New Jersey Insurance Fraud Defendants Have Right to Jury Trial

Insurance companies sued 63 defendants including physicians and chiropractors; medical, imaging, and pain-management practices; medical equipment and billing companies; employees, owners, and shareholders of those practices and companies; and an attorney and unlicensed individuals. The complaint alleged that the 63 defendants violated New Jersey’s Insurance Fraud Prevention Act (IFPA) when they engaged in a scheme to defraud the insurance companies of $8.14 million in personal injury protection benefits under the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A–1 to –35. According to the complaint, the defendants provided unnecessary care and prescribed unnecessary medical equipment, engaged in fraudulent testing of patients, misrepresented test results and patients’ symptoms, and unlawfully split fees and concealed prohibited self-referrals—all for the purpose of wrongly securing or enhancing recoveries for claimants or price gouging. The complaint also contended that some defendants paid fees to individuals who staged accidents, created fraudulent medical records and bills, and recruited persons involved in accidents who suffered either minor or no injuries.


The IFPA authorizes two separate causes of action to enforce the statutory scheme—one a State action brought by the Commissioner of Banking and Insurance, and the other a private civil action brought by insurers damaged as the result of a violation of any provision of the IFPA. The IFPA authorizes an insurance company to pursue compensatory and treble damages against a violator. The insurance companies sought various forms of relief: payment of compensatory damages, treble damages, and attorneys’ fees under the IFPA; a determination of its legal rights that allegedly fraudulent benefits did not have to be paid; disgorgement of benefits paid; and constructive trusts and equitable liens on the defendants’ assets.


The Superior Court, Law Division, Union County, granted the insurance companies’ motion to withdraw their jury-trial demand and denied the defendants’ request for a trial by jury. The trial court determined that, in an action arising under the IFPA, neither the statutory scheme nor the New Jersey Constitution granted a civil defendant the right to a jury trial. The Superior Court, Appellate Division, affirmed.


The Supreme Court of New Jersey reversed and remanded. The court held that a civil defendant sued by an insurance company for violating the IFPA has a state constitutional right to trial by jury.


A New Jersey civil defendant sued by an insurance company for violating the IFPA has a state constitutional right to trial by jury. Specifically, the state constitutional right to a civil jury trial provided by Article I, Paragraph 9 of the New Jersey Constitution applied to private-action claims seeking compensatory and punitive damages under the IFPA. Under New Jersey’s constitutional jurisprudence, the right to a jury trial applies to causes of action—even statutory causes of action—that sound in law rather than equity. In determining whether the jury-trial right applies to a statutory cause of action, courts assess whether the grant of a jury trial is consistent with New Jersey’s common-law tradition. The court noted that the relief available—compensatory damages, treble damages, and attorneys’ fees—was legal in nature, rather than equitable in nature. The court also noted that the IFPA cause of action resembled a cause of action for common-law fraud, as the only element of a claim for common-law fraud absent from an IFPA claim was reliance by the plaintiff on the false statement. The court remanded the case to the trial court to allow the defendants to exercise their right to a jury trial.


The Supreme Court of New Jersey reversed the trial court’s denial of the defendants’ request for a trial by jury.


See: Allstate New Jersey Ins. Co. v. Lajara, 2015 WL 4276162 (N.J., Jul. 16, 2015) (not designated for publication).