Archive for the 'NJ – Sworn Statement/EUO' Category


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The insurer sought damages and rescission under Pennsylvania common law and New Jersey’s Insurance Fraud Prevention Act. There was a fire at the insured’s New Jersey shore home, and allegedly subsequent theft of personal property from the home. The insured made a claim for lost personal property and submitted photographs of the lost items.

After investigation, the insurer concluded that the photographs were taken after the fire loss at issue, at a different home owned by the insured in Philadelphia. Thus, contrary to the insured’s sworn statement, these items were not lost or stolen from her shore home.

The policy provided there was no coverage “if, whether before or after a loss, an ‘insured’ has: 1. intentionally concealed or misrepresented any material fact or circumstance; 2. engaged in fraudulent conduct; or 3. made false statements relating to this insurance.”

The insurer denied the claims for the personal property in the photos on the basis that the insured “intentionally concealed and/or misrepresented material facts concerning [her] claim for personal property, and made false statements regarding the items that were allegedly lost due to the fire or theft.”

The insured brought breach of contract and bad faith claims, which were dismissed for lack of prosecution. The insurer’s fraud claims were raised as counterclaims. The insured did not file any opposition, and by the time the insurer moved for summary judgment, the insured was pro se.

On the Pennsylvania common law fraud claims, the court observed: “It follows, as the night follows the day, that [the insured] has suffered no personal property loss for the items photographed since she still had possession of those undamaged items after the fire and alleged theft.”

The court not only granted relief on the personal property damage claims for the allegedly lost items, but as to the entire loss, including the sum paid for the value of the home. The court stated:

“The record is clear that [the insurer] made payments … in reliance on what it believed at the time to be her truthful representations about her losses as a result of the fire and alleged theft. [The insurer paid] $351,767.17 in dwelling coverage and $10,000 in personal property coverage. As it turned out, there is no genuine dispute about the fact that [the insured] made materially false representations … in an effort to mislead it into paying her for personal property which she did not lose. … Under the terms of the insurance policy, no coverage is provided if the insured either before or after the loss intentionally concealed or misrepresented any material fact, engaged in fraudulent conduct, or made a false statement relating to their insurance. Clearly, [the insured] breached these provisions of the policy.”

Accordingly, we will enter summary judgment … against [the insured] on the counterclaim of common law fraud for $361,767.16, the amount …paid to her.”

The court also granted equitable rescission under Pennsylvania common law fraud principles, and granted relief under New Jersey’s Insurance Fraud Prevention Act. The court noted that the New Jersey statute includes recovery of reasonable investigation expenses, costs of suit and attorney’s fees. However, the court did not appear to award damages for investigation, costs or legal fees.

The Act itself provides for relief against an insured who “(1) Presents or causes to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy . . . knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim; or . . . (3) Conceals or knowingly fails 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[.] N.J.S.A. § 17:33A-4(a).(1, 3).”

The same facts supporting the common law fraud finding supported this statutory relief.

Finally, the court also awarded over $45,000 in prejudgment interest on the Pennsylvania claims.

Date of Decision: August 21, 2018

Pallante v. Certain Underwriters at Lloyd’s, London, U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 17-1142, 2018 U.S. Dist. LEXIS 141427 (E.D. Pa. Aug. 21, 2018) (Bartle, J.)


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This is a bad faith case arising out of Superstorm Sandy damage to the insured’s home. Coverage for the full loss was denied, and breach of contract and bad faith claims followed. This opinion involves the insurer’s summary judgment motion on the bad faith claim. Judgment was entered on the bad faith claim for the insurer.

Bad Faith Standards

New Jersey recognizes bad faith claims for “both bad faith in denial of benefits and bad faith in delay of processing of claims.” A bad faith claim might exist where payment was intentionally and unreasonably delayed on an undisputed claim. The test is whether a claim is “fairly debatable”. If the insured cannot establish “as a matter of law a right to summary judgment on the substantive claim [e.g., the breach of the insurance contract]” there is no actionable bad faith claim. The plaintiff has to show the “absence of a reasonable basis for denying benefits of the policy and the defendant’s knowledge or reckless disregard of the lack of a reasonable basis for denying the claim.”

In the first party context, under New Jersey law: “Although a fairly debatable claim is a necessary condition to avoid liability for bad faith, it is not always a sufficient condition. Rather, we are satisfied that the appropriate inquiry is whether there is sufficient evidence from which reasonable minds could conclude that in the investigation, evaluation, and processing of the claim, the insurer acted unreasonably and either knew or was conscious of the fact that its conduct was unreasonable.” In this case, the “principal issue presented is whether Plaintiff has adduced factual evidence from which a reasonable jury could find that [the insurer] lacked a fairly debatable reason for denying the disputed portion of the claim. Because in this summary judgment motion [the insurer] has set forth the factual basis for its determinations of coverage and loss, and because Plaintiff has not come forward with evidence that Plaintiff’s entitlement to recover for these losses was so clear that it was not fairly debatable, Plaintiff will be unable to prove its bad faith claim in Count 2 and summary judgment will be granted….”

No bad faith conduct on the record in claims handling

Specifically, the court observed that the insured did not seek summary judgment on the breach of contract claim, and the court itself was not going to find it undisputed that the contract was breached. This alone would appear to be fatal to the insured’s opposition under the reasonably debatable standard. Further, the court observed that the insurer considered the opinions and advice of expert consultants in the claims handling process. The court also listed a variety of “plausible” steps the insurer took to adjust the claim.

No bad faith delay

The court further rejected the insured’s delay argument. It found the insurer promptly investigated the damages, retained experts and a licensed contractor to evaluate the claims, and shared its findings with the insured throughout the process. The insured failed to submit responsible estimates during the process with supporting documentation, and was unresponsive for many months at a time, included a delay in submitting a sworn statement in proof of loss.

Rhetorical assertions without support unsuccessful

The court addressed “Plaintiff’s rhetorical assertions that bad faith is demonstrable from assigning incompetent and inattentive claims adjusters who were ‘repeatedly told … to sit back and wait for the statute of limitations to run out in the hopes that the Plaintiff would miss the filing deadline’….” There was no support for this assertion and, to the contrary, the insured’s large loss director instructed the claim adjuster “to remind Plaintiff’s representatives in writing that the policy contained a two-year suit limitation condition” and the adjuster did so by writing a letter calling “attention to the suit limitation in advance of the approaching deadline.”

Alleged incompetent adjusting did not affect this claim

Early in the claims handling process an adjuster was criticized by his superior for not documenting the file. That adjuster was replaced. However, that this adjuster “temporarily failed to address the potential claim does not give rise to a material factual dispute, as it is undisputed that proper investigation was undertaken, results were shared and explained to Plaintiff and Plaintiff’s agent, and the claim file was put squarely on track as directed by the management. That there remains an area of disputed claims, as alleged in Count One, does not imply that those disputes were caused by [the insurer’s] deliberate indifference to a proper investigation and claims adjustment process.”

Attorney’s fees not recoverable

The court previously ruled that attorney’s fees could only be recoverable as consequential damages on a bad faith claim, and not for a direct suit to enforce casualty or other direct coverage. Since the bad faith claim was dismissed, no attorney’s fees were recoverable.

Date of Decision: March 29, 2018

Breitman v. National Surety Corp., Civil Action No. 14-7843 (JBS/AMD), 2018 U.S. Dist. LEXIS 52496 (D.N.J. Mar. 29, 2018) (Simandle, J.)