BROKER AND POLICYHOLDER FACE POTENTIAL LIABILITY UNDER NEW JERSEY’S INSURANCE FRAUD PREVENTION ACT (New Jersey Federal)

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The insurer sued to void two life insurance policies on the basis they were obtained through fraudulent statements and omissions. It also sought relief under New Jersey’s Insurance Fraud Prevention Act (IFPA).

A Trust was both the policyholder and beneficiary. In its initial complaint, the carrier alleged the insured decedent made false statements and material omissions concerning serious medical conditions concealed from the insurer, including Hodgkin’s Lymphoma.

The carrier wanted to amend its complaint by adding claims against the Trustee and its insurance broker for their alleged knowing involvement in this fraudulent conduct. The Trustee and broker opposed the motion to amend. The court granted the motion.

The court rejected the argument that the IFPA only applied to misconduct during the course of an insurance claim. The court recognized the IFPA also applies to conduct in the application process.

In granting the motion, the court relied upon allegations that the broker “was untruthful when he filled out the agent’s statement….” The court found this could violate N.J. Stat. Ann. § 17:33A-4(a)(3), which addresses concealing or knowingly failing “to disclose the occurrence of an event which affects any person’s initial or continued right or entitlement to (a) any insurance benefit or payment or (b) the amount of any benefit or payment to which the person is entitled.”

The court also looked to the allegation that both the broker and Trustee “knew of and conspired to conceal” the decedent’s medical visit to a longevity center and the results of that visit which referenced prior medical history. The court added that if the broker and Trustee “knew the Decedent was untruthful on the applications and failed to disclose that…, or actively participated in the Decedent’s alleged misconduct, it could demonstrate a violation of N.J. Stat. Ann. § 17:33A-4(a)(4) or (b).”

Section 17:33A-4(a)(4) addresses a person who “[p]repares or makes any written or oral statement, intended to be presented to any insurance company or producer for the purpose of obtaining: … (b) an insurance policy, knowing that the statement contains any false or misleading information concerning any fact or thing material to an insurance application or contract….”

Section 17:33A(4)(b) encompasses a person who “knowingly assists, conspires with, or urges any person or practitioner to violate any of the provisions of this act.”

Date of Decision: February 18, 2020

Symetra Life Ins. Co. v. Jjk 2016 Ins. Trust, U. S. District Court District of New Jersey Civil Action No. 18-12350 (MAS) (ZNQ), 2020 U.S. Dist. LEXIS 29291 (D.N.J. Feb. 18, 2020) (Quraishi, J.)

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