New Jersey Supreme Court Lowers Threshold for Proving Insurance Fraud
Insurance Law Update
The New Jersey Supreme Court held that an insurer suing for fraud need only prove the fraud by a “preponderance of the evidence.”
In Liberty Mutual Insurance Company v. Land, __ A.2d __, 2006 WL 649866 (N.J. Mar 14, 2006), the court overruled a prior decision that required “clear and convincing evidence” the defendant violated New Jersey’s Insurance Fraud Prevention Act (“IFPA”). Consequently, the Land decision improves the ability of insurers to obtain monetary sanctions under the IFPA against insureds asserting fraudulent claims.
After a tree fell and damaged the roof of defendants’ cabin, they submitted an intentionally inflated claim to their homeowners insurer. Once the insurer’s investigation uncovered the fraud, the insurer sued defendants and their public adjuster for violation of IFPA. A jury found the insurer had proven its IFPA claim by clear and convincing evidence. Defendants appealed and the insurer filed a cross-appeal, claiming that the trial court erred by applying an incorrect standard of proof. The appellate division held that the “clear and convincing” standard should apply but the supreme court reversed, holding that the proper burden of proof under the IFPA is a “preponderance of the evidence.”