Under the Insurance Fraud Prevention Act (“IFPA”), an insurance company may sue to recover compensatory damages against those who commit insurance fraud. In Allstate Insurance Co. v. Lajara, 2015 N.J. LEXIS 797 (2015), Allstate sue 63 defendants alleging violations of the IFPA. It claimed that the defendants (doctors, billing companies, employees and shareholders of these companies) engaged in a broad scheme to defraud Allstate of $8.14 million in personal injury benefits. The issue in the Lajara case was whether the defendants were entitled to a jury trial.
The trial court and the Appellate Division found that there was no right to a jury trial. The defendants appealed to the New Jersey Supreme Court. The Supreme Court examined whether this right was implicit in the statutory scheme or, alternatively, was mandated under the New Jersey Constitution.
Allstate argued that the IFPA did not specifically provide the right to a jury trial within the statute and, thus, the legislature did not intend to give this right to any defendants sued under this statute. Further, it claimed that the remedies under this law are equitable in nature, which are not constitutionally entitled to a jury trial.
The Supreme Court pointed out that the right to a jury trial is deeply rooted in the English common law and traces its origins as far back as the Magna Carta. This common law tradition was carried over to the American colonies and became a fundamental right. The New Jersey Constitution does contain the right to a jury trial. However, it was never intended to guarantee a right to a jury trial in all civil cases. Rather, the right applies to only claims that are based in law, rather than in equity. Those claims that seek relief in the form of monetary damages, as opposed to equitable relief (such as an injunction) would be “legal” versus “equitable” claims.
The remedies available to an insurance company for a violation of the IFPA are compensatory damages, treble damages, attorneys fees and costs. Hence, the relief available to an insurance company under this Act is legal in nature.
The Supreme Court also likened a claim under the IFPA to a common law fraud claim, under which a defendant does have the right to a jury trial. Although its elements are not perfectly aligned, the Court stated that is not necessary to trigger this right.
Hence, it concluded that the Legislature did not intend that in an IFPA action would be inconsistent with the rights granted under our State Constitution. Because the Legislature provided for legal remedies in this statute, it can be inferred that it intended to authorize a jury trial. Thus, it reversed the Appellate Division and remanded the matter back to the trial court for a jury trial.
