FAILURE TO DISCLOSE AUTOMATIC COVERAGE/PREMIUM INCREASES STATES CLAIM FOR NEW JERSEY CFA VIOLATION (New Jersey Federal)

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The insured had an ongoing relationship with its carrier, obtaining multiple commercial general liability policies over the years. The insured alleges that the carrier used an undisclosed “inflation guard” program to raise its coverage and premiums over the years, contrary to the insurer’s own requirement that the premium guard program be disclosed to the insured.

Alleging that it was kept in the dark, and would not have agreed to the coverage and premium increased, the insured brought Consumer Fraud Act (CFA) and common law fraud claims against the carrier. The insured describe the carrier’s conduct as “an unconscionable practice of applying undisclosed or hidden automatic premium escalations to insurance contracts that do not appear to call for or disclose such escalations.” The court denied the carrier’s motion to dismiss the fraud and CFA claims.

As to the CFA claims, the court found the insured’s “allegations necessarily implicate an extracontractual fraud. Without disclosure of these charges, Plaintiff was deprived of the opportunity to negotiate them away or seek an alternative carrier. While it is true the product Plaintiff received increased his coverage limits to protect against inflation, non-disclosure of such procedures – and as Plaintiff alleges, intentional concealment of them – may be viewed as unlawful and fraudulent behavior. This type of allegedly unfair and undisclosed business practice is within the spirit and scope of the NJCFA.”

Date of Decision: June 24, 2020

Trocki v. Penn National Mutual Casualty Insurance Co., U.S. District Court District of New Jersey 1:19-cv-13638-NLH-KMW, 2020 U.S. Dist. LEXIS 111150 (D.N.J. June 24, 2020) (Hillman, J.)

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