Court Opinion

ID: 6221381
Source: CourtListenerOpinion
Date Created: 2022-02-14 15:08:06.158241+00
Date Added: 2024-06-11T08:57:21.841122
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-4224-18

MARGIN HOLDINGS,
LTD., LLC,

          Plaintiff-Appellant,

v.

FRANKLIN MUTUAL
INSURANCE COMPANY,

          Defendant/Third-Party
          Plaintiff-Respondent,

v.

SAMUEL ORNSTEIN,

     Third-Party Defendant-
     Appellant.
________________________

                   Argued January 31, 2022 – Decided February 14, 2022

                   Before Judges Sabatino, Rothstadt, and Mayer.

                   On appeal from the Superior Court of New Jersey, Law
                   Division, Somerset County, Docket No. L-0032-16.
            Brian M. Block argued the cause for appellants Margin
            Holdings, Ltd., LLC, and Samuel Ornstein
            (Mandelbaum Salsburg, PC, attorneys; Michael F.
            Bevacqua, Jr., of counsel and on the briefs; Brian M.
            Block, on the briefs).

            Christian R. Baillie argued the cause for respondent
            (Methfessel & Werbel, Esqs., attorneys; Richard A.
            Nelke, of counsel and on the brief; Christian R. Baillie,
            on the brief).

PER CURIAM

      This dispute involves a first-party insurance claim regarding two separate

alleged incidents of vandalism and theft of auto parts, for which the insurer

denied payment to the policyholder based on a misrepresentation/fraud clause

in the insurance policy. After the insurer denied the claim, the policyholder

filed suit for coverage. The insurer counterclaimed, alleging the policyholder

committed common-law and statutory insurance fraud. The trial court granted

summary judgment to the insurer on liability and entered a final monetary

judgment in its favor. The policyholder and a third-party defendant now appeal,

alleging the trial court committed multiple errors.

      For the reasons that follow, we vacate summary judgment and remand the

matter for further proceedings. Among other things, we conclude a jury, not a

judge, should resolve the parties' central dispute as to whether the policyholder

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made material misrepresentations to the insurer in connection with its claims of

covered losses.

                                       I.

      Since we are vacating summary judgment and remanding for further

development of the record and the resolution of disputed facts, we do not present

here a comprehensive narrative. Instead, we summarize the facts and allegations

as succinctly as possible in this complex and highly contentious case.

      The Insured Units and the Alleged Losses

      The alleged incidents of loss occurred on September 28, 2014 and October

11, 2014, respectively, at the same commercial condominium unit located on

Woodfern Road in Branchburg, New Jersey (the "Subject Unit"). The Subject

Unit was located within the Dobie Plantation Condominium Complex,

consisting of thirty-six commercial real estate units. These units were developed

and managed by Branchburg Commerce Park, LLC ("BCP").                The Dobie

Plantation Condominium Complex was originally operated by a company called

the Dobie Plantation Condominium Association, which was acquired by BCP in

June 2000.1

1
  The parties refer to the condominium complex as "Branchburg," which we
will use at times in this opinion.
                                                                           A-4224-18
                                       3
      The Subject Unit was one of thirteen units at the complex allegedly owned

by plaintiff Margin Holdings Ltd., LLC ("Margin"), and insured by

defendant/counterclaimant/third-party plaintiff, Franklin Mutual Insurance

Company ("Franklin Mutual"). In October 2014, Margin, the policyholder, filed

claims with Franklin Mutual regarding the vandalism and theft. After an eleven-

month investigation, on September 24, 2015, Franklin Mutual denied the

vandalism         and         theft        claims,        invoking          the

"Concealment/Misrepresentation/Fraud" provision in the insurance policy.

      Disputed Ownership

      At the heart of this appeal is the question of who owned the insured

property and the auto parts at the time of the vandalism and theft claims , and

whether appellants' representations about ownership were untruthful.

      Documents in the record show that in or about June 2000, BCP acquired

all thirty-six units at Branchburg. BCP was owned by three separate LLCs

whose members, Howard Bernard, Loren A. Schultz, and third-party defendant

Samuel Ornstein, also operated BCP.

      On January 4, 2013, BCP filed for bankruptcy, with Ornstein signing the

petition as Manager of the LLC. At the time of the bankruptcy petition, BCP

was one-third owned by Bernard's company and two-thirds owned by

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                                      4
Creweonline.com, Ltd. ("Creweonline"), a company owned by Ornstein that

appeared to have acquired Schultz's former interest in BCP. As part of the

bankruptcy plan, BCP agreed to sell all the units it owned at the complex and to

use the proceeds to pay off BCP's creditors.

      Vincenzina "Gina" Martorana formed Margin, admittedly with the

assistance of Ornstein, to acquire some of BCP's property at Branchburg.

Martorana, through her entity Margin, first bought four units at the complex in

November 2013. In August 2014 Margin acquired an additional nine units,

including the Subject Unit at issue here. The record suggests that some of the

units acquired by Margin were already leased by commercial tenants. The rent

payments from these occupants were apparently collected by Ornstein and his

management company on Margin's behalf. Ornstein acknowledged he acted as

a consultant to Margin.

      The Insurance Policy

      Franklin Mutual initially issued a Businessowners insurance policy to

Margin in November 2013 (the "Policy") for three of Margin's units at the

complex, with an endorsement in 2014 adding four additional units owned by

Margin, including the Subject Unit (the "Endorsement").

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      The Endorsement included coverage for the Subject Unit up to $355,000

for business personal property, as well as coverage for loss of business income,

but it did not include any coverage for the building itself, unlike the coverage

for the other units owned by Margin and covered by the Policy.

      The auto parts, the subject of the theft claim Margin filed, apparently came

into Margin's possession on September 9, 2014, when Margin entered in to an

Agreement of Sale and Real Estate Lease with Turner Resources, Ltd. (another

company owned by Ornstein).         Pursuant to that agreement, Margin would

acquire a collection of new and used Rolls-Royce and Bentley auto parts, in

exchange for Margin providing Turner "the exclusive use of, and ultimately

clear title to, a 2003 Bentley . . . currently leased . . . to Margin." In addition,

Margin would continue to pay all expenses related to the 2003 Bentley,

including lease payments, insurance, and maintenance costs, until the end of the

lease term in May 2017, as well as granting a lease to Turner for the Subject

Unit for a term of five years at an annual rate of $1, with Turner responsible

only for utility consumption.     Finally, the agreement provided that Margin

would offer Turner a lease renewal option for the Subject Unit at an annual rate

of $24,000 upon the termination of the initial five-year term.

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                                         6
      The auto parts are not mentioned specifically in the Policy or the

Endorsement. However, the claim is predicated on those parts being insured

property located within the Subject Unit.

      Notably, Franklin Mutual does not contend—or present any proof—that

Margin made fraudulent representations in connection with the application for

insurance. The fraud issues here are confined to Margin's claims.

      The Acts of Vandalism and Theft

      Less than a month after Margin came into possession of the auto parts and

signed the lease with Turner, on September 28, 2014, the Subject Unit was

vandalized. On October 11, 2014, some of the auto parts acquired by Margin

from Turner were stolen.

      As mentioned previously, Margin filed claims for losses arising out of

these incidents later in October 2014. Nearly a year later, in September 2015,

Franklin Mutual declined the claims, citing the Fraud clause in the Policy.

      Franklin Mutual presents no evidence to contradict that the Subject Unit

was actually vandalized or that auto parts were actually stolen from it. Nor does

Franklin Mutual argue that acts of vandalism are not covered under the Policy.

      Rather, Franklin Mutual based its denial of Margin's claims on evidence

uncovered in its investigation allegedly showing that Margin and its "authorized

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members, representatives and agents" violated the Fraud clause of the Policy, 2

including when such agents of Margin "intentionally made willfully false

statements as to material facts . . . during . . . Examinations Under Oath

[("EUOs")]."

        The    insurer's   declination   letter   did   not   identify   any   specific

misrepresentations or name any of Margin's agents who allegedly made such

misrepresentations, although the only two individuals whose EUOs are

mentioned in the parties' briefs are Martorana and Ornstein.

        After Franklin Mutual denied an internal "appeal" of the claims' denial,

the instant litigation ensued.

2
    The Fraud clause of the Policy states:

              This policy is void, if either before or after a loss or
              occurrence or claim, any insured misrepresents or
              knowingly conceals any material fact or circumstance,
              commits fraud, or swears falsely relating to any aspect
              of this insurance (including the information we relied
              upon in issuing this contract).       However, if we
              specifically choose not to declare this policy void, we
              do not provide insurance under this policy to, or for the
              benefit of, any such insureds.

              [(Emphasis added).]
                                                                                 A-4224-18
                                             8
      This Litigation

      Margin filed its initial complaint with a jury demand in the Law Division

in January 2016 alleging Franklin Mutual improperly denied its first-party

insurance claims.       In its answer, Franklin Mutual, among other things,

counterclaimed and asserted that Margin made material misrepresentations in

violation of the New Jersey Insurance Fraud Prevention Act ("IFPA"), N.J.S.A.

17:33A-1 to -30. Franklin Mutual asserted that Martorana misrepresented her

relationship with Ornstein and Ornstein's role in Margin, and that she is a "front"

for Ornstein.

      Franklin Mutual also filed a third-party complaint against Ornstein

alleging, among other things, that he was the "Owner, Principal, Chief Operating

Officer and/or Chief Executive Officer of Margin" and had filed a fraudulent

claim under Margin's insurance policy in violation of the IFPA by concealing

and misrepresenting the ownership and operation of Margin and various other

related companies. In his response to the third-party complaint, Ornstein denied

he was an Owner/Managing Member of Margin.

      The Claims Investigation

      During discovery, appellants learned that Franklin Mutual, while initially

assigning the claims to an employee, had retained an independent adjuster,

                                                                             A-4224-18
                                        9
Decker Associates ("Decker"), to assist with its investigation. Decker thereafter

raised alarm about the lack of coverage for the theft of the auto parts, because

such parts were not mentioned in either the Policy or Endorsement.

      In December 2014, Franklin Mutual retained a law firm, Methfessel &

Werbel, to assist in its investigation. That law firm has continued to represent

Franklin Mutual throughout this litigation.

      Upon learning of Decker's involvement in the claims investigation,

Margin served a subpoena duces tecum upon Decker, requesting all related

documents, in February 2017. Methfessel & Werbel, as the insurer's counsel,

forwarded thirty-five documents from Decker, with numerous documents

redacted for various reasons, including "work product privilege" and "attorney-

client privilege." In the letter accompanying the documents, Franklin Mutual

alleged it was improper for Margin to contact Decker directly, since in its

Responses to Interrogatories, Franklin Mutual had identified an employee of

Decker as an expert witness to testify for it at trial.

      Margin, meanwhile, objected to what it viewed as Franklin Mutual's

counsel's interference with a non-party's subpoena. On April 24, 2017, Margin

filed a motion to compel production of unredacted copies of "non-party, fact

witness Decker's documents." While Franklin Mutual's response to the motion

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                                        10
was pending, Franklin Mutual's counsel sent a letter to the court on May 9, 2017,

and copying Margin's counsel, advising that the trial judge's sole law clerk had

accepted prospective employment with its firm to commence in September 2017

and thus would need to be screened from this case.

      On May 17, 2017, Franklin Mutual filed partial opposition to the motion

to compel, maintaining objections to eleven of the thirty-five produced

documents while agreeing to disclose unredacted the remaining twenty-four

documents. In its reply brief, filed on May 22, 2017, Margin waived objections

to three of the remaining eleven disputed documents, thus narrowing its request

to eight documents ("Eight Disputed Documents").

      The trial court was supplied with the Eight Disputed Documents to

perform an in camera review. Eventually, the trial court ruled, after a series of

orders, that the Eight Disputed Documents were privileged and undiscoverable.

      Summary Judgment Motion Practice

      After this drawn-out discovery dispute, Franklin Mutual moved for

summary judgment on November 1, 2018, seeking the dismissal of Margin's

complaint and the grant of summary judgment on Franklin Mutual's

counterclaim and third-party complaint against Ornstein alleging violations of

the IFPA. In its motion papers, Franklin Mutual identified Ornstein as an agent

                                                                           A-4224-18
                                      11
of Margin who made material misrepresentations in violation of the Policy. The

moving papers further included a "non-exhaustive" list of post-claim-denial

material misrepresentations, comprising eleven bullet points (the "Bullet

Points").

      In response, Margin and Ornstein cross-moved for summary judgment,

seeking dismissal of Franklin Mutual's affirmative defense under the Fraud

clause of the Policy, the counterclaim in its entirety, and Franklin Mutual's third-

party complaint against Ornstein. In their submission, Margin and Ornstein

asserted that nine of the eleven Bullet Points listed by Franklin Mutual were

alleged misrepresentations uncovered during discovery in the instant litigation,

rather than during Franklin Mutual's pre-claim-denial investigation, and thus

inappropriately cited as a basis for denying coverage.

      The Court's Grant of Summary Judgment for Franklin Mutual

      After hearing oral argument, the trial court entered an order on January 4,

2019 granting summary judgment to Franklin Mutual: (1) on its affirmative

defense, thereby dismissing Margin's Amended Complaint, (2) on its IFPA

counterclaims against Margin, and (3) on its IFPA third-party claims against

Ornstein.    The order further requested that Franklin Mutual submit a

"Certification of Fees, Costs, and Investigation Expenses within [seven] days."

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                                        12
The trial court entered another order the same day denying Margin and

Ornstein's cross-motion for summary judgment in full.

      A six-page letter opinion accompanied both orders, finding in key part

that Ornstein was an agent of Margin, and at the very least, Bullet Points 2 and

10 represented actionable material misrepresentations under the Policy's Fraud

clause.

      Final Judgment

      After Franklin Mutual submitted a certification of investigatory costs, the

trial court entered a final order of judgment for Franklin Mutual on April 16,

2019, directing Margin and Ornstein, jointly and severally, to pay Franklin

Mutual $108,163.51.

      This Appeal

      The instant appeal by Margin and Ornstein ensued. Franklin Mutual has

not cross-appealed.

      On appeal, Margin and Ornstein assert: (1) this court should reverse the

grant of summary judgment for Franklin Mutual and instead grant summary

judgment for Margin and Ornstein, because (a) the insured did not make

misrepresentations; (b) Franklin Mutual did not and could not provide any

evidence on the key element of materiality; (c) any misrepresentations made

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                                      13
during the instant litigation after the insurer had already denied the claims are

irrelevant as a matter of law; and (d) Franklin Mutual did not prove damages,

one of the four elements required to prevail on an IFPA claim. In the alternative,

appellants request that, at the very least, we vacate the judgment entered in favor

of Franklin Mutual and remand for a jury trial.

      Additionally, Margin and Ornstein urge this court to reverse the discovery

orders denying Margin's motion to compel the production of the Eight Disputed

Documents. They contend the trial court's various rulings concerning that

requested discovery are inconsistent and lack sufficient findings grounded in the

record.

                                         II.

                                         A.

      We begin by underscoring well-established principles governing summary

judgment practice. The court must "consider whether the competent evidential

materials presented, when viewed in the light most favorable to the non-moving

party, are sufficient to permit a rational factfinder to resolve the alleged disputed

issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am.,

142 N.J. 520, 540 (1995); see also R. 4:46-2(c). A court must not resolve

contested factual issues but instead must determine whether there are any

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                                        14
genuine factual disputes. Rozenblit v. Lyles, 245 N.J. 105, 121 (2021) (citations

omitted).   If there are materially disputed facts, the motion for summary

judgment should be denied. Parks v. Rogers, 176 N.J. 491, 502 (2003); Brill,

142 N.J. at 540. To grant the motion, the court must find that the evidence in

the record "'is so one-sided that one party must prevail as a matter of law.'" Brill,

142 N.J. at 540 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252

(1986)).

      Our review of an order granting summary judgment, as here, must observe

the same standards, including an obligation to view the record in a light most

favorable to the non-moving parties. See Estate of Narleski v. Gomes, 244 N.J.

199, 205 (2020) (citing Harz v. Borough of Spring Lake, 234 N.J. 317, 329

(2018)). We accord no special deference to a motion judge's assessment of the

documentary record, as the decision to grant or withhold summary judgment

does not hinge upon a judge's determinations of the credibility of testimony

rendered in court, but instead amounts to a ruling on a question of law. See

Manalapan Realty, L.P. v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995)

(noting that no "special deference" applies to a trial court's legal

determinations).

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                                        15
      Substantively, we frame our analysis with due regard to long-standing

precedents concerning both common-law insurance fraud as well as statutory

insurance fraud under the IFPA.

      In general, insurance policies are liberally construed to afford coverage

that a fair interpretation will allow. Villa v. Short, 195 N.J. 15, 24 (2008); Am.

Wrecking Corp. v. Burlington Ins. Co., 400 N.J. Super. 276, 282 (App. Div.

2008). However, "courts cannot write for the insured a better policy of insurance

than the one purchased." Mem'l Props., LLC v. Zurich Am. Ins. Co., 210 N.J.

512, 525 (2012) (quoting Flomerfelt v. Cardiello, 202 N.J. 432, 441 (2010)

(internal quotation marks omitted)).

      These general principles have been developed and applied within the more

specific context of an insurer's allegation that a policyholder has submitted a

fraudulent claim. Over thirty years ago in the seminal case of Longobardi v.

Chubb Ins. Co. of N.J., 121 N.J. 530, 537-42 (1990), our Supreme Court

performed an extensive analysis of a "concealment or fraud" clause, which

mandated "forfeiture by an 'insured who has intentionally concealed or

misrepresented any material fact or circumstance relating to this insurance.'" Id.

at 537 (quoting the subject insurance policy). In construing that provision, the

Court noted in Longobardi that the law disfavors forfeitures; thus, such fraud

                                                                            A-4224-18
                                       16
clauses "should be construed if possible to sustain coverage."      Ibid. (citing

Hampton v. Hartford Fire Ins. Co., 65 N.J.L. 265, 267 (E. & A. 1900)).

      Longobardi was a case of first impression for the Court to consider

whether fraud clauses "apply when an insured misrepresents facts to the insurer

that is investigating a loss." Id. at 538. The Court concurred with other federal

and state courts that found such clauses applicable for post-loss investigations.

Ibid. Thus, the Court held:

            When an insurer clearly warns in a "concealment or
            fraud" clause that it does not provide coverage if the
            insured makes a material misrepresentation about any
            material fact or circumstance relating to the insurance,
            the warning should apply not only to the insured's
            misrepresentations made when applying for insurance,
            but also to those made when the insurer is investigating
            a loss. Such misrepresentations strike at the heart of
            the insurer's ability to acquire the information
            necessary to determine its obligations and to protect
            itself from false claims. Thus, an insured's commitment
            not to misrepresent material facts extends beyond the
            inception of the policy to a post-loss investigation.

            [Longobardi, 121 N.J. at 539 (emphasis added).]

      That said, the Court in Longobardi cautioned that such a post-loss

misrepresentation must be "knowing and material" for the policy to be voided.

Id. at 540. A "mere oversight or honest mistake will not cost an insured his or

her coverage; the lie must be wilful[l]." Ibid. (citations omitted). The Court

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                                      17
further noted "[t]he insured's motive for lying . . . is irrelevant." Ibid. Thus, "it

does not avail insureds to lie for reasons that appear to them to be sufficient ."

Ibid.

        Of particular relevance for the present appeal, the Supreme Court in

Longobardi made clear that "[n]ot every knowingly false statement made by an

insured, however, will relieve an insurer of its contractual obligations. Rather,

forfeiture results only when the fact misrepresented is material." Ibid. (emphasis

added).

        Further expounding on this materiality requirement, we stated in Selective

Ins. Co. v. McAllister, 327 N.J. Super. 168, 178 (App. Div. 2000), that

materiality "generally is a question of fact to be determined by a jury." We

reached that conclusion through an examination of Longobardi and a Second

Circuit decision cited therein, Fine v. Bellefonte Underwriters Ins. Co., 725 F.2d

179, 183 (2d Cir. 1984).

        In Longobardi, questions of materiality as to misrepresentations in an

insurance fraud case were decided by a jury after a trial, and that procedure was

upheld by the Supreme Court on appeal.          121 N.J. at 536-43. The Court

instructed that materiality "should be judged as of the time when the

misrepresentation is made," as hindsight "is irrelevant to the materiality of an

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                                        18
insured's misrepresentation to an insurer." Id. at 541. As the Court explained,

"[a]n insured's misstatement is material if when made a reasonable insurer would

have considered the misrepresented fact relevant to its concerns and important

in determining its course of action." Id. at 542 (emphasis added). The Court

found this standard would incentivize insureds to tell the truth, since it would

dissuade an insured from gambling that a lie will turn out to be unimportant to

the resolution of its claim. Id. at 541-42. In so holding, the Court rejected this

court's assertion that the insurer must have been prejudiced by the

misrepresentation; thus, the standard, while high, is not impossible to meet. Id.

at 542.

      As the United States Supreme Court recently advised in another litigation

setting, materiality is a context-dependent question, and often involves "factual

determinations uniquely suited for a jury." CITGO Asphalt Ref. Co. v. Frescati

Shipping Co, Ltd., __ U.S. ___, __, 140 S. Ct. 1081, 1089 n.4 (2020); see also

TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976) (observing that

materiality becomes a question of law only when no reasonable jury, based on

undisputed facts in the record, could reach anything but one conclusion).

      The Court in Longobardi did not discuss the IFPA at length, although it

mentioned one of the statute's provisions, N.J.S.A. 17:33A-4(a)(1), when

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                                       19
defining what type of misrepresentation would give rise to a claim under the

IFPA.       121 N.J. at 540 (stating the statute "proscrib[es] knowing

misrepresentations by insured in presentation of claims").

        Not only must a misrepresentation be made knowingly to violate the IFPA,

but it also must be material. The IFPA, enacted in 1983, is a comprehensive

statute that codifies the Legislature's goal "to confront aggressively the problem

of insurance fraud[.]" N.J.S.A. 17:33A-2; see also Liberty Mut. Ins. Co. v. Land,

186 N.J. 163, 171-72 (2006). The IFPA aims to address societal harms "by

facilitating the detection of insurance fraud, eliminating the occurrence of such

fraud through the development of fraud prevention programs, requiring the

restitution of fraudulently obtained insurance benefits, and reducing the amount

of premium dollars used to pay fraudulent claims." N.J.S.A. 17:33A-2; see also

Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 210 N.J.

597, 609-10 (2012); State v. Sailor, 355 N.J. Super. 315, 319 (App. Div. 2001).

        In a more recent opinion, the Supreme Court in Allstate N.J. Ins. Co. v.

Lajara, 222 N.J. 129, 147-48 (2015) illuminated the similarities and differences

between a private-party action brought under the IFPA and a cause of action for

common-law insurance fraud.

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                                       20
      A successful common-law fraud claim requires: "(1) a material

misrepresentation of a presently existing or past fact; (2) knowledge or belief by

the defendant of its falsity; (3) an intention that the other person rely on it; (4)

reasonable reliance thereon by the other person; and (5) resulting damages." Id.

at 147 (emphasis added) (quoting Banco Popular N. Am. v. Gandi, 184 N.J. 161,

172-73 (2005)).

      By comparison, to prevail on an IFPA claim,

            an insurance company must demonstrate that: (1) the
            defendant "presented" a "written or oral statement"; (2)
            the defendant knew that the statement contained "false
            or misleading information"; and (3) the information
            was "material" to "a claim for payment or other benefit
            pursuant to an insurance policy . . . . " N.J.S.A.
            17:33A–4(a)(1). The insurance company must also
            prove a fourth element—that it was "damaged as the
            result of a violation of [the IFPA]." N.J.S.A. 17:33A–
            7(a).

            [Lajara, 222 N.J. at 147-48 (emphasis added).]

"The only element of a claim for common-law fraud absent from an IFPA claim

is reliance by the plaintiff on the false statement." Id. at 148.

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                                        21
      The Court held in Lajara that a defendant has a right to a trial by jury in a

private action brought under IFPA. Id. at 148-49.3 The Court did not address

whether materiality was a question of fact for the jury under the IFPA. At the

very least, the Court did not identify that as a difference between an IFPA claim

and a common-law claim.4

                                        B.

      The motion judge concluded as a matter of law that Margin made at least

two material misrepresentations of fact to Franklin Mutual during the post -loss

investigation of the claims. Specifically, the judge adopted the defense theory

that Ornstein was an agent of Margin and that Bullet Points 2 and 10 were

material misrepresentations that entitled Franklin Mutual to a judgment of

liability on both its common-law claim of insurance fraud and its IFPA claim.

3
  In the present case, both Margin and Franklin Mutual made jury demands in
their respective pleadings.
4
   The Court did observe in Lajara that the presence of the damages element
permitted an insurer "to seek money damages, and even treble damages if 'the
defendant has engaged in a pattern of violating [the IFPA]." 222 N.J. at 148
(quoting N.J.S.A. 17:33A-7(b)). In this vein, the Court found it notable that
"attorneys' fees, investigatory costs, and costs of suit are, by definition,
compensatory damages under the IFPA, and therefore a successful lawsuit
initiated by an insurance company will necessarily involve an award of
damages." Ibid. (citing N.J.S.A. 17:33A–7(a)).
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                                       22
With all due respect to the trial court, that critical determination of materiality,

in the circumstances presented, should have been reserved for a jury.

       Bullet Points 2 and 10 both concern allegations of material untrue

statements made in connection with the ownership of the Subject Unit. We

discuss them in turn.

       Bullet Point 2: Sprecher's Deposition Testimony

       In Bullet Point 2, Franklin Mutual contends a material misstatement was

made in Margin's submission "of the deed transfer from Branchburg Commerce

Park, LLC to Margin Holdings for the second sale [of the premises] indicating

that     [an    individual      named]        Andrew     Sprecher       was      the

Director/Secretary/Treasurer of Creweonline.com, Ltd., the 'Sole Member' of

Branchburg Commerce Park, LLC."

       Sprecher's name appears on the August 2014 deed that conveyed nine

condominium units, including the Subject Unit, from BCP to Margin. The typed

portion of the deed below his signature identifies Sprecher as the

"Director/Secretary/Treasurer" of Crewonline.com, Ltd., which was the sole

member of the grantor, BCP.

       During this litigation, Sprecher was deposed as a witness. When shown

the August 2014 deed, he acknowledged that his true signature appeared on the

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                                         23
deed. Sprecher did not remember whether he was ever a director, secretary, or

treasurer of Crewonline.com, and did not know or remember anything about the

entity. He stated that he signed the deed because Ornstein had asked him to sign

it. Sprecher also did not know at his deposition if "the LLC" [Crewonline.com

or BPC] had been the only owner of the premises, although he had signed an

affidavit of title attesting to that. He also testified that his signature on an office

space lease between BCP and Margin, and a HUD Settlement form 5 was not his

own. He did recall signing as "an authorized secretary" of an entity on a

notarized document about five years earlier, but he could not recall the entity's

name.

        Franklin Mutual contends that Sprecher's deposition testimony proves that

the BCP deed to Margin was part of a "sham transaction" designed to conceal

Ornstein's involvement in not only the sale of the property, but his role in each

of the LLCs. In its reply brief, Franklin Mutual stipulates that Sprecher may

have been a "secretary" of Crewonline.com, but maintains he was not director

or treasurer of the entity.

5
  We note the lease and HUD form were not documents submitted by Margin to
the insurer in support of its claims of loss, but instead were obtained later in
discovery.
                                                                                A-4224-18
                                         24
      Despite the suspicions raised by Sprecher's deposition testimony, we are

not   persuaded    it   conclusively   shows    that   Margin    made    material

misrepresentations to Franklin Mutual in connection with its loss claims for the

premises. Viewing the summary judgment record, as we must, in a light most

favorable to Margin, see R. 4:46-1—and bearing in mind the general guidance

of Longobardi and other case law allocating materiality issues to juries—we

hold that genuine questions of fact and credibility are raised by Bullet Point 2.

      For one thing, it appears undisputed that the Policy was procured by

Margin and that apparently Margin paid the premiums for that insurance

coverage. No other competing claimant or owner of the unit or the auto parts

within it has emerged, in nearly a decade since the loss was reported.

      It is not self-evident that a reasonable insurer would have been misled and

would have had a sound basis to deny the claims simply because of an asserted

defect in the property's deed if, in fact, the policyholder that paid the premiums

is the same party filing the claims and presenting proof of the theft and

vandalism. The record needs to be developed more on this point, possibly with

the benefit of expert testimony, and the associated materiality issues resolved

by a jury.

                                                                            A-4224-18
                                       25
      In addition, even as we duly note the chain of title concerns raised by

Sprecher's deposition that can be presented to a trier of fact, Franklin Mutual

thus far has not established that Margin lacks an insurable interest in the Subject

Property, a factor that is undoubtedly pertinent to materiality. See Balentine v.

N.J. Underwriting Ass'n, 406 N.J. Super. 137 (App. Div. 2009).            Nor has

Franklin Mutual yet proven that this potential defect in title is material to and

affects its resolution of Margin's claims.

      In Balentine, this court applied the long-settled principle that "to recover

proceeds on an insurance policy, the insured must have an insurable interest in

the realty, chattel or person covered by that insurance."       Id. at 141 (citing

Shotmeyer v. N.J. Realty Title Ins. Co., 195 N.J. 72, 85-87 (2008)). The test for

whether an insured has an insurable interest in property is "whether the insured

has such a right, title or interest therein, or relation thereto, that he will be

benefited by its preservation and continued existence or suffer a direct pecuniary

loss from its destruction or injury by the peril insured against." Ibid. (quoting

Hyman v. Sun Ins. Co., 70 N.J. Super. 96, 100 (App. Div. 1961)) (internal

quotations omitted).

      We specifically analyzed in Balentine whether "the record owner of real

property, who is serving as the nominee of another person, has an insurable

                                                                             A-4224-18
                                       26
interest in that realty sufficient to recover the proceeds of a vandalism policy on

which he is listed as a named insured." Id. at 139. In that case, both plaintiffs,

Balentine and Gianetta, initially co-owned a commercial property. Ibid. When

Balentine was in bankruptcy, the plaintiffs jointly transferred the property to

Gianetta for one dollar, while allowing Balentine to continue using the property

for business purposes.     Ibid.   Gianetta also issued a power of attorney to

Balentine, which allowed the latter to pay "the property taxes, insurance

premiums, utilities and other expenses for the premises." Ibid. In the underlying

insurance policy providing coverage for the building, the named insured was

listed as "Gianetta c/o . . . Balentine." Ibid.

      In denying the vandalism claim filed on behalf of Gianetta, the insurer

decided that Gianetta was "merely Balentine's nominee," as Gianetta did not

personally pay the taxes, utilities, or other charges on the building. Id. at 140.

The insurer posited that, "upon information and belief . . . [the] 'plaintiffs

arranged to place the property in plaintiff Gianetta's name in order to shield it

from plaintiff Balentine's creditors.'" Id. at 140-41.

      We held in Balentine that Gianetta had an insurable interest in the property

despite the insurance company's assertion he had no pecuniary stake in the

building. Id. at 143. We noted that Gianetta, as the named property owner,

                                                                             A-4224-18
                                        27
would be liable "[i]f the real estate taxes were unpaid" or "an occupant or visitor

were injured by a dangerous condition on the premises."          Id. at 144. We

acknowledged "Gianetta may not have had much of an upside in owning the

building . . . but he surely had a downside if the premises were left uninsured."

Ibid. We further noted the unfairness of adopting the insurer's argument that

neither Gianetta nor Balentine deserve to be paid for this loss, as such a holding

"would create a windfall for the insurer, allowing it to retain the premiums it

reaped on this policy without providing anything in return." Ibid. (emphasis

added).

      Franklin Mutual theorizes that Margin purchased the thirteen units at

BCP, including the Subject Unit, as a means for Ornstein to defraud creditors.

But as this court in Balentine noted, such a determination affecting the rights of

creditors should be made in another forum and is not appropriate to resolve in

this insurance dispute. Id. at 145.

      Further, there is evidence that funds were paid on behalf of Margin, with

the assistance of a mortgage loan from Wells Fargo, to acquire the premises. As

the record owner, Margin presumably would be responsible if real estate taxes

or utilities were unpaid or if someone were injured on the premises.

                                                                             A-4224-18
                                       28
      Regarding the two claims at the subject of the current litigation, Ornstein

voluntarily attended an EUO held by Franklin Mutual in 2015, where he stated

that he acted as a consultant to Margin, however he was not a policyholder or

owner, and has "nothing to gain from [the claims]." We are aware that Ornstein

apparently has made contrary statements to FEMA or otherwise indicating a

greater role. These cited inconsistencies should be assessed under the totality

of circumstances by a trier of fact.

      Franklin Mutual also takes issue with the fact that the Subject Unit was

sold for much less than its fair market value, citing to Bernard's 2017 petition to

reopen the bankruptcy proceedings for BCP, which sold the Subject Unit to

Margin. However, as the Supreme Court held in Miller v. N.J. Ins. Underwriting

Ass'n, 82 N.J. 594, 597 (1986) and as we noted in Balentine, the soundness of

such a purchase does not disprove that Margin had an insurable interest in the

Subject Unit.

      Lastly, we must note the trial court did not provide specific reasons why

Franklin Mutual met its burden of establishing materiality under Bullet Point 2 .

There is no ability to remand the matter for an amplified statement of reasons

by the same judge, as the judge is now retired.

                                                                             A-4224-18
                                       29
      Bullet Point 10: Ornstein's EUO Testimony

      We reach the same conclusion with respect to Franklin Mutual's Bullet

Point 10, finding that it also raises questions of materiality for a jury to resolve.

      In Bullet Point 10, Franklin Mutual posits Ornstein lied several times

regarding the ownership of the units. Specifically, Bullet Point 10 avers there

was a material misrepresentation as to:

             Mr. Ornstein's sworn testimony that he did not know
             who the individual owners of [BCP] were, in spite of
             the fact that he previously represented himself to be the
             owner and/or an executive office of [BCP] and "owned"
             Creweonline.com, Ltd., which purportedly was the sole
             member of [BCP] per the deed transfer from [BCP] to
             Margin Holdings for the second sale of nine units.

In connection with these alleged misrepresentations by Ornstein, the parties

dispute whether he is an "insured" under the Policy, with appellants arguing he

is not, and Franklin Mutual arguing he is.

      Again, it is not patently evident how these alleged misrepresentations by

Ornstein are material to Margin's loss claims. As the Fraud clause of the Policy

states, only statements made by an "insured" can nullify the Policy. The term

"insured" is defined in two distinct ways in the Policy in Parts I and II.

Presumably, since Margin is seeking recovery under Part I of the Policy, which

covers damage to "Business Property and Loss of Business Income," and not

                                                                               A-4224-18
                                        30
under Part II, which contains liability coverage provisions, only the Part I

definition of "insured" would apply. That definition, which is narrower than the

definition in Part II, defines the "insured" as "the person or entity designated as

insured in the [Policy] Declarations." The Declarations identify the "named

insured" on all four pages as "Margin Holdings LLC," and state in Item 3: "You

[, the insured] are a: LLC."

      Even if, for the sake of discussion, Ornstein was deemed to be included

as an "insured" under the Part I coverages of the Policy, it is not certain why his

statements referenced in Bullet Point 10 constitute misrepresentations, let alone

material ones. In Ornstein's pertinent testimony cited by Franklin Mutual, the

exchange was as follows:

            Q: And who owns Branchburg Commerce Park LLC?

            A: It's owned by a couple of other LLCs, other entities.

            Q: And ultimately the corporate owners involved, the
            people that are actually the owners of the other
            corporate entities?

            A: I don't know – I don't have all of that information,
            but I don't know whether that's something I can provide.
            I don't know what my responsibilities are to them in that
            regard.

      We recognize that these professions of ignorance or lack of recollection

could be found by a trier of fact to be untruthful. But that is a cred ibility

                                                                             A-4224-18
                                       31
assessment to be made by a jury and not resolved on a written record. These

statements made during the post-loss investigation could be found to be

"knowing and material" misrepresentations that were willful on Ornstein's part.

Conversely, they conceivably might be found to be matters of oversight or

mistake. A jury should make that credibility assessment. Longobardi, 121 N.J.

at 540 (citations omitted).

      Further, Franklin Mutual does not conclusively establish why Ornstein's

supposed misrepresentations about the ownership of BCP were material to the

insurer's denial of Margin's claims. Although not explicitly stated, Franklin

Mutual appears to rely upon Ornstein's prior bad acts in other bankruptcy and

insurance fraud proceedings, as demonstrating a strong likelihood of Ornstein

perpetrating fraud in this case. However, there are at least two problems with

such reliance.

      First, N.J.R.E. 404(b)(1) mandates that evidence "of other crimes, wrongs,

or acts is not admissible to prove a person's disposition in order to show that on

a particular occasion the person acted in conformity with such disposition." To

be sure, such prior-acts evidence "may be admitted for other purposes, such as

proof of motive, opportunity, intent, . . . plan, knowledge, identity, or absence

of mistake . . . ." N.J.R.E. 404(b)(2). However, Franklin Mutual has not

                                                                            A-4224-18
                                       32
specified under N.J.R.E. 404(b) the admissible purpose for which it repeatedly

characterizes Ornstein as a "serial fraudster." The admissibility of any prior bad

acts by Ornstein would need to be decided at or before the jury trial in a Rule

104 hearing, and weighed against the exclusionary factors of N.J.R.E. 403. The

summary judgment context is not appropriate for such an admissibility ruling.

      Second, as noted above, the materiality of Ornstein's statements about the

ownership of BCP to Margin's claims of loss should not be presumed. As we

already noted, the named insured for a Part I claim under the Policy is Margin,

not Ornstein. Margin apparently paid the premium, is shown on the deed as the

record owner, and is the party seeking payment for the claim. Franklin Mutual

has the burden of proving that Ornstein's alleged misrepresentations, if their

falsity had not been uncovered, would likely have caused the loss claim to be

paid to the wrong owner. That is by no means certain. The strength of the

evidence in meeting the insurer's burden of proof should be litigated at a trial.

Hence, Bullet Point 10 cannot sustain a grant of summary judgment.

      Conclusion

      In essence, the core dispute here appears to revolve around a series of

several unresolved questions. Did Margin—which is identified on the deed as

the Subject Unit's owner, which was listed on the Policy as the insured , and

                                                                            A-4224-18
                                       33
which paid the premiums—wrongfully try to get paid on claims for losses on

property it did not actually own? If so, then who did own the property instead?

Was it BCP? Was it some other entity? Was it Ornstein? What exactly was

Ornstein's role concerning the property? Did he have an insurable interest? Did

anyone else?    Do any of these answers materially eliminate the insurer's

obligation to pay on the claims if the losses are proven? These are all fact-laden

and credibility-dependent questions bearing on materiality that must be sorted

out by a jury, not by the court on a paper record.

       In summary, we conclude the trial court prematurely granted the insurer

summary judgment on these thorny questions of materiality. The court strayed

from well-established precedent in not allowing a jury to resolve them. The

orders granting summary judgment, which were solely founded on Bullet Points

2 and 10, are accordingly vacated. Because these are issues for a jury, by the

same logic we reject Margin's request to enter judgment in its own favor.

                                       III.

       Given our decision to vacate summary judgment, we need not go further

and resolve here other issues that are best decided in the first instance by the

trial court.

                                                                            A-4224-18
                                       34
        In particular, we reserve for the trial court, if it turns out to be vital to

reach     it,   the   question   of   whether      any   alleged   post-investigation

misrepresentations, i.e., made by Margin during litigation, can support a claim

of insurance fraud under the common law or the IFPA. The trial court did not

address that issue and chose to focus solely on Margin's pre-lawsuit statements.

We decline the invitation to resolve the issue here without the benefit of

reasoned analysis and a fuller development of the record.

        Similarly, we need not address here whether the method adopted by the

trial court to quantify the insurer's damages through a certification, rather than

testimony subjected to cross-examination, was appropriate. The judgment has

been vacated, and the issues of damages may now be litigated anew, if

necessary, at or following a trial on liability.

        Lastly, we direct that a successor judge on remand must examine the Eight

Disputed Documents in camera and make independent determinations of

privilege and discoverability, as the present record and the previous series of

rulings by the trial court do not enable meaningful appellate review. We decline

the opportunity to perform de novo review of the documents ourselves.

        All other issues raised on appeal lack sufficient merit to warrant

discussion. R. 2:11-3(e)(1)(E).

                                                                               A-4224-18
                                         35
      Vacated and remanded. The trial court shall convene a case management

conference within thirty days to plan the remand process. We do not retain

jurisdiction.

                                                                     A-4224-18
                                   36