjuster, submitted a claim of loss to plaintiff Liberty Mutual Insurance Company (Liberty Mutual). Based on evidence suggesting fraudulent activity on the part of defendants, including a videotape depicting Budge and two other men repeatedly slamming a 600-pound portion of the fallen tree against the cabin s roof, Liberty Mutual filed suit against defendants asserting IFPA violations. At the conclusion of trial, a jury ruled in favor of Liberty Mutual, concluding that it had proven its claims by clear and convincing evidence. Defendants appealed, and Liberty Mutual cross-appealed, asserting that the trial court should have applied a preponderance of the evidence standard. The Appellate Division reversed and remanded for a new trial, finding that Liberty Mutual s counsel committed prejudicial errors. The panel, however, agreed with the trial court that IFPA violations must be proven by clear and convincing evidence. We granted Liberty Mutual s petition for certification, limiting our review solely to the proper standard of proof. For the reasons set forth below, we hold that the standard of proof under the Insurance Fraud Prevention Act is a preponderance of the evidence. [N.J.S.A. 17:33A-2.] As Justice Garibaldi acknowledged in 1992, [i]nsurance fraud is a problem of massive proportions that currently results in substantial and unnecessary costs to the general public in the form of increased rates. Merin, supra, 126 N.J. at 436. As such, the Act is a comprehensive statute designed to help remedy high insurance premiums which the Legislature deemed to be a significant problem. State v. Sailor, 355 N.J. Super. 315, 319 (App. Div. 2001). To that end, IFPA interdicts a broad range of fraudulent conduct. For example, a person or practitioner violates the Act if he or she [p]resents or causes to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy . . . knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim. [N.J.S.A. 17:33A-4(a)(1).] Other violations of the Act include but are not limited to concealing or knowingly failing to disclose information concerning a person s initial or continued right or entitlement to a benefit, N.J.S.A. 17:33A-4(a)(3); presenting any knowingly false or misleading statement in an insurance application, N.J.S.A. 17:33A-4(a)(4)(b); or knowingly assisting, conspiring with, or urging any person or practitioner to violate any of the Act s provisions, N.J.S.A. 17:33A-4(a)(5)(b). To deter and punish such violations, the Legislature created a number of enforcement mechanisms and penalties. First, N.J.S.A. 17:33A-5a(1) authorizes the Commissioner of the Department of Banking and Insurance to bring a civil action seeking monetary penalties. Those penalties range from not more than $5,000 for the first violation, $10,000 for the second violation, and $15,000 for each subsequent violation, plus court costs and reasonable attorneys fees. N.J.S.A. 17:33A-5b. Alternatively, IFPA authorizes the Commissioner to levy identical civil administrative penalties. N.J.S.A. 17:33A-5c. A party assessed with administrative penalties is entitled to seek a hearing. N.J.S.A. 17:33A-5c. After a hearing and upon a finding that a violation occurred, the Commissioner may impose the statutory penalties as well as attorneys fees and the costs of prosecution. N.J.S.A. 17:33A-5c. The Commissioner also may order the payment of restitution to any insurance company or person who has suffered a loss as a result of an IFPA violation. N.J.S.A. 17:33A-5c. The Act further allows any insurance company that has been damaged as a result of a statutory violation to bring a civil action to recover compensatory damages, including reasonable investigation costs and attorneys fees. N.J.S.A. 17:33A-7a. A successful insurance company shall recover treble damages if the court determines that the defendant engaged in a pattern of violations under the Act. N.J.S.A. 17:33A-7b. In addition, the Act permits the Commissioner to join in such an action to recover civil penalties. N.J.S.A. 17:33A-7d. If the commissioner prevails, the court may also award court costs and reasonable attorney[s ] fees actually incurred by the commissioner. N.J.S.A. 17:33A-7d. Finally, any person who is found to have committed insurance fraud must pay a $1,000 surcharge. N.J.S.A. 17:33A-5.1. And, in the context of automobile insurance fraud -- a context not present here, see note 4, infra, ___ N.J. ___ (slip op. at 24), -- a violator of IFPA is subject to a mandatory one-year loss of driving privileges. N.J.S.A. 39:6A-15. In reviewing IFPA s statutory sanctions, this Court has held that the civil penalties authorized by the Act are remedial in nature, Merin, supra, 126 N.J. at 432-33, and serve to compensate the State for the costs incurred as a result of investigating and prosecuting insurance fraud, id. at 445. Consequently, we must construe the Act s provisions liberally to accomplish the Legislature s broad remedial goals. See, e.g., Young v. Schering Corp., 141 N.J. 16, 25 (1995) ( Where the Legislature s intent is remedial, a court should construe a statute liberally. ). [Polk, supra, 90 N.J. at 561 n.1 (quoting Steadman, supra, 450 U.S. at 102, 101 S. Ct. at 1008, 67 L. Ed 2d at 79).] See also Grogan, supra, 498 U.S. at 286, 111 S. Ct. at 659, 112 L. Ed. 2d at 764 (noting that congressional silence on standard of proof issue is inconsistent with the view that Congress intended to require a special, heightened standard of proof ); State by Humphrey v. Alpine Air Prods., Inc., 500 N.W.2d 788, 790 (Minn. 1993) ( When the legislature says nothing about the standard of proof to be used, this is regarded as a signal that the legislature intended the preponderance of the evidence standard. ); Allstate Ins. Co., supra, 5 Cal. Rptr. 3d at 496 ( Clearly, if the Legislature had wished to impose [a] higher evidentiary standard on an action to recover damages under [the California Insurance Frauds Prevention Act], it would have so stated. ). We therefore decline to interpret the Legislature s silence as an indication that it intended to depart from the customary standard of proof in civil cases. Rather, the more reasonable conclusion is that absence of an evidentiary standard indicates that a preponderance of the evidence -- the traditional, default standard -- applies. CHIEF JUSTICE PORTIZ and JUSTICES LaVECCHIA and RIVERA-SOTO join in JUSTICE ZAZZALI s opinion. JUSTICE WALLACE concurs in the result. JUSTICE ALBIN filed a separate, dissenting opinion, in which JUSTICE LONG joins. Plaintiff-Appellant, v. ROSE LAND and FRANK LAND, Defendants, and STEVEN BUDGE, Defendant-Respondent. JUSTICE ALBIN, dissenting. The majority has determined that the lowest burden of proof - the preponderance of evidence standard -- should apply in cases prosecuted by insurance companies under the Insurance Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-1 to -30, despite the lack of any language in the IFPA that suggests such a standard. The majority divines that standard by unnecessarily and vainly searching for a legislative intent when, apparently, the Legislature did not give a second thought to the subject. Because both the language of the statute and its legislative history are silent concerning the applicable standard of proof in cases prosecuted under the IFPA, ante at (slip op. at 10), this Court has not only the constitutional and equitable power, but the duty to set the standard. A defendant who is found liable under the IFPA is subject to compensatory damages, treble damages, mandatory assessment of investigation expenses, attorneys fees and costs, and, if the case involves automobile insurance fraud, a mandatory one-year driver s license suspension. Those penalties in their totality are more than the equivalent of punitive damages, which by statute must be proved by clear and convincing evidence. The significant consequences that flow from a judicial determination of IFPA liability should warrant a heightened degree of accuracy. The preponderance of evidence standard sets the bar too low. There is no sound reason why insurance companies should not bear the burden of proving an IFPA violation by clear and convincing evidence. I therefore respectfully dissent. LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. ROSE LAND and FRANK LAND, Defendants, And STEVEN BUDGE, Defendant-Respondent. DECIDED March 14, 2006 Chief Justice Poritz PRESIDING OPINION BY Justice Zazzali CONCURRING IN RESULT Justice Wallace DISSENTING OPINION BY Justice Albin