TRIAL COURT ERRED GRANTING JUDGMENT ON FRAUD CLAIM TO VOID THE POLICY AT THE END OF PLAINTIFF’S CASE (New Jersey Appellate Division)
This case focuses on procedural issues and burdens of proof at trial, concerning whether the insured’s alleged fraud during an investigation was grounds to void a policy. At trial, the insured put on her case, and the carrier moved for involuntary dismissal (directed verdict) at the end of plaintiff’s case. The trial court granted judgment to the insurer, and the Appellate Division reversed.
The insured’s claim revolved around a fire loss. In the years before that loss, the insured had a relatively small roof claim, and a large water damage claim. During her testimony at trial, the insured described a meeting with the carrier’s investigator during the fire loss claim. The investigator was not merely a claim adjuster, but was actually a fraud unit investigator – unknown to the insured.
The insured admitted she denied there was any prior damage claim on the water loss, knowing this was not true. She felt it was not the investigator’s business and had nothing to do with the fire loss. The investigator had the insured’s application, which did not include either prior loss. This was part of the investigation, again unknown to the insured. The application itself, however, was never introduced into evidence at trial.
This interview during the claim process was not taken under oath. At her subsequent examination under oath, the insured did admit the two prior loss claims.
Both courts’ focus was on the misleading statement to the investigator about the water damage claim, rather than on the application’s not including the two losses. The two key elements were misrepresentation and materiality. The trial court found a material misrepresentation and voided the policy after plaintiff put on her case.
The Appellate Division disagreed, looking closely at the procedural setting and burdens of proof, in finding that the materiality element was not proved. The court especially noted the different burdens placed on defendant when dismissal is sought at the end of plaintiff’s case, rather than at the end of all parties’ cases.
Plaintiff’s case-in-chief did not include the original application, and the Appellate Division found there was insufficient evidence within plaintiff’s case itself to demonstrate how the water loss was relevant to the fire loss claim, or important in determining the insurer’s course of action. Moreover, the misrepresentation claim was an affirmative defense, with the insurer bearing the burden of proof. As the court stated:
“Accordingly, regardless of whether the information in an application not introduced at trial came from plaintiff or someone else, there was no factual basis for the [trial] judge to find that [the insured] ‘clearly tried to mislead [the investigator] as to something that seemed to justify what looked like misstatements in the application.’ Without the original insurance application or testimony from anyone at [the insurer] as to the nature of the investigation, the trial court clearly erred when it involuntary dismissed [the] suit based on her willful misrepresentation of material facts following her fire loss.”
Finally, the court observed that even though its ruling was based on a fundamental failure to prove materiality in the procedural circumstances at trial below, the insured would not be precluded from arguing at re-trial “a fact-finder could also consider whether [she] corrected her misstatements promptly in her examination under oath in considering their materiality.” July 30, 2019
Pokhan v. State Farm Fire & Cas. Co., New Jersey Superior Court Appellate Division DOCKET NO. A-3336-17T3, 2019 N.J. Super. Unpub. LEXIS 1699, 2019 WL 3425917 (App. Div. July 30, 2019) (Accurso, Fuentes, JJ.)