892 A.2d 1240 (N.J. 2006), Liberty Mut. Ins. Co. v. Land

Citation:892 A.2d 1240, 186 N.J. 163
Opinion Judge:Justice ZAZZALI delivered the opinion of the court.
Party Name:LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. Rose LAND and Frank Land, Defendants, and Steven Budge, Defendant-Respondent.
Attorney:Mauro C. Casci, Leonardo, argued the cause for appellant (Mr. Casci, attorney: Russell Macnow, Colts Neck, on the brief)., Steven A. Budge, argued the cause for respondent, pro se., John C. Grady, Deputy Attorney General, argued the cause for amicus curiae Attorney General of New Jersey (Peter C....
Case Date:March 14, 2006
Court:Supreme Court of New Jersey

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892 A.2d 1240 (N.J. 2006)

186 N.J. 163



Rose LAND and Frank Land, Defendants,


Steven Budge, Defendant-Respondent.

Supreme Court of New Jersey

March 14, 2006.

Argued Oct. 24, 2005.

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Mauro C. Casci, Leonardo, argued the cause for appellant (Mr. Casci, attorney; Russell Macnow, Colts Neck, on the brief).

Steven A. Budge, argued the cause for respondent, pro se.

John C. Grady, Deputy Attorney General, argued the cause for amicus curiae Attorney General of New Jersey (Peter C. Harvey, Attorney General, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel; Mr. Grady and Jeffrey R. Caccese, Deputy Attorney General, on the brief).

Robert B. Hille, Secaucus, argued the cause for amicus curiae New Jersey State Bar Association (Stuart A. Hoberman, President, Woodbridge and Mr. Hille, attorneys; Mr. Hoberman, of counsel; Mr. Hille, Mr. Hoberman, James A. McFaul and Megan M. Roberts, Secaucus, on the brief).


ZAZZALI, Justice.

[186 N.J. 165] In this appeal, we must determine the appropriate standard of proof under the Insurance Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-1 to -30. In December 2000, a tree fell onto the cabin of defendants Rose and Frank Land. Following the accident, the Lands and co-defendant Steven Budge, who is the Lands' nephew and a licensed public adjuster, submitted a claim of loss to plaintiff Liberty Mutual Insurance Company (Liberty Mutual). Based on evidence suggesting fraudulent activity on the part of defendants, including a videotape depicting Budge and two other men repeatedly slamming a 600-pound portion of the fallen tree against the cabin's roof, Liberty Mutual filed suit against defendants asserting IFPA violations. At the conclusion of trial, a jury ruled [186 N.J. 166] in favor of Liberty Mutual, concluding that it had proven its claims by clear and convincing evidence. Defendants appealed, and Liberty Mutual cross-appealed, asserting that the trial court should have applied a preponderance of the evidence standard. The Appellate Division reversed and remanded for a new trial, finding that Liberty Mutual's counsel committed prejudicial errors. The panel, however, agreed with the trial court that IFPA violations must be proven by clear and convincing evidence.

We granted Liberty Mutual's petition for certification, limiting our review solely to the proper standard of proof. For the reasons set forth below, we hold that the standard of proof under the Insurance Fraud Prevention Act is a preponderance of the evidence.

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Rose Land owns a small cabin at 32 Cohocton Road in Highland Lakes that she and her husband Frank use as a vacation home. At the time that the dispute arose, Liberty Mutual insured the cabin for property damage. On the morning of December 12, 2000, a tree located on the property of Joseph Rizzo, the Lands' next-door neighbor at 30 Cohocton Road, fell onto the roof of the Lands' cabin. After Rizzo personally informed Frank Land of the accident, Land telephoned his nephew, Steven Budge, a licensed public adjuster in the State of New Jersey, to assess the damage and secure the structure. In addition to informing Land, Rizzo also called his insurance company, which sent an agent to inspect the damage later that day. During the inspection, Rizzo and the insurance representative observed that the tree "significant[ly] damage[d]" a portion of the Lands' roof.

Shortly thereafter, Rizzo's wife informed him that she saw Budge and two other men on the top of the cabin "doing some additional damage." "To protect [him]self" against increased damage claims, Rizzo then videotaped Budge and his associates working on the cabin's roof. The videotape depicts the three men taking a portion of the fallen tree, estimated to be about 600 [186 N.J. 167] pounds, and slamming it at least ten times against the roof, creating further damage to the roof and shattering a skylight. The videotape also shows Frank Land on the ground gesturing to Budge and his associates and climbing a ladder to provide a jacket to one of the workers. At trial, Budge explained his conduct on the videotape as "perform[ing] emergency service on the home."

Budge subsequently assisted the Lands in preparing and filing an insurance claim on their behalf with Liberty Mutual for $69,338. In connection with that claim, the Lands and Budge agreed that, if there was a recovery, Budge would receive fifteen percent of the insurance settlement proceeds. At Liberty Mutual's request, the Lands submitted four separate proofs of loss. Each proof of loss was submitted on Budge's letterhead, bore his signature, and included a provision in which the insured swore that there was no attempt to deceive Liberty Mutual. Rose Land and her husband also appeared for an examination under oath as part of the claims process.

Anne Hamtil, Liberty Mutual's insurance adjuster, and Joseph Balinski, a builder employed by the company, inspected the cabin ten days after the incident. Based on that inspection, Balinski prepared a damage estimate for the December 2000 loss, concluding that it would cost only $9,291.23 to make the necessary repairs. At trial, Balinski testified that he had previously prepared a damage estimate in connection with a 1999 insurance claim filed by Rose Land that also involved a tree falling on the cabin. In comparing the two estimates, Balinski found that some of the damage documented in the 1999 claim had not been repaired and was included in the estimate submitted in support of the December 2000 claim. Balinski also stated that, in his opinion, many of the repairs in the 2000 estimate were unnecessary.

Because of the suspect nature of the Lands' claim, Liberty Mutual denied coverage and filed suit against the Lands and Budge, alleging IFPA violations. The Lands counterclaimed against Liberty Mutual seeking to enforce their homeowners' insurance policy claim and asserting that Liberty Mutual acted in [186 N.J. 168] bad faith in denying that claim. Budge also counterclaimed, alleging bad faith on the part of Liberty Mutual. After a six-day trial, the jury returned a verdict in favor of Liberty Mutual, finding that it had proven by clear

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and convincing evidence that all three defendants "knowingly misrepresented, concealed, or failed to disclose any material fact concerning the property loss." The jury further concluded that Budge "intentionally cause[d] or contribute[d] to the loss." The trial court awarded Liberty Mutual treble damages, counsel fees, and investigative costs totaling $82,412.64 and denied Budge's motion for reconsideration.

Defendants appealed, asserting that the trial court committed prejudicial errors during trial. Liberty Mutual cross-appealed, claiming that the trial court erred in charging the jury that an IFPA violation must be proven by clear and convincing evidence. In an unpublished opinion, the Appellate Division reversed and remanded for a new trial for various reasons, including prejudicial statements made by Liberty Mutual's counsel during summation. The panel also concluded, without analysis, that it was "satisfied that the proper burden of proof [under IFPA] is clear and convincing evidence." We granted certification, limited solely to determining the appropriate standard of proof. 183 N.J. 587, 874 A.2d 1106 (2005). We also allowed the Attorney General and the New Jersey State Bar Association to participate as amici curiae.


We commence our analysis with a review of the standards of proof at issue in this appeal. We then look to IFPA's plain language, statutory purpose, and penalties to determine whether the Legislature addressed the question. Finally, we examine prior case law addressing the issue.


The New Jersey Rules of Evidence set forth three standards of proof: a preponderance of the evidence, clear and convincing evidence, and proof beyond a reasonable doubt. [186 N.J. 169] N.J.R.E. 101(b)(1). As a general rule, the preponderance of the evidence standard applies in civil actions. State v. Seven Thousand Dollars, 136 N.J. 223, 238, 642 A.2d 967 (1994) ("In civil cases, the standard of proof is a preponderance of evidence."); see also 2 McCormick on Evidence § 339 (Strong ed., 5th ed. 1999) (stating that, except "in certain exceptional controversies," preponderance of evidence standard typically applies in civil cases); 9 Wigmore on Evidence § 2498 (3d ed. 1940) (same). A preponderance of the evidence is also "the usual burden of proof for establishing claims before state agencies in contested administrative adjudications." In re Polk License Revocation, 90 N.J. 550, 560, 449 A.2d 7 (1982).

Under the preponderance standard, "a litigant must establish that a desired inference is more probable than not. If the evidence is in equipoise, the burden has not been met." Biunno, Current N.J. Rules of Evidence, comment 5a on N.J.R.E. 101(b)(1) (2005); see also McCormick on Evidence, supra,§ 339 ("The most acceptable meaning to be given to the expression, proof by a preponderance, seems to be proof which leads the jury to find that the existence of the contested fact is more probable than its nonexistence."). Application of the preponderance standard reflects a societal judgment that both parties should "share the risk of error in roughly equal fashion." Addington v. Texas, 441 U.S. 418, 423, 99 S.Ct. 1804, 1808, 60 L.Ed.2d 323, 329 (1979). The decision to apply any other standard of proof "expresses a preference for one side's interests." Herman & MacLean v. Huddleston, 459 U.S. 375, 390, 103 S.Ct. 683, 691, 74 L.Ed.2d 548, 561 (1983).

The second standard, clear and convincing evidence, is a higher standard

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of proof than proof by a...

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