2017 Windstorm Insurance Conference

Property Insurance Fraud Litigation: Wind and Related Cases

Ty Tyler, Esq.Tyler & Hamilton, P.A.Andrew P. Rock, Esq.

The Rock Law Group, P.A.

Introduction:

Andrew P. Rock, Esquire and Ty Tyler, Esquire

Objective – Come away with information and case law you can use by:n Expanding your knowledge on wind claimsn Help you spot fraud issues within a claim

n Avoid committing fraudn Preventing Fraud

Topics on Fraudn Bad Faithn Good Faith and Fair Dealingn Duties of Adjusters and Agents to Help

Prevent Fraudn Due Diligencen Insurers Deceptive Trade Practicesn Application Misrepresentation

BAD FAITH

BAD FAITHn Benson v. QBE Ins. Corp., 61 F.Supp. 3d 1277 (S.D.

Fla. 2014)n Plaintiffs, former owners of condominium units who were members

of the condominium association, brought bad faith claims againsttheir windstorm insurer for purported dilatory practices in connectionwith processing the condominium association's damage claims.QBE moved to dismiss for failure to state a claim.

n QBE argues that Plaintiffs are not entitled to relief under Fla. Stat. §624.155(1) because they failed to allege any damages and becausethey were never insured by QBE. Court disagreed. Plaintiffs allegedamages caused by QBE's dilatory processing of the Association'sinsurance claim, notwithstanding that Plaintiffs were not themselvesinsureds. Additionally, the civil remedy provision of Florida'sinsurance code is not strictly limited to insureds.

BAD FAITH(…Continued)

n Benson v. QBE Ins. Corp., 61 F.Supp. 3d 1277 (S.D.Fla. 2014)n QBE argues that Plaintiffs do not come within the term “any person”

because they were never insured by QBE. Insurance code definesa “person” as “an individual, insurer, company, association,organization, Lloyds, society, reciprocal insurer or interinsuranceexchange, partnership, syndicate, business trust, corporation,agent, general agent, broker, service representative, adjuster, andevery legal entity.” Fla. Stat. § 624.04. Florida Supreme Court hasdetermined that the term “any person” is “precise” and that itsmeaning is “unequivocal”; “[b]y choosing this wording the legislaturehas evidenced its desire that all persons be allowed to bring civilsuit when they have been damaged by enumerated acts of theinsurer.” Auto–Owners Ins. Co. v. Conquest, 658 So.2d 928, 929(Fla.1995).

BAD FAITH(…Continued)

n Benson v. QBE Ins. Corp., 61 F.Supp. 3d 1277 (S.D.Fla. 2014)n QBE alternatively argues that Association released Plaintiffs' claims

when it settled its own bad faith claim against QBE. However, insupport of this argument, QBE relies on the language of both thecondominium agreement between Plaintiffs and the Association andthe settlement agreement between the Association and QBE.Because neither document formed part of the pleadings, QBE'smotion to dismiss is better suited for motion for summary judgment.

BAD FAITHn Divine Motel Group, LLC v. Rockhill Ins. Co., 2015 WL

4095449 (M.D. Fla. July 7, 2015)n Court held that insured failed to demonstrate that a “covered cause

of loss” damaged the walls or roof of its motel property permittingwind-driven rain of Tropical Storm Debby to intrude, concluding thatthe exception to the policy's water intrusion limitation did not apply.

n Policy states that “interior of any building or structure, or to personalproperty in the building or structure, caused by or resulting fromrain, snow, sleet, ice, sand or dust, whether driven by wind or not ...”is not covered. Policy includes exception to the water intrusionlimitation which allows coverage for water intrusion damage only if“[t]he building or structure first sustains damage by a CoveredCause of Loss to its roof or walls through which the rain, snow,sleet, ice, sand or dust enters.”

BAD FAITH(…Continued)

n Divine Motel Group, LLC v. Rockhill Ins. Co., 2015 WL4095449 (M.D. Fla. July 7, 2015)n The fact that Tropical Storm Debby caused water damage to the

interior of the property and the personal property therein is notsufficient on its own to establish coverage. Insured failed to identifywhat other “Covered Cause of Loss” caused the damage to the roofor walls to permit the rain to enter the property.

n As to “faulty workmanship” exclusion, insured argues that theexclusion does not preclude coverage because it contains an“ensuing loss” exception. Court disagrees, because water enteredthe property through damage caused by inadequate maintenance,faulty design, and defective repairs, but the faulty workmanshipdamages were not Covered Causes of Loss.

BAD FAITHn Fox Haven of Foxfire Condo. IV Ass'n, Inc. v. Nationwide

Mut. Fire Ins. Co., 2015 WL 667935 (M.D. Fla. Feb. 17,2015)n Fox Haven’s condominium sustained damages from Hurricane

Wilma. Nationwide determined 20% of the damage was due to thehurricane and paid $23,579.25. Fox Haven invoked appraisal andfiled a CRN, citing Nationwide’s failure to attempt good faithsettlement.

n The appraisal panel issued an award of $381,461.12, whichNationwide paid.

n Fox Haven then filed suit based on §624.511 and §626.9541,arguing that Nationwide acted in bad faith because it paid additionalamounts after the expiration of the CRN’s 60-day cure period.Nationwide argues that the appraisal award was issued long afterthe cure period.

BAD FAITH(…Continued)

n Fox Haven of Foxfire Condo. IV Ass'n, Inc. v. NationwideMut. Fire Ins. Co., 2015 WL 667935 (M.D. Fla. Feb. 17,2015)n Court granted summary judgment on this issue in favor of

Nationwide, holding that any action or inaction that takes place afterthe 60-day cure period cannot support an insured’s bad faith claim,because it is impossible for an insurer to remedy bad faith that hasnot yet occurred.

n Fox Haven’s primary argument in support of bad faith relies ondiscrepancy between Nationwide’s damage calculation and theappraisal award. Court held a jury could find that Nationwide low-balled Fox Haven.

BAD FAITHn Imperial Park, LLC v. Penn-Star Ins. Co., 133 F.Supp. 3d

1003 (M.D. Tenn. 2015)n Insured property owner and its lessee brought action against insurer

and its parent corporation after damage resulting from violentwindstorm, alleging breach of contract, bad faith refusal to pay, andother claims arising from alleged mishandling of a property damageclaim.

n Defendants moved for summary judgment on all claims, andinsured moved for partial summary judgment on its breach ofcontract and bad faith refusal to pay claims.

n Court held fact issues precluded summary judgment as to parentcorporation’s liability, alleged misrepresentation regarding insured'sownership of property did not void policy, lessee's TennesseeConsumer Protection Act (TCPA) claim was precluded by insurancestatute, and fact issue precluded summary judgment on lessee'sfraud and misrepresentation claims, as well as insured's breach ofcontract and bad faith refusal to pay claims.

BAD FAITHn Azoroh v. Auto. Ins. Co. of Hartford, CT., 2016 WL

4148184 (D. D.C. August 4, 2016)n Where an insurer has a duty to investigate, this includes a duty in

Georgia and most other States to assess the value thathomeowners lose because of physical damage to their homes, evenif their homes are repaired.

n There is no such thing as “bad faith” claim handling under aStandard Flood Insurance Policy. Even Superstorm Sandy couldnot cause the recovery of extra contractual damages whetherprejudgment interest, post-judgment interest, consequentialdamages, penalties, punitive damages, or attorneys’ fees.

n There is also no such thing as an actionable "bad faith" claim arisingfrom the procurement of a Standard Flood Insurance Policy, either.

GOOD FAITH AND FAIR DEALING

GOOD FAITHn Poulsen v. Farmers Ins. Exch., 2016 WL 415905 (UT

App. August 4, 2016)n Insureds brought action against property insurer, alleging that

insurer breached terms of insurance policy and breached impliedobligation of good faith and fair dealing when it denied claim fordamage that their property allegedly sustained in windstorm.

n Insureds did not demonstrated that the insurance policy's use of theword “roof” is “fairly susceptible” to interpretation. Accordingly, Courtfound no error in district court's conclusion that, at the time of thewindstorm, insureds’ house had “no ‘roof’ as contemplated by the[insurance] policy.” Because this conclusion was a sufficient basisfor the district court to grant summary judgment to insurer, Courtdeclined to address Insureds’ other challenges.

GOOD FAITHn Treece v. JP Morgan Chase Bank, N.A., 2015 WL

3935761 (S.D. Fla. June 26, 2015)n Plaintiffs maintained Chase breached the implied covenant of good

faith and fair dealing by, inter alia, “[a]lleging that windstorminsurance was mandatory per the contract when it is not;”“[f]abricating false claims about a previous windstorm policy expiringwhen there never was a prior windstorm policy;” and “[u]sing theirdiscretion to choose an insurance policy in bad faith and incontravention of the parties' reasonable expectations, bypurposefully selecting exorbitantly-priced force-placed insurancepolicies to maximize their own profits.”

n Chase argued it was entitled to summary judgment becausePlaintiffs failed to demonstrate Chase violated an express term ofthe Mortgage, and prohibiting Washington Mutual Bank, FA andChase from requiring windstorm coverage for the subject propertywould contravene the express terms of the Mortgage.

GOOD FAITH(…Continued

n Treece v. JP Morgan Chase Bank, N.A., 2015 WL3935761 (S.D. Fla. June 26, 2015)n Chase argues there is no evidence in the record to support

Plaintiffs' assertion the amount of the force-placed windstorminsurance premium was unreasonable. Court found a reasonablejury could find the premium on the force-placed insurance selectedby Chase was unreasonable, based on evidence that annualpremium was $51,406.05, Chase increased Plaintiffs' monthlymortgage payments from $2,977.00 to $14,720.34, and comparisonof another annual premiums between $6500 and $7800.

Duties of Adjusters and Agentsto Help Prevent Fraud

Help Prevent Fraudn Shade Tree Apartments, LLC v. Great Lakes Reinsurance

(UK) PLC, 2015 WL 8516595 (W.D. Tex. December 11,2015)n After receiving notice of loss, Great Lakes sent its claim adjuster and

Seneca sent its claim adjuster to investigate the respective claims.Shade Tree alleged that adjusters, acting independently of each other,performed substandard, outcome-oriented investigations andmisrepresented the amount of covered damages under their respectivepolicies.

n Shade Tree specifically alleged that Great Lakes’ adjuster failed toprovide updates regarding the status of the claim, purposefully delayedre-inspection of the property, and failed to provide a supplementalestimate of repair costs he had orally agreed were covered under thepolicy.

Help Prevent Fraud(…Continued)n Shade Tree Apartments, LLC v. Great Lakes Reinsurance

(UK) PLC, 2015 WL 8516595 (W.D. Tex. December 11,2015)n Shade Tree alleged Seneca’s adjuster relied on an unreliable third-

party investigation to determine the damage found by the engineerwas caused by a storm outside the policy period. As a result of theadjusters’ misconduct, Shade Tree alleged Great Lakes and Senecaundervalued and wrongfully denied Shade Tree’s claims, leavingShade Tree unable to properly and completely repair damages causedby the storm, causing additional damage to the Property.

n Court found, in part, that because Shade Tree could at least potentiallyrecover against adjusters for violations, the adjusters were notimproperly joined.

Help Prevent Fraudn Fernandez v. Allstate Fire & Cas. Ins. Co., 2015 WL

6736675 (N.D. Tex. November 4, 2015)n Lawsuit arises in connection with a severe hail and wind storm that

damaged Fernandez residence.n Allstate insured the Property under a homeowner's insurance policy

that included coverage for hail and windstorm damage.n Williamson, an Allstate agent, sold the Policy to Fernandez. After

Fernandez made a claim under the Policy, Allstate assigned Kruse toinspect and adjust the claim.

n Fernandez alleged generally that she suffered damages by relying ondefendants' misrepresentations regarding coverage under the Policy.Fernandez alleged that Williamson represented that the Policy hadcharacteristics or benefits that it did not possess

Help Prevent Fraud(…Continued)n Fernandez v. Allstate Fire & Cas. Ins. Co., 2015 WL

6736675 (N.D. Tex. November 4, 2015)n Fernandez alleged that Williamson's role as an Allstate insurance

agent in this matter was that of a sales agent. But apart from allegingthat Williamson represented “that the Policy included hail andwindstorm coverage for damage to Plaintiff's home”—a representationthat is indisputably true considering that the Policy does cover physicalloss caused by windstorm or hail—Fernandez does not specificallyallege that Williamson made any other representations. Accordingly,there is no reasonable basis for the court to predict that Fernandezmight be able to recover against Williamson.

n Nor can the court predict that Fernandez might be able to recoveragainst Williamson. She failed to adequately allege that Williamsonrepresented that the Policy had characteristics or benefits that it didnot possess or that he misrepresented that the Policy was of aparticular standard, quality, or grade when it was of another.

Help Prevent Fraudn McDonald v. Lemon-Mohler Ins. Agency, LLC, 183 So. 3d

118 (Miss. Ct. App. 2015)n Landowners, who financed a new home construction project on

property they purchased from insured, who let windstorm policy lapsedue to nonpayment of premiums, brought action against insuranceagency for intentional and negligent misrepresentation, negligence,and gross negligence following destruction of home in a hurricanebefore the project was finished.

n Appellate Court held (1) agency was not grossly negligent in itsdealings with insured and landowners; and (2) sufficient evidenceexisted that negligence of landowners, who failed to procure their ownwindstorm policy, was the sole proximate cause of the loss.

Help Prevent Fraudn Collins v. State Farm Ins. Co., 160 So. 3d 987 (La. App.

4th Cir. 2015)n Insured contends that insurance agent had a duty to inform Mr. Collins of

State Farm's decision not to renew his homeowner's policy when it madethis decision in September 2004. Insured further contends that when hewent to agent’s office in July of 2005, agent should have informed him ofthe nonrenewal. Insured contends that it was hurricane season and therewould have been no reason for him to visit agent’s office except todiscuss his insurance coverage. Insured thus alleges that by failing todisclose this material information, agent committed fraud.

n Agent counters that neither the Louisiana Insurance Code nor theLouisiana jurisprudence recognizes such a duty. Rather, Insurance Coderequires the non-renewing insurance company to notify the insured ofnonrenewal. Further, Louisiana jurisprudence holds that insuranceagents do not have a duty to advise clients when they areunderinsured. Cameron Parish Sch. Bd. v. State Farm Fire &Cas.Co., 560 F.Supp.2d 485, 489 (W.D.La.2008).

Help Prevent Fraud(…Continued)

n Collins v. State Farm Ins. Co., 160 So. 3d 987 (La. App.4th Cir. 2015)n The Louisiana Supreme Court held that an insurance agent owes a duty of

“reasonable diligence” to his customer. The duty of “reasonable diligence” isfulfilled when the agent procures the insurance requested. La. R.S.22:636(H) provides: “[n]otice of cancellation or nonrenewal given by the insurerin accordance with this Chapter shall be deemed sufficient. The insuranceproducer, insurance agent, or insurance broker shall not be required to give anyseparate or additional notice of cancellation or nonrenewal.”

n The Court found Mr. Glass did not commit fraud. “Fraud is a misrepresentationor a suppression of the truth made with the intention either to obtain an unjustadvantage for one party or to cause a loss or inconvenience to the other. Fraudmay also result from silence or inaction.” La. C.C. art. 1953. In order to bring acause of action for fraud, the following three elements must be alleged: “(1) amisrepresentation of material fact, (2) made with the intent to deceive, (3)causing justifiable reliance with resultant injury.” Chapital v. Harry Kelleher &Co., 13–1606, p. 13 (La.App. 4 Cir. 6/4/14), 144 So.3d 75, 86. Moreover, fraudmust be alleged with particularity. La. C.C.P. art. 856. There is no evidence thatMr. Glass misled or misrepresented a material fact to Mr. Collins with intent todeceive in any way.

DUE DILIGENCE

DUE DILIGENCE

n Sai Hotel Group Ltd. v. Steadfast Ins. Co., 2015 WL6511434 (W.D. Tex. October 27, 2015)n Plaintiffs property was substantially damaged by severe wind and hail

storm, including roof, exteriors, interiors, HVAC, and other structures ofthe Property.

n Steadfast assigned Plaintiff's claim to an internal adjuster who is notlicensed to adjust claims in Texas. In turn, Steadfast's employeeassigned Thomas Gollatz as the local adjuster charged with assessingdamages under the Policy. Mr. Gollatz was improperly trained and notequipped to handle this type of claim.

DUE DILIGENCE (…Continued)

n Sai Hotel Group Ltd. v. Steadfast Ins. Co., 2015 WL6511434 (W.D. Tex. October 27, 2015)n The Texas Insurance Code permits an individual who has sustained

“actual damages” to bring an action “against another person for thosedamages caused by the other person engaging in ... an unfair ordeceptive act or practice in the business of insurance.” An insuranceadjuster is specifically included under the definition of “person.” An“unfair or deceptive act or practice in the business of insurance”includes engaging in a variety of numerated “unfair settlementpractices.”

n The Petition enumerated several instances in which Gollatz's actionsconstitute violations of the Texas Insurance Code. This is sufficientunder Texas' “fair notice” standard to state a claim. Defendants failedto meet their burden of establishing that Defendant Gollatz wasfraudulently joined.

Insurers Deceptive Trade Practices

Insurers Committing Fraudn U.S., ex rel. Rigsby v. State Farm Fire & Cas. Co., 794 F.3d

457 (5th Cir. 2015), cert. granted in part State Farm Fire &Cas. Co. v. U.S., ex rel. Rigsby, 136 S. Ct. 2386 (2016)n Relators brought qui tam action under the False Claims Act (FCA) against

insurer that issued homeowners policies and flood policies, alleging thatinsurer submitted false claims to the government for payment ongovernment-backed flood policies arising out of damage caused byHurricane Katrina.

n United States District Court for the Southern District of Mississippientered judgment on jury verdict in relators' favor, denied relators’ requestto conduct further discovery, and denied insurer's motions for a new trialand judgment notwithstanding the verdict. Relators and insurer appealed.

n Appellate Court found (1) district court abused its discretion by denyingrelators' post-trial request for discovery, (2) as matter of first impression,violation of FCA's seal requirement does not automatically mandatedismissal, (3) relators’ violations of FCA's seal requirement did notwarrant dismissal, and (4) evidence was sufficient to support jury findingthat claim presented for payment was false.

DECEPTIVE TRADE PRACTICES AND FRAUD

n National Lloyds Insurance Company v. Lewis,2015 WL 690807 (Tex.App.-­Beaumont, 2015)n Court of Appeals determined jury’s damage awards were supported by legallysufficient evidence pursuant to the Deceptive Texas Trade Practices Act (DPTA).

n Jury awarded economic damages of $56,822.69 for DTPA violations, mentalanguish damages of $10,000, and $133,645.38 for committing DTPA violationsknowingly. Lloyds challenged amounts, not that finding that it violated DTPA.

n Jury heard evidence that: policy did not contain language requiring insured toreplace her entire roof after receiving an insurance payment;; Lloyds did not payfor insured’s evacuation or living expenses because her home was not completelyuninhabitable;; representation was made to FEMA, even though there was nosuch requirement in policy;; letters sent by Lloyds probably did not comply withLloyds's obligation to explain reasons for claim denial;; basis for denial wasinsured had not replaced roof after 2005 Hurricane Rita claim;; claims processorand adjuster lacked adequate experience to properly adjust claim;; Lloyds closedits file on claim although adjuster had done “little or no investigation”;; Lloyds'sletter did not adequately explain why insured would not be compensated foritems adjuster included in his estimate and misrepresents terms of the policy.

n See also: Johnson v. Bank of America, N.A., 2014 WL 5490935 (Tex.App.-­Beaumont, 2014) ;; Kelly v. State Farm Fire & Casualty Co., No. 2014-­CQ-­1921(May 5, 2015).

APPLICATION MISREPRESENTATION

Application Misrepresentation

n Moustafa v. Omega Ins. Co., 2016 WL 4649849 (Fla. 4th DCASeptember 7, 2016)n Insureds made two claims. The first, in 2005, for damage to the roof

caused by Hurricane Wilma. The second, in 2007, after a leaking showerpan caused water damage. Both claims were covered by prior insurers.

n Moustafa did not disclose the two prior claims of loss on the policyapplications. Specifically, in the “Loss History” section Moustafa checked“no” to the question, “[h]ave you had any losses at this or any otherlocation in the last three years, whether paid by insurance or not?” He alsochecked “no” to the question, “[h]ave you had previous water damage atthe insured location?” Additionally, Moustafa signed the portion of theformal application indicating that, to the best of his knowledge and belief,there was not any unrepaired damage to the property.

Application Misrepresentation(…Continued)

n Moustafa v. Omega Ins. Co., 2016 WL 4649849 (Fla. 4th DCASeptember 7, 2016)n The trial court correctly held that Moustafa's misrepresentations were

material as a matter of law because the “clear and uncontradicted”evidence established that those misrepresentations objectively preventedOmega from “adequately estimat[ing] the nature of the risk in determiningwhether to assume the risk.” Furthermore, the evidence supported the trialcourt's conclusion that Omega would not have issued the policy if it hadknown about the unrepaired damage.

n The Homeowners also assert that Omega could not rescind the policy'scoverage as it applied to Ahmed because her failure to sign the applicationmeans that she personally did not make any material misrepresentations.Court found this argument to be meritless.

FRAUD

Fraudn United States v. Didier, 585 Fed.Appx. 667 (9th Cir.

2014), reversing and remanding United States v. Didier, et. al, 2013 WL 5524593 (D.C.Mont. Oct. 4, 2013)

The Ninth Circuit held that Didier’s misrepresentations to Chubbwere material because they were capable of influencing the carrier’sdecision to provide payment to Didier for the “reasonable increase” in herliving expenses resulting from a covered loss. Importantly, the Ninth Circuitnoted that, “[e]ven if the amount of expenses claimed would have beenreasonable had Didier actually incurred them, the policy requirement of an‘increase’ made Didier’s misrepresentations material.”

Didier’s criminal convictions for mail fraud were upheld.

Fraud(…Continued)

n Luna v. Nationwide Property and Casualty Ins. Co., 798 F.Supp.2d 821 (S.D.Tex. 2011)

Insured filed lawsuit against property insurer alleging fraud.Insured’s Complaint arose from the insurer’s alleged underpayment to theinsured for roof, and related, damages.

Fraud claims must satisfy the heightened pleading requirement setforth in FRCP 9(b): “In allegations alleging fraud…, a party must state withparticularity the circumstances constituting fraud or mistake.” A dismissalfor failure to plead fraud with particularity is treated the same as a Rule12(b)(6) dismissal for failure to state a claim.

The Court granted insurer’s motion to dismiss; insured’s complaintcontained only of vague and general conclusions; breach of contract doesnot, by itself, constitute an unfair or deceptive trade practice.

Fraud(…Continued)

n Dairy America, Inc. v. New York Marine and General Ins. Co., et al., 2010 WL 2555116 (E.D.Cal. June 18, 2010)

Punitive damages claim against the insurer for bad faith denial of claim.; insurer’s motion for summary judgment denied.

The California District Court found that the insured raised factual issues as to whether a managing agent of the insurance company engaged in malicious, oppressive, or fraudulent conduct in conscious disregard of the insured’s rights under the subject policy.

Fraud is “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” A plaintiff may seek punitive damages upon “clear and convincing” evidence of fraud. “

Fraud(…Continued)

n Paulsen v. State Farm Ins. Co., 2008 WL 417738 (E.D.La. Feb. 13, 2008)

Bad faith and fraud claims regarding alleged underpayment.“Fraud is a misrepresentation or a suppression of the truth made

with the intention either to obtain an unjust advantage for one party or tocause a loss or inconvenience to the other. Fraud may also result fromsilence or inaction.” In order to establish fraud, two elements must be met:(1) an intent to defraud or to gain an unfair advantage, and, (2) a resultingloss or damage.

Fraud(…Continued)

n State Farm Fire & Casualty Co. v. Radcliff, et al., 987 N.E.2d 121 (Ind. Ct. App. 2013)

State Farm received bad publicity for denying claims, and thentargeted, for criminal fraud prosecution, company offering roof repairs to itsinsureds (most repair companies in the region refused work for State Farminsureds due to State Farm’s claims-denial practices); company ‘sbusiness was destroyed.

State Farm withheld from NICB claims materials tending to negatefraudulent practices of repair company, and there was additional evidencethat insurer, with ill will, singled out repair company to defray its ownnegative media attention.

Jury subsequently awarded company $14.5 million on adefamation claim.

Fraud(…Continued)

n Those Certain Underwriters at Lloyd’s, London, etc. v. Cleopatra, LLC, et al., 2013 WL 6081460 (Sup. Ct. N.J. Nov. 20, 2013)

Insured lied to insurer concerning claims history. Lloyd’s sought tovoid the policy by way of claims for legal fraud, equitable fraud, andviolation of the N.J. Insurance Fraud Prevention Act,.

Equitable fraud requires proof of a material misrepresentation, themaker’s intent that the other party rely on it, and detrimental (thoughreasonable) reliance by the other party. Even innocent misrepresentationscan constitute equitable fraud justifying rescission of an insurance policy.

The Court affirmed the lower court’s grant of summary judgment tothe insurer on its equitable fraud claim, and affirmed dismissal of allcounterclaims against the insurer.