A decision by the New Jersey Supreme Court has eased the requirements for proving civil fraud under the state's Insurance Fraud Prevention Act.
The court ruling in the case of Liberty Mutual Insurance Co. vs. Land found it only takes a "preponderance of the evidence" and reversed a lower court decision that required proof of fraud by "clear and convincing evidence."
The Insurance Council of New Jersey praised the decision as one that will make it easier to combat insurance fraud in the state.
ICNJ president Magdalena Padilla said "the New Jersey Supreme Court ruling sends a clear message that New Jersey will not tolerate insurance fraud in any way, shape or form."
Under the Insurance Fraud Prevention Act, a policyholder who "knowingly misrepresented" the facts relative to the submission of an insurance claim can be required to pay three times the amount of a fraudulent claim, plus the insurance company's cost and legal fees.
In the case at issue, which the high court ruled on March 14, a New Jersey couple and their nephew were ordered to pay Liberty Mutual $82,412 for making a fraudulent claim after a neighbor's tree fell on the couple's vacation cabin in 2000.
According to court documents, the defendants were videotaped creating additional damage to inflate their claim.
The defendants appealed the verdict on procedural grounds and Liberty cross-appealed, asserting that the case should have been decided on the "preponderance" rather than the higher "clear and convincing" test.
Both the ruling and dissenting opinions noted that the Legislature remained silent on the issue when it crafted the law 23 years ago.
In his ruling, Justice James Zazzali wrote that applying the clear and convincing standard to IFPA violations could result in inconsistent results. "It is doubtful that the Legislature envisioned that an affirmative defense of fraud would be governed by a preponderance of the evidence but that a counterclaim based on the same fraudulent conduct would require a heightened standard of proof."
In his dissent, Justice Barry Albin wrote that the combination of treble damages and attorney's fees warrants the "clear and convincing" standard.
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