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Liberty Mutual Insurance Co. v. Land

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


March 27, 2009

LIBERTY MUTUAL INSURANCE COMPANY, PLAINTIFF-RESPONDENT,
v.
ROSE LAND AND FRANK LAND,*FN1 DEFENDANTS, AND STEVEN BUDGE, DEFENDANT-APPELLANT.

On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2169-01.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 5, 2009

Before Judges Carchman, R. B. Coleman and Sabatino.

This insurance fraud matter returns to this court a second time, following a retrial that we ordered in our February 2005 unpublished opinion, see Liberty Mut. Fire Ins. Co. v. Land, Docket No. A-5337/5690-02 (February 23, 2005), and the Supreme Court's ensuing opinion clarifying that plaintiff's burden of proof is by a standard of the preponderance of the evidence. Liberty Mut. Ins. Co. v. Land, 186 N.J. 163 (2006).

We need not recite at length the underlying facts, which are detailed in our prior decision and the Supreme Court's opinion. Briefly, this is an action by plaintiff, Liberty Mutual Insurance Company,*fn2 against defendant Steven Budge under the New Jersey Insurance Fraud Protection Act ("the IFPA" or "the Act"), N.J.S.A. 17:33A-1 to -30. The complaint also named as co-defendants Rose Land and Frank Land, who are Budge's aunt and uncle.*fn3 At the times relevant to this matter, Budge was a public adjuster.

After a neighbor's tree fell on the roof of their cabin in Highland Lake in December 2000, the Lands filed a property damage claim with plaintiff, their homeowners' insurer. The Lands hired Budge, their nephew, to assist them in presenting the insurance claim, agreeing to pay him ten percent of any recovery.

In investigating the claim, plaintiff discovered that Budge, Mr. Land, and another man had apparently gone on the roof after the tree fell and had attempted to increase the physical damage to the Lands' cabin. Among other things, the men had been observed slamming a portion of the fallen tree repeatedly on the roof, causing additional holes in the structure. They also shattered a skylight and bent a television antennae. These activities were videotaped by the neighbor, Joseph Rizzo, who had owned the tree. He supplied a copy of the videotape to plaintiff.

Meanwhile, the Lands had submitted four proofs of loss, which were on Budge's letterhead and also contained his signature. The claims totaled $69,338. As an additional part of the claims process, the Lands appeared for an oral examination, at which they both asserted under oath that the tree had fallen through the roof into the dwelling.

After completing its investigation, plaintiff concluded that the claims of loss had been fraudulently inflated. It accordingly denied coverage and withheld the payment of benefits. Plaintiff then brought an action against Budge and the Lands in the Law Division, alleging breach of contract and numerous violations of the IFPA. Among other things, plaintiff sought compensatory damages in the litigation, which it requested to have trebled under N.J.S.A. 17:33A-7(b) (authorizing treble damages "if the court has determined that the defendant has engaged in a pattern of violating [the] [A]ct").

The matter was initially tried before a jury in the fall of 2002. That trial resulted in a jury verdict in plaintiff's favor against all three defendants, finding that they each had violated the IFPA. The trial court then issued a corresponding judgment awarding compensatory and trebled damages. On the ensuing appeal, we set aside the initial judgment on three distinct grounds: (1) the appropriate standard of proof was by a heightened "clear and convincing" evidence, not the preponderance standard that had been charged to the jury; (2) plaintiff's counsel made improper comments in his summation which may have tainted the jurors; and (3) Budge, who represented himself, should have been permitted to testify at trial in narrative form. We thus remanded the case for a new trial.

In its own review of the case, the Supreme Court determined, as a matter of law, that the proper standard of proof in a civil action brought by an insurer under the IFPA is the preponderance standard. 186 N.J. at 170-79. Consequently, the Court reversed our opinion on that discrete legal issue. Ibid. The Court left the balance of our dispositions unaltered, and remanded the case to the Law Division for the new trial that we had previously directed. Id. at 180-81.

After motions on several pretrial issues, the case was tried a second time before a jury in November and December 2006. Defendant again appeared pro se, but this time was permitted to testify in narrative form. The second jury also returned a verdict in plaintiff's favor, finding that Budge and the Lands had each violated the Act. Consequently, the court entered an order for final judgment on April 19, 2007. The order first awarded plaintiff $5,157.41 in investigative costs, plus $52,576.78 in counsel fees. The court then trebled those amounts, yielding a total of $173,202.57. The court also specified that defendants are responsible for reimbursing plaintiff for $2,100 in expenses attributable to Rizzo. The total judgment, on which defendants are jointly and severally liable, is $175,302.88.

On his pro se appeal, Budge has raised the following points:

POINT I

THE TRIAL COURT ERRED IN NOT CONDUCTING THE NEW TRIAL IN ACCORDANCE TO THE REMAND BACK FOR A NEW TRIAL FROM THE APPELL[ATE] COURT FOR IMPROPER STATEMENTS MADE BY RESPONDENT['S] ATTORNEY DUR[]ING TRIAL AND DUR[]ING CLOSING. ALSO FOR THE ERRONEOUS DECISION OF THE TRIAL COURT FAILING TO ALLOW APPELLANT BUDGE TO DEFEND IN A MANNER OF HIS CHOICE AND FORCING AN UNWILLING ATTORNEY TO ASK QUESTIONS AT THE LAST MINUTE INSTEAD OF ARTICULATING HIS OWN OFFEN[S]E AND DEFENSE. THE TRIAL JUDGE MADE A REVERSIBLE LEGAL ERROR THAT AFFECTED THE OUTCOME OF THE TRIAL. THE TRIAL COURT CLEARLY ABUSED ITS DISCRETION DISREGARDING THE APPELLATE FINDINGS FOR A NEW TRIAL.

POINT II

THE JUDGE ERR[ED] IN NOT RECUSING HIMSELF BECAUSE THE JUDGE CLAIMED IN HIS CHAMBERS, HE WAS APPALLED AT THE DECISION OF THE APPELLATE COURT DECISION TO REMAND BACK FOR A NEW TRIAL AND WAS TOO EMOTIONAL TO HANDLE THE CASE. ("I SENT IT OVER TO ANOTHER JUDGE ALONG WITH A MESSAGE") THE MATTER SHOULD HAVE BEEN HEARD BY ANOTHER JUDGE IN THE PROPER VENUE AS MOTIONED BY DEFENDANTS. THE RECORD IS CLEAR THROUGHOUT THE TRIAL THAT THE JUDGE WAS PREJUDICIAL TO THE APPELLANTS.

POINT III

THE ORDER OF THE SUPERIOR COURT TO DENY APPELLANTS['] MOTIONS FOR A 104 HEARING ETC. AND GRANTING RESPONDENT['S] LAW OF THE CASE MOTIONS ALSO CONTRADICTS THE APPELL[ATE] COURTS REMAND FOR A NEW TRIAL, AND NOT ALLOWING OR ALLOWING INTO EVIDENCE OR TESTIMONY THAT SHOULD NOT OR SHOULD HAVE BEEN ADMITTED. THIS WAS A HARMFUL ERROR THE VIDEO AND OTHER EVIDENCE WAS IRRELEVANT AND HAD NO PROBATIVE VALUE[.]

POINT IV

THE EVIDENCE WAS INSUFFICIENT TO SUSTAIN A VERDICT IN FAVOR OF PLAINTIFF LM AND LM HAD NOT PROVIDED A PRIMA FACI[E] CASE. THE MOTION TO VACATE THE JURY SHEET BY THE APPELLANTS/DEFENDANTS SHOULD HAVE BEEN GRANTED AND OR A NEW TRIAL SHOULD HAVE COMMENCED.

POINT V

THE TRIAL COURT ERROR DURING JURY SELECTION AND PUTTING THIS APPELLANT/DEFENDANT UNDER DURESS IN TRYING TO EXCUSE WHAT APPELLANT FELT WAS A VERY PREJUDICIAL JUROR. THE TRIAL JUDGE MADE A REVERSIBLE LEGAL ERROR THAT AFFECTED THE OUTCOME OF THE TRIAL AND SHOULD BE REMANDED FOR A NEW TRIAL.

POINT VI

THE TRIAL COURT ERR[ED] IN ALLOWING "THE INSURANCE FRAUD PREVENTION ACT" TO BE CONSIDERED OR TO BE BROUGHT UP AT THE CLOSING INSTRUCTIONS TO THE JURY. IT DOES NOT APPLY IN THIS CASE AT ALL. THE TRIAL JUDGE MADE A REVERSIBLE LEGAL ERROR THAT AFFECTED THE OUTCOME OF THE TRIAL AND SHOULD BE REMANDED FOR A NEW TRIAL.

POINT VII

UNDER THE DECLARATORY JUDGMENT ACT AND "THE STATUTE OF FRAUDS ACT" THE PLAINTIFF [IS] BARRED FROM ACTIONS AGAINST OTHER TH[A]N THAT WHICH IS IN THEIR PLEADINGS. THE PLAINTIFF HAS NO CONTRACT WITH DEFENDANTS STEVEN BUDGE OR FRANK LAND AND THEREFORE DO NOT HAVE ENFORCEABLE ACTION IN COURT.

POINT VIII

RESPONDENT/PLAINTIFF FAILED TO ACCEPT OFFER OF SETTLEMENT THREE TIMES HIS ACTUAL ALLEGED DAMAGE THEREFORE THEY MUST PAY FOR ALL FEES AND THE MATTER SHOULD NEVER HAVE GONE TO TRIAL IN THE FIRST PLACE.

POINT IX

RESPONDENT/PLAINTI[FF] MADE PREJUDICIAL STATEMENTS DURING TRIAL AND CLOSING WHILE THE VIDEO WAS BEING PLAYED AGAINST THE AGREEMENT THAT THE COURT AND ALL PARTIES WOULD NOT SPEAK OR NARRATE DURING THE PLAYING OF THE VIDEO AND APPELLANT COULD NOT RESPOND.

POINT X

THE BURDEN OF PROOF UNDER THE PREPON[D]ER[A]NCE OF THE EVIDENCE THIS APPEL[L]ANT FEELS IS INCORRECT. ALTHOUGH THE NJ [SUPREME] COURT HELD IN THIS CASE TO LOWER IT FROM CLEAR AND CONVINCING EVIDENCE IN WHICH THE SUPE[R]IOR COURT AND APPELLATE COURT AGREED TO BE CLEAR AND CONVINCING. [(Boldface and underlining omitted).]

Having fully considered these points, as amplified at oral argument before us, we conclude that the appeal lacks merit, substantially for the reasons cogently expressed in Judge Dumont's detailed letter opinion of April 20, 2007. As a threshold matter, we are satisfied that Judge Dumont was not obligated to recuse himself from presiding over the second jury trial, notwithstanding Budge's contentions of bias. As to Budge's substantive and procedural arguments, none of them have sufficient merit to warrant discussion, see Rule 2:11-3(e)(1)(E), except for his subsidiary argument concerning the judgment's trebling of counsel fees, an issue that we shall address briefly.

As a remedy for insurers who have been victimized by insurance fraud, Section 7(a) of the IFPA provides that:

a. Any insurance company damaged as the result of a violation of any provision of this act may sue therefor in any court of competent jurisdiction to recover compensatory damages, which shall include reasonable investigation expenses, costs of suit and attorneys fees. [N.J.S.A. 17:33A-7(a) (emphasis added).]

In addition, as then-Associate Justice Zazzali noted in the Supreme Court's majority opinion in this very case, "[a] successful insurance company shall recover treble damages if the court determines that the defendant has engaged in a pattern of violations under the Act[.]" 186 N.J. at 173. Such trebling is authorized under Subsection 7(b), which reads:

b. A successful claimant under subsection

a. shall recover treble damages if the court determines that the defendant has engaged in a pattern of violating this act. [N.J.S.A. 17:33A-7(b).]

A "pattern" under the statute is established by "five or more related violations." N.J.S.A. 17:33A-3. We accept the trial court's finding that such a wrongful pattern was established here by the multiple false statements presented on this claim of loss, which the court tabulated as comprising eleven distinct violations. See Merin v. Maglaki, 126 N.J. 430, 435-39 (1992); see also State v. Fleischman, 189 N.J. 539, 551-54 (2007).

An unsettled legal question arises, however, as to whether an insurer's counsel fees may properly be included within the damages subject to trebling under subsection 7(b). The statute on its face reflects that counsel fees are, by definition, part of the "compensatory damages" authorized under subsection 7(a). Subsection 7(b) then provides, for extreme cases involving a pattern of violations, that a successful claimant "shall recover treble damages." N.J.S.A. 17:33A-7(b). The question becomes what exactly is trebled? More particularly, are all compensatory damages as defined in subsection 7(a) to be trebled, or are only the traditional out-of-pocket losses sustained by the plaintiff, independent of its counsel fees to be trebled?

We are cognizant that the ordinary structure of remedial statutes that authorize both the trebling of damages and the recovery of counsel fees do not typically include counsel fees in the amount trebled. See, e.g., N.J.S.A. 56:8-19 (providing that under the Consumer Fraud Act a successful claimant is entitled to "threefold" damages and "also" reasonable attorneys' fees and costs of suit); N.J.S.A. 56:9-12 (stating that under the Antitrust Act, a successful claimant shall recover treble damages, "together with" reasonable attorneys fees and costs of suit); see also Rendine v. Pantzer, 141 N.J. 299, 343 (1995) (allowing up to a 100% counsel fee enhancement above the lodestar in Law Against Discrimination cases).

The legislative history of the IPFA is somewhat instructive but not conclusive on this question. One of the earlier bills that led to the adoption of the IFPA, Assembly Bill No. 1719, did not contain a treble damages provision, but instead would allow an insurer to recover punitive damages "in addition to compensatory damages." See Assembly Banking and Ins. Comm., Statement to Assemb. Bill No. 1719, at 2 (March 14, 1983) (emphasis added). Compensatory damages were defined in A-1719 as "including reasonable investigation expenses, the costs of the action and attorney's fees." Ibid. Thereafter, A-1719 was apparently revised to replace the punitive damages provision with a treble damages provision, a sanction applicable only where the defendant had engaged in a "pattern" of violations. See S. Labor, Industry and Professions Comm., Statement to Assemb. Bill No. 1719, at 2 (June 16, 1983). The Senate Committee noted that compensatory damages "may include" reasonable investigation expenses, costs of suit and attorneys' fees. Ibid. The version of the bill that was originally enacted in 1983 retained the "may include" language. N.J.S.A. 17:33A-7(a) (amended 1997). The statute, as enacted, also retained the treble damages language. See N.J.S.A. 17:33A-7(b). The text of the statute currently provides that compensatory damages "shall include" reasonable investigation expenses, costs of suit and attorneys fees. N.J.S.A. 17:33A-7(a) (as amended). None of the legislative materials that we have located explicitly address whether the treble damages under subsection

(b) were intended to include counsel fees.

We also note that the dissenting Justices in this very case described treble damages as a remedy that would be "on top of" requiring the defendant to pay the insurer's investigation expenses, costs of suit and counsel fees. 186 N.J. at 187.

Although the question is not free from doubt, we conclude that the statute by its literal terms most likely signifies that the Legislature intended counsel fees to be part of the damages that may be trebled under N.J.S.A. 17:33A-7(b). We reach that conclusion mindful of the remedial purposes of the Act, Merin, supra, and the words chosen by the Legislature in defining compensatory damages. DiProspero v. Penn, 183 N.J. 477, 492-96 (2005). We also discern no constitutional impediment to such a reading of the statute, although we might conclude differently if, say, the statute called for counsel fees to be multiplied by a higher figure. The trebling of counsel fees may serve an important deterrent effect, especially in cases where the fraud may be blatant but the insurer's out-of-pocket non-legal expenses are small.

Affirmed.


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