Third Circuit Authorizes New Jersey Consumer Fraud Act Claim Against Automobile Insurer Regarding Allegedly Fraudulent Procurement of Release

In Alpizar-Fallas v. Favero, the United States Court of Appeals for the Third Circuit examined a putative class action arising from an automobile accident allegedly resulting in injuries. Both the injured party and the other driver were insured by the same company. On the day after the accident, the injured party was contacted by a claims adjuster for the insurer, who asked that he visit her home later that day. When the adjuster visited, he purportedly requested that the injured party sign certain documents, claiming that this would expedite the handling of her claim. The injured party (whose native language was Spanish) signed the document without realizing that the documents included a full release of all claims against the insured regarding the accident.

The injured party commenced an action against the other driver, the liability insurer, and the adjuster. The plaintiff filed putative class claims against the insurer and adjuster, alleging violations of New Jersey insurance regulations and the state’s Consumer Fraud Act. The insurer and adjuster removed the matter to the United States District Court for the District of New Jersey. The insurer and adjuster filed a motion to dismiss, contending that there was no private cause of action for violation of New Jersey insurance regulations and that the allegations did not support a claim for violation of the Consumer Fraud Act. The insurer and adjuster also contended that the plaintiff did not sufficiently raise allegations of fraud with particularity as required by the Federal Rules of Civil Procedure, and that the plaintiff did not plead an “ascertainable loss” as required by the Consumer Fraud Act. The trial court granted the motion, holding that the Consumer Fraud Act only applied to the insurance industry with regard to the sale or marketing of policies, rather than the failure to pay benefits.

The Third Circuit began its review of the decision by noting that while there is no private cause of action for the violation of New Jersey insurance regulations, this did not preclude a claim under the Consumer Fraud Act. Although the Court acknowledged that the Consumer Fraud Act has been held not to apply to the denial of insurance benefits, the Court noted that the plaintiff in this case did not make a claim for insurance benefits and did not allege that she had been denied any benefits. Rather, the case concerned allegations of fraud with regard to the subsequent performance of a consumer contract. The Court held that such allegations stated a claim under the plain language of the Consumer Fraud Act.

The Court also held that the complaint sufficiently alleged a claim of fraud with particularity, as it identified the date, time, and place of the alleged conduct and provided a detailed description of the conduct. Finally, the Court held that the plaintiff properly pled an “ascertainable loss” as required by the Consumer Fraud Act, as she alleged that she and the putative class members were stripped of their rights to pursue claims against the insured’s policyholders. The Third Circuit therefore reversed the trial court’s order dismissing the case.

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