NJ Court Orders Retrial to Allocate Liability in Premium Fraud Case

By Andrew G. Simpson | February 17, 2023

There will be a jury retrial on allocation of liability in a New Jersey workers’ compensation premium fraud case won by Liberty Insurance Corp. against a construction firm.

The New Jersey Supreme Court ruled yesterday that a trial court erred in not instructing its jury to allocate fault among the defendants in accordance with the state’s comparative negligence law and remanded the case for a retrial for the purpose of allocating liability only. The remand does not change the overall findings of guilt or liability, or the overall compensation awarded

Liberty brought claims under the state’s Insurance Fraud Protection Act (IFPA), which allows for treble damages, and the workers’ compensation premium fraud law against Techdan, Exterior Erecting Services and principals Daniel Fisher, Robert Dunlap and Carol Junz.

Techdan and Exterior handle exterior wall construction for commercial buildings. Dunlap and Fisher were LLC members and officers of Techdan; Dunlap was an officer and sole shareholder of Exterior; Fisher was a part owner of Exterior; and Junz was the controller of both entities, responsible for securing workers’ compensation insurance.

Liberty contended that the 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.

The defendants denied liability and argued that Liberty’s claims were “barred in whole or in part by the doctrine of contribution/ comparative fault.”

After proceedings at trial and on appeal, the main question for the state’s high court was whether the claims were subject to the apportionment procedure of the Comparative Negligence Act (CNA).

The trial court granted partial summary judgment on 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 remaining claims were tried before a jury over 10 days. The trial judge did not instruct, and no party argued, that the jury should allocate fault. The trial judge directed the jury to assess any compensatory damages (exceeding the already assessed damages of $75,000) against each defendant found liable, and to consider Liberty’s punitive damages claim. The verdict sheet defined compensatory damages as “the amount of lost insurance premiums.”

The jury concluded that Liberty proved at least one of its claims against each defendant, and found that Techdan, Exterior, Dunlap, and Junz, but not Fisher, had engaged in a pattern of insurance fraud. It imposed compensatory damages against Techdan and Exterior, but not against Dunlap, Fisher, or Junz. The jury found Dunlap, Fisher, and Junz, but not Techdan or Exterior, liable for punitive damages

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 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 ruled that all defendants would be jointly and severally liable for the jury’s total compensatory damages award, and it imposed on Techdan, Exterior, Dunlap, and Junz joint and several liability for treble damages awarded against them under the IFPA.

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, 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 law, the trial court trebled that amount, found those defendants jointly and severally liable for the damages, and entered judgment against each of those defendants in the amount of $2,270,970. The trial court also 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.

An appellate court 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. This court concluded that the trial court’s errors warranted a new trial.

The state Supreme Court has now agreed that the trial court should have charged the jury to allocate percentages of fault and should have molded the judgment based on those jury’s allocation findings.

“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,” the high court stated.

While the high court concurred with the appellate division that the failure to apply the CNA warrants a new trial on remand so that a new jury may apportion percentages of fault, it did not agree regarding the scope of the new trial on remand.

The high court said the trial court’s failure did not affect the integrity of the jury’s discrete determinations of liability, including its finding regarding a pattern of insurance fraud, and the court said, there is no need to revisit those determinations on remand. Similarly, the remand should not redetermine the total amount of compensatory damages. The jury awarded a total of $681,990 in compensatory damages, representing the value of insurance premiums that would have been paid to Liberty. That damages award constitutes a jury’s finding of “the full value of the injured party’s damages” and it should not be revisited on remand, according to the high court’s ruling.

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