New Jersey Supreme Court Analyzes Right to Jury Trial in Statutory Insurance Fraud Cases

​On Monday, January 5, the New Jersey Supreme Court heard oral argument in a matter raising the question of whether a defendant in a civil action brought under the state’s Insurance Fraud Prevention Act (“IFPA”) has the right to a jury trial. Allstate New Jersey ins. Co. v. Lajara concerns allegations that the defendants owned and operated several chiropractic facilities that engaged in an ongoing pattern of fraud, including staging automobile accidents and paying kickbacks for referrals. The plaintiffs seek restitution of $8.2 million in personal injury protection benefits paid as a result of the alleged fraud, as well as treble damages, attorneys’ fees, and costs. In addition, the plaintiffs seek a constructive trust and equitable lien on defendants’ assets until they have disgorged the damages at issue.

The Appellate Division of the Superior Court upheld the trial court’s denial of the defendant’s request for a jury trial. In doing so, the Appellate Division determined that the New Jersey Constitution does not mandate jury trials for claims under the Act, as such claims are equitable in nature. The Court also declined to find an implied right to a jury trial under the statute, noting its reluctance to do so when a statute does not expressly provide for jury trials. The Court observed that implying a right to a jury trial under the IFPA would be inconsistent with statutory language authorizing the Insurance Commissioner to determine IFPA violations and impose penalties without the involvement of a jury, as well as language designating the trial court as the finder of fact regarding the presence of a pattern of violations for the purpose of awarding treble damages. Furthermore, the Court noted that finding an implied right to a jury trial would contravene the Legislature’s “apparent goal” of creating “a swift and cost-effective” remedy for insurance fraud.

Before the New Jersey Supreme Court, counsel for the defendants argued that as the Appellate Division has previously found an implied right to a jury trial for claims arising under New Jersey’s Consumer Fraud Protection Act (“CFPA”), the IFPA should be interpreted in the same manner in light of its similarities to the CFPA. The plaintiff insurers’ attorney observed that the Legislature did not provide for an express right to a jury trial in enacting the IFPA and subsequent amendments, thereby recognizing that no such right existed.

During the oral argument, a number of justices acknowledged that the IFPA did not expressly establish the right to a jury trial. In particular, Justice Barry Albin observed that the Legislature was likely aware that it could have incorporated language in the statute establishing such a right. However, several justices also focused upon the current practice of trial courts with regard to IFPA actions. In this regard, plaintiffs’ counsel averred that trial courts routinely authorized jury trials for IFPA cases. At least one justice concurred, noting that the issue would have been a more frequent subject of appeals if trial courts had denied requests for IFPA jury trials. It is unclear from the Court’s line of questioning whether the apparent tendency of trial courts to allow jury trials in IFPA cases will have any impact upon the Court’s ultimate decision.

As the Appellate Division’s decision recognized, adjudication of IFPA actions by courts rather than juries helps ensure that such actions are decided in a swift and cost-effective manner. If the Supreme Court affirms the Appellate Division’s determination that there is no right to a jury trial for IFPA actions, such a decision will help ensure that the IFPA remains a potent weapon for combatting insurance fraud.