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Third Circuit Rules that Plaintiff May Sue Insurance Carrier under the Consumer Fraud Act for Deceptive Practices with Respect to her Personal Injury Claim

By on February 1, 2019 in Civil Lawsuits with 0 Comments

Plaintiff Ana Lidia Alpizar-Fallas sued Progressive Garden State Insurance Company (“Progressive”) and one of its agents, claiming that the Progressive agent violated the Consumer Fraud Act due to deceptive business practices. Alpizar-Fallas was insured by Progressive, as was the driver of the other vehicle. She claimed to have suffered a personal injury in a car accident. She claims that, the day after the accident, a Progressive agent had her sign a release of her personal injury claim, under the guise of facilitating the payment of damages for her property damages for her vehicle. In Alpizar-Fallas v. Favero, 908 F.3d 910 (3d Cir. 2018), one of the issues was whether plaintiff was able to make a claim under the Consumer Fraud Act for the allegedly deceptive practices of Progressive with respect to her personal injury claim.

Alpizar-Fallas sued the driver of the other vehicle, Frank Favero, for the personal injuries she claimed to have suffered from the accident. Thereafter, she amended her complaint to include a class action against Progressive and its agent, Brian Barbosa (“Barbosa”), based upon their allegedly deceptive business practices in having her sign a release of her personal injury claims. She submitted this claim based upon several causes of action, including the New Jersey Consumer Fraud Act.

Progressive and Barbosa filed a motion to dismiss her class action for failure to state a claim.  In support of their motion to dismiss the Consumer Fraud Act (“CFA”), they argued that the CFA does not apply “to schemes to defraud policyholders of their benefits and personal injury claims.”  The District Court agreed and dismissed the CFA claim, holding that the CFA applied only to the sale or marketing of insurance policies. It followed a New Jersey state court decision, Myska v. NJM, 440 N.J. Super. 458 (App. Div. 2015), in which the District Court quoted Myska that the CFA does not apply to “an insurance company’s refusal to pay benefits.”

This matter was appealed to the Court of Appeals for the Third Circuit, which issued a precedential decision in this case. The Third Circuit found that Myska did not apply to these facts. Here, the plaintiff was not claiming that she filed an insurance claim and was denied benefits. Rather, the Court found that her allegations in her complaint fit squarely within the language of the CFA.

She alleged that: (1) she relied on the express false representations of the agent that the documents she needed to sign were merely to facilitate payment for damages to her motor vehicle; (2) the agent (Barbosa) made false representations to her about the documents she signed; (3) the document actually prepared and signed was a broadly written comprehensive release of any and all claims; (4) she reasonably relied on the materially false representations when she signed the documents; (5) Defendants and others at the insurance company engaged in the same pattern of unlawful conduct as to other similarly situated individuals; and (6) as a result of “this deceptive and unconscionable practice, present and former insurance policy holders of Defendant, Progressive[,] have continued to be stripped of their rights to pursue claims against other policy holders of Progressive Garden State Insurance Company due to the [Appellees’] false and misleading representations…..”

The Third Circuit found that these facts, when taken together, did state a claim for fraud in connection with the subsequent performance of a  consumer contract, which was a situation “explicitly” covered by the language of the CFA. Hence, the Court predicted “that the New Jersey Supreme Court would apply the CFA to Alpizar-Fallas’s claim, where an insurance company is alleged to have fraudulently performed a contract with a consumer.” Accordingly, the Third Circuit concluded that the plaintiff’s complaint did state a viable claim under the CFA and reversed the District Court’s decision as to the dismissal of this claim.


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Betsy G. Ramos

About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 25 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.


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