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NJ Supreme Court Rules that the Right to a Jury Trial under the NJ Constitution Applies to Private Action Claims under the Insurance Fraud Prevention Act

On July 16, 2015, in Allstate New Jersey Insurance Co. v. Gregorio Lajara, the New Jersey Supreme Court held that the right to a civil jury trial provided by Article 1, Paragraph 9, of the New Jersey Constitution applies to private-action claims seeking compensatory and punitive damages under the New Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30 (the “IFPA”). In doing so, the Court reversed the decision of the Appellate Division, which affirmed the trial court’s determination that neither the IFPA nor the state Constitution grants such a right, and resolved the varied approaches taken by the state’s lower courts in determining whether IFPA claims should be tried before juries.

The Court’s analysis turned on the nature of the remedy sought in private action claims under the IFPA, as opposed to those sought in civil restitution claims brought by the State. The Court first noted that 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. The Court then found that a successful lawsuit initiated by an insurance company under the IFPA necessarily involves monetary damages, which is legal as opposed to equitable relief. And so while the IFPA does not expressly confer litigants with a right to a jury trial, the Court concluded that it would be absurd to posit that in enacting the IFPA the New Jersey legislature intended a result inconsistent with the State’s Constitution.

The Court’s holding draws a significant distinction between cases under the IFPA brought by private insurance companies and those brought by the State, narrowing the scope and breadth of the Appellate Division’s prior ruling in State v. Sailor, 335 N.J. Super. 315 (App. Div. 2001). In Sailor, which was cited as the “controlling precedent” by the Appellate Division in Lajara, the court found that when the State asserts a civil restitution claim under the IFPA, the defendant is not entitled to a jury trial because the remedy at issue is equitable in nature.

The distinction between private-action claims and state restitution claims under the IFPA is significant—and could extend far beyond the right to a jury trial. For example, numerous other cases in New Jersey have been cited by insurance carriers as obviating the need to prove damages in an IFPA case. See e.g., Liberty Mut. Ins. Co. v. Land, 186 N.J. 163 (2006); Open MRI of Morris & Essex, L.P. v. Frieri, 405 N.J. Super. 576 (App.Div. 2009). In Lajara, however, the Court re-affirmed that an insurance company bringing private claims under the IFPA must prove that it was “damaged as the result of a violation” of IFPA.

Notwithstanding the Lajara decision, the IFPA remains one of the broadest, most carrier-friendly, insurance fraud statutes in the country. So health care providers facing payer scrutiny or claims under the IFPA should consult with the health care fraud lawyers at Buttaci Leardi & Werner, LLC, who are well-versed in both the substantive and procedural nuances of the statute.

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  • Posted on: Jul 22 2015