IFPA Claims by Private Insurers are Subject to Trial by Jury

Allstate New Jersey Ins. Co. v. Lajara, 222 N.J. 129 (2015).  The Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to-30 (“IFPA”), permits insurance companies to sue those who engage in insurance fraud, and to recover compensatory and treble damages, as well as attorneys’ fees and other forms of relief.  Plaintiff Allstate and its affiliated companies sued 63 defendants under the IFPA.  Plaintiffs’ complaint demanded a jury trial, but plaintiffs later were allowed to withdraw that demand over the objection of defendants, who sought a jury trial.  The Law Division denied defendants’ request, and the Appellate Division, on leave to appeal, affirmed in an opinion reported at 433 N.J. Super. 20 (App. Div. 2013) and discussed here.  The Supreme Court granted defendants’ motion for leave to appeal, and today the Court reversed the decisions below by a 6-0 vote.  Justice Albin wrote the Court’s opinion.

The lower courts had found that neither the IFPA nor the New Jersey Constitution’s right to a jury trial enabled defendants to have a jury trial here.  Justice Albin disagreed on both counts.

The IFPA is silent about jury trial rights.  But Justice Albin rightly observed that this silence does not end the inquiry.  Rather, in keeping with prior jurisprudence, the Court would look at the nature of the remedies that the IFPA affords to private insurance companies, and the extent to which an action under the IFPA resembles causes of action at common law, as to which the right to a jury trial is unquestioned.

“[T]he most persuasive factor” is the remedy available to insurance companies under the IFPA.  Tke key remedies– compensatory and treble damages, which Justice Albin characterized as punitive to the extent that they exceed single damages, and attorneys’ fees (defined by the IPFA as part of compensatory damages)– “are a typical form of legal relief.”  Legal claims, in contrast to equitable ones, generally carry the right to trial by jury.  [For more about this and related jury trial issues, see “The Right to a Civil Jury Trial in New Jersey,” 47 Rutgers L. Rev. 1461 (1995), an article that I co-authored but which was not cited by the Court in this case].

The other prong of the analysis also pointed to a right to a jury trial.  “A private-party action brought under the IPFA resembles a cause of action for common law fraud.”  Though common law fraud requires reliance, while IFPA claims do not, Justice Albin did not find that to be an impediment.  He analogized to the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. (“CFA”), under which reliance is also not required.  The Appellate Division had previously held in Zorba Contractors, Inc. v. Newark Housing Auth., 362 N.J. Super. 124 (App. Div. 2003), that the CFA contained an implied right to a jury trial.  Noting that the Court had previously stated that “[t]he closest statutory analogue to [the] IFPA] in New Jersey is the Consumer Fraud Act,” Justice Albin extended the Zorba principle to the IFPA.

The Court also rejected plaintiffs’ argument that the Legislature intended to avoid the “delays and inefficiencies” of jury trials.  “We presume that the Legislature is aware that New Jersey’s jury-trial right attaches to statutory actions that confer legal remedies and resemble actions in common law.  In other words, we will presume, as we must, that the Legislature intended to conform to the Constitution.”

Finally, Justice Albin rebuffed plaintiffs’ argument that the fact that the IFPA states that a plaintiff shall recover treble damages “if a court determines” (emphasis added) that there has been a violation means that there is no role for a jury.  “First, the statute does not consign to the ‘court’ the determination of facts for actual damages.  Second, the term ‘court’ is not inconsistent with the jury serving as fact-finder.”

The IFPA also allows the Commissioner of Banking and Insurance to join an insurer’s action in order to sue for civil penalties.  The Commissioner did so here.  As Justice Albin observed in a footnote, however, no one contended that there was a jury trial right as to the Commissioner’s claims.  Thus, the Court’s ruling today is properly limited to IFPA claims brought by insurers only.