Liberty Ins. Corp. v. Techdan, LLC
| Decision Date | 15 February 2023 |
| Docket Number | A-52-21 |
| Parties | Liberty Insurance Corp. and LM Insurance Group, Plaintiffs-Appellants, v. Techdan, LLC, Exterior Erecting Services, Inc., Daniel Fisher, Robert Dunlap, and Carol Junz, Defendants-Respondents. |
| Court | New Jersey Supreme Court |
Argued October 12, 2022
On certification to the Superior Court, Appellate Division.
Anthony J. Golowski, II, argued the cause for appellants (Goldberg Segalla, attorneys; Anthony J. Golowski, II, Anita Hotchkiss, and H. Lockwood Miller, III, on the briefs).
John B. Kearney argued the cause for respondent Carol Junz (Kearney and Associates, attorneys; Justin T. Loughry and Lawrence W. Lindsay, on the briefs).
John P. Morris argued the cause for respondents Techdan, LLC Exterior Erecting Services, Inc., Daniel Fisher, and Robert Dunlap (John P. Morris, on the briefs).
Michael A. Malia argued the cause for amicus curiae the Coalition Against Insurance Fraud (Peri & Stewart and McGill and Hall, attorneys; Michael A. Malia and Thomas Hall on the brief).
Eric S. Poe submitted a brief on behalf of amicus curiae the Citizens United Reciprocal Exchange (Eric S. Poe, of counsel and on the brief, and Abbey True Harris, on the brief).
PATTERSON, J., writing for the Court.
In this appeal, the Court considers whether claims brought under the Insurance Fraud Protection Act (IFPA) and the Workers' Compensation Act (WCA) by plaintiffs Liberty Insurance Corp. and LM Insurance Corp. (Liberty) against defendants Techdan, LLC (Techdan), Exterior Erecting Services, Inc. (Exterior), Daniel Fisher, Robert Dunlap, and Carol Junz are subject to the apportionment procedure of the Comparative Negligence Act (CNA). The Court also considers whether it was plain error for the trial court not to give an ultimate outcome charge instructing the jury that if it were to find that a defendant engaged in a pattern of insurance fraud, any award of compensatory damages would be trebled. Finally, the Court considers the appropriate scope of the new trial upon remand.
Liberty issued workers' compensation policies to Techdan from March 2004 to March 2007. It contends, among other allegations, that defendants misrepresented the relationship between Techdan and Exterior and the ownership structure of the two entities and provided fraudulent payroll records to reduce the premiums for workers' compensation insurance. Techdan was indicted for second-degree theft by deception, and Dunlap entered a guilty plea to that charge on Techdan's behalf.
Liberty filed this action, asserting claims against all defendants for fraud under the IFPA, workers' compensation premium fraud under N.J.S.A. 34:15-57.4, and common-law fraud. It also pled claims for breach of contract and civil conspiracy. Liberty demanded compensatory damages, including treble damages pursuant to the IFPA, attorneys' fees and costs, and punitive damages. It asked the court to impose joint and several liability on all defendants for any damages, costs, or fees awarded. Defendants denied liability and pled as an affirmative defense that Liberty's claims were "barred in whole or in part by the doctrine of contribution/ comparative fault."
The court granted partial summary judgment as to Liberty's IFPA claim for insurance fraud against Techdan, Exterior, Dunlap, and Fisher; partial summary judgment as to Liberty's workers' compensation fraud claim against all defendants; and partial summary judgment as to Liberty's breach of contract claim against Techdan and Exterior. The court denied summary judgment as to Liberty's remaining claims. The court granted defendants' motion seeking an ultimate outcome jury charge. That charge would have informed the jury that if it were to find a pattern of fraudulent conduct under N.J.S.A. 17:33A-7(b) against any defendant, any compensatory damages award under the IFPA against that defendant would be trebled.
The case was reassigned to a different judge and was tried before a jury over ten trial days. At trial, no party argued that the jury should allocate fault in accordance with N.J.S.A. 2A:15-5.2(a)(2). Notwithstanding the prior judge's ruling that the jury should be given an ultimate outcome charge, no party asked the trial court to include such a charge. The trial court did not instruct the jury to allocate fault in accordance with the CNA, and it did not issue an ultimate outcome charge.
The jury found Techdan liable for $454,660 in compensatory damages and found Exterior liable for $227,330 in compensatory damages, but awarded no compensatory damages against Dunlap, Fisher, or Junz. It awarded punitive damages in the amount of $200,000 against Dunlap, $10,000 against Fisher, and $45,000 against Junz, but awarded no punitive damages against Techdan or Exterior.
The trial court determined that all defendants should be jointly and severally liable for the total of $756,990 awarded as compensatory damages. The court entered judgment against Fisher, who was not liable for treble damages under the IFPA, in the amount of $756,990. Based on the jury's finding that Techdan, Exterior, Dunlap, and Junz had engaged in a pattern of insurance fraud under the IFPA, the trial court trebled that amount, found those defendants jointly and severally liable for the damages award, and entered judgment against each of those defendants in the amount of $2,270,970. The trial court entered judgment for trebled attorneys' fees in the amount of $2,768,018.01 and trebled costs in the amount of $290,048.61 against Techdan, Exterior, Dunlap, and Junz. The court vacated the jury's award of punitive damages against Dunlap, Fisher, and Junz.
The Appellate Division held that the trial court erred when it imposed joint and several liability on defendants rather than directing the jury to allocate percentages of fault to defendants in accordance with N.J.S.A. 2A:15-5.2(a)(2). The Appellate Division also held that the trial court should have given the jury an ultimate outcome charge that damages awarded for violation of the IFPA would be trebled as to any defendant found to have engaged in a pattern of fraudulent conduct. The Appellate Division concluded that the trial court's cumulative errors warranted a new trial, and it remanded the matter for a new trial as to all issues. The Court denied defendants' petitions for certification, 251 N.J. 32 (2022); 251 N.J. 33 (2022), and granted Liberty's cross-petition, 251 N.J. 41 (2022).
HELD: Pursuant to N.J.S.A. 2A:15-5.2(a) and -5.2(d), the trial court should have charged the jury to allocate percentages of fault and should have molded the judgment based on the jury's findings. The trial court's failure to apply the CNA warrants a new trial on remand so that a new jury may apportion percentages of fault under N.J.S.A. 2A:15-5.2(a)(2). The Court does not disturb the first jury's findings on the issues of liability under the IFPA, the WCA, or Liberty's common-law claims, or its determination of total compensatory damages. The Court finds no plain error in the trial court's failure to give the jury an ultimate outcome charge in this complex matter.
1. The CNA, N.J.S.A. 2A:15-5.1 to -5.8, codifies the principle of comparative negligence, which represents a more just and socially desirable distribution of loss than that ever achieved by the rule of contributory negligence. When the CNA and the Joint Tortfeasors Contribution Law are applied together, the percentage of a total judgment assessed against a joint tortfeasor is determined not by pro rata allocation of damages, but by the factfinder's determination of the fault of each tortfeasor and, in cases involving contributory negligence, the fault of the plaintiff. A party whose fault is assessed to be less than 60% cannot be held jointly and severally liable for the entire award of damages. Nothing in the CNA suggests that a party must request an allocation for the court to conduct such an allocation; to the contrary, the statute's plain language expresses the Legislature's intent that in actions covered by the statute, the factfinder's allocation of fault and the court's molding of the verdict are mandatory. N.J.S.A. 2A:15-5.2(a), (b), (d). Contrary to the trial court's ruling in this case, defendants do not need to plead crossclaims against one another for the court to allocate fault. (pp. 17-19)
2. The Court discusses the scope of cases to which the CNA applies. It first applied to "negligence actions," a term undefined in the original statute. N.J.S.A. 2A:15-5.2 (1973). Case law and legislative amendments have recognized that the CNA governs a broad range of civil causes of action, including statutory and common-law claims premised on intentional conduct as well as those based on negligence. See N.J.S.A. 2A:15-5.2(c), -5.3; Blazovic v. Andrich, 124 N.J. 90, 107-08 (1991); Gennari v. Weichert Co. Realtors, 148 N.J. 582, 608-09 (1997). (pp. 20-23)
3. The Court reviews the history and relevant provisions of the IFPA, including that treble damages are recovered under N.J.S.A. 17:33A-7(b) if "the defendant has engaged in a pattern of violating" the statute. The Court also reviews the relevant provisions of the WCA, N.J.S.A. 34:15-57.4(a)(2) and (b). (pp. 23-27)
4. In determining whether Liberty's IFPA and WCA workers' compensation fraud claims are subject to the CNA's apportionment procedure, the Court focuses on the "substance of the action and not the conclusory terms used by the parties," as the Legislature prescribed. N.J.S.A. 2A:15-5.2(c)(1). After reviewing both claims in detail, the Court concludes that they are among the types of cases to which the CNA applies and that there is no reason to exclude Liberty's IFPA or WCA claims from the allocation-of-fault scheme prescribed by the Legislature in the CNA. Further, Liberty's assertion of a...
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