2005 WL 2363828 (N.J.Super.A.D.)

UNPUBLISHED OPINION. CHECK COURT RULES BEFORE CITING.

Superior Court of New Jersey, Appellate Division.

Jose Vincente PEREZ, Plaintiff-Appellant

v.

OHIO CASUALTY INSURANCE COMPANY, Defendant-Respondent,

and

Yiselle Sanchez and Ford Motor Credit, Defendants.

Argued March 8, 2005.

Decided Sept. 29, 2005.

SYNOPSIS

On appeal from Superior Court of New Jersey, Law Division, Hudson County, L-3713-01.

COUNSEL:  Noberto A. Garcia argued the cause for appellant (Blume, Goldfaden, Berkowitz, Donnelly, Fried & Forte, attorneys; Mr. Garcia, on the brief).

Anthony J. Golowski II argued the cause for respondent (Podvey, Sachs, Meanor, Catenacci, Hildner & Cocoziello, attorneys; Mr. Golowski and Anthony M. Rainone, on the brief).

JUDGES:  Before Judges SKILLMAN, COLLESTER and PARRILLO.

PER CURIAM.

[*1]  Plaintiff Jose Perez appeals from an order of summary judgment in favor of defendant Ohio Casualty Group (Ohio Casualty) on its counterclaim and the entry of final judgment against him in the amount of $188,571.63. We affirm in part and reverse in part.

As set forth in the certifications of the parties, the deposition of plaintiff and the request for admissions served upon plaintiff pursuant to R. 4:22-1, the factual setting presented to the motion judge was as follows. Plaintiff was born in Bogotá, Colombia on January 24, 1965, and entered the United States in 1990. He remained as an illegal alien. Subsequently, he lived with Maria Soto [FN1] and their two children in a house he purchased in North Bergen.

FN1. Although the record repeatedly refers to Ms. Soto as plaintiff’s wife, plaintiff’s response on Ohio Casualty’s request for admissions tates, “[P]laintiff was not legally married. Maria Soto is plaintiff’s common-law spouse."

Plaintiff obtained a New Jersey driver’s license on August 7, 1992. He claims he did so during a one-month period when the New Jersey Department of Motor Vehicles (NJDMV) was issuing licenses without proof of legal residency prior to January 1993, the effective date of legislation requiring proof that presence in the United States was authorized under federal law. N.J.S.A. 39:3-10. According to the NJDMV records, his license was maintained “in good standing.”

Plaintiff insured a 1987 Chevrolet van with Allstate Insurance Company until early 1999 when Allstate declined to continue coverage for reasons unrelated to this case. On February 17, 1999, with the assistance of an insurance agent, plaintiff applied for an automobile policy from Ohio Casualty with his driver’s license information and a false social security number. Ohio Casualty issued the policy.

On August 14, 1999, plaintiff was in an accident while driving on Bergenline Avenue in North Bergen with Maria Soto, one of their children and two other persons in his van. Neither plaintiff nor his passengers sought medical assistance at that time. However, later that evening plaintiff went to the hospital complaining of neck and back pain. When x-rays revealed no significant injury, he was sent home with instructions to take Motrin. According to plaintiff, his back pain intensified over the next four months so that he was unable to work. He then met with an attorney and was referred to a chiropractor for treatment. After a number of sessions, plaintiff was referred to various other physicians. He underwent numerous tests as a hospital outpatient and received extensive medical treatment over a two-year period. Ms. Soto also was treated extensively for injuries caused by the accident.

On December 21, 1999, plaintiff applied for medical expense benefits and income continuation benefits under the personal injury protection (PIP) provision of his Ohio Casualty policy. He filled out and submitted the application with the same false social security number and used the same number on medical provider assignment forms. Ohio Casualty paid PIP medical benefits on behalf of plaintiff and Ms. Soto from March 15, 2001 to August 13, 2001, in the total amount of $62,857.21.

[*2]  In the summer of 2001, questions arose as to plaintiff’s identity and possible duplicative medical treatment, and Ohio Casualty’s special investigations unit discovered that the social security number plaintiff supplied in fact was issued to a woman in Pennsylvania in 1961. Ohio Casualty immediately ceased payment of PIP benefits and canceled coverage of the policy based on fraud and lack of cooperation by the insured.

Plaintiff filed a civil complaint on June 12, 2001, seeking a declaration that Ohio Casualty was required to continue payment of PIP benefits. Ohio Casualty counterclaimed for recision of the insurance contract, recovery of the moneys paid for PIP benefits and treble damages under the New Jersey Insurance Fraud Prevention Act (NJIFPA). N.J.S.A. 17:33A-1 to 17:33A-30. Cross-motions for summary judgment were filed after discovery proceedings were concluded. The motion judge denied plaintiff’s application for summary judgment but granted summary judgment to Ohio Casualty. He found that plaintiff failed to corroborate his assertion that he lawfully obtained his New Jersey driver’s license and that he therefore did not have a valid license since he was an illegal alien. Alternatively, the judge found that plaintiff’s knowing use of a false social security number on his PIP application was a material and fraudulent misrepresentation which entitled Ohio Casualty to void the automobile policy and recoup the moneys it paid for PIP benefits to plaintiff and Ms. Soto.

Following denial of plaintiff’s application for reconsideration, the motion judge entered final judgment to Ohio Casualty in the amount of $188,571.63, representing three times the PIP benefits paid to plaintiff and Ms. Soto in addition to costs and fees in defending the action pursuant to N.J.S.A. 17:33A-7(b). This appeal ensued. [FN2]

FN2. Plaintiff does not appeal from the denial of his motion for summary judgment.

Our scope of review of a summary judgment requires us to determine whether a genuine issue of fact was presented by the evidential materials supplied and, if not, whether the moving party is entitled to the relief requested as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523, 666 A.2d 146 (1995); Judson v. Peoples Bank and Trust Co. of Westfield, 17 N.J. 67, 74, 110 A.2d 24 (1954); R. 4:46-2. The Supreme Court described the procedural process as follows:

[W]hen deciding a motion for summary judgment under Rule 4:46-2, the determination whether there exists a genuine issue with respect to a material fact challenged requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party in consideration of the applicable evidentiary standard, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.

[Brill, supra, 142 N.J. at 523, 666 A.2d 146.]

Plaintiff argues that the motion judge erred in the application of the Brill standard in finding that plaintiff made a fraudulent misrepresentation. He claims that there exists a genuine factual issue on the validity of plaintiff’s New Jersey driver’s license and argues that plaintiff’s use of a false social security number was immaterial and insufficient for a finding of fraud as a matter of law. Alternatively, he contends that Ohio Casualty is estopped from withholding PIP payments because it continued to collect his premium payments and that the judgment entered against him offends equity.

[*3]  We agree that the trial judge misapplied the Brill standard in finding as a matter of law that plaintiff did not possess a valid New Jersey driver’s license. Plaintiff testified during his deposition that he obtained his license from NJDMV after taking the written and driving tests and presenting his Colombian passport, and his driving record with the NJDMV confirms that his license was “in good standing” at all times relevant to this case. Therefore, the factual issue of the validity of his driver’s license could not be resolved on summary judgment. Brill, supra, 142 N.J. at 523, 666 A.2d 146; R. 4:46-2(c). Furthermore, while Ohio Casualty argues that plaintiff’s license must have been renewed after the statutory amendment requiring proof of legal residency, the record does not contain the renewal application. We decline to infer any fraudulent misstatement by plaintiff in the absence of proof in the record.

However, we find that the motion judge correctly granted summary judgment to Ohio Casualty based on the uncontested fact that plaintiff knowingly supplied a false social security number in his application for PIP benefits, which constituted a material misrepresentation entitling Ohio Casualty to rescind plaintiff’s policy based on fraud. Plaintiff admitted using the same social security number on the PIP application that he had used “for several years,” which was issued to a different person in a different state. He asserted his privilege against self-incrimination, both during his deposition and in response to Ohio Casualty’s Request for Admission to the question of whether he had ever been issued a social security number, after being advised that in this civil action an adverse inference can be drawn from plaintiff’s exercise of the privilege. See Mahne v. Mahne, 66 N.J. 53, 60, 328 A.2d 225 (1974); State Dep't of Law & Pub. Safety v. Merlino, 216 N.J.Super. 579, 587-88, 524 A.2d 821 (App.Div.1987), aff'd, 109 N.J. 134, 535 A.2d 968 (1988); In re Hotel and Rest. Empl. and Bartenders, 203 N.J.Super. 297, 338, 496 A.2d 1111 (App.Div.), certif. denied, 102 N.J. 352, 508 A.2d 223 (1985), cert. denied sub. nom, Gerace v. New Jersey Casino Control Com., 475 U.S. 1085, 106 S.Ct. 1467, 89 L.Ed.2d 723 (1986).

A policy of insurance may be voided by an insurer for a willful misrepresentation of a material fact or circumstance made before or after the claimed loss. Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530, 539-40, 582 A.2d 1257 (1990); see also Palisades Safety & Ins. Ass'n v. Bastien, 344 N.J.Super. 319, 781 A.2d 1101 (App.Div.2001) (misrepresentation that insured was single and the only resident of his household was material and sufficient to void the policy). As stated by our Supreme Court,

[W]hen an insurer clearly warns in a “concealment or fraud” clause that it does not provide coverage if the insured makes a material misrepresentation about any material fact or circumstance relating to the insurance, the warning should apply not only to the insured’s misrepresentations made when applying for insurance, but also to those made when the insurer is investigating a loss. Such misrepresentations strike at the heart of the insurer’s ability to acquire the information necessary to determine its obligations and to protect itself from false claims. Thus, an insured’s commitment not to misrepresent material facts extends beyond the inception of the policy to a post-loss investigation.

[*4]  [Longobardi, supra, 121 N.J. at 539, 582 A.2d 1257.]

The misrepresentation must be knowing and willful; an honest mistake is insufficient to deny coverage for a loss. Id. at 540, 781 A.2d 1101. However, an insured’s motive for lying is irrelevant.

Forfeiture does not depend on proof that an insured harbored an intent to recover proceeds to which he or she was not entitled. An insurer may refuse payment if an insured willfully misrepresented material facts after a loss, even if the insured did not harbor such an intent.

[Ibid.]

Since plaintiff knowingly gave a false social security number in his application for PIP benefits, the requisite element of willfulness is satisfied. The remaining question is whether this knowing misrepresentation was material, and this element is satisfied if the misrepresentation relates to a subject relevant to an investigation by the insurer of the claim and its determination of a proper course of action. Fine v. Bellefonte Underwriters Ins. Co., 725 F.2d 179, 183 (1984), cert. denied, 474 U.S. 826, 106 S.Ct. 86, 88 L. Ed.2d 70 (1985); Palisades Safety, supra, 344 N.J.Super. at 322- 23, 781 A.2d 1101. Here, Ohio Casualty representatives certified without contradiction that an insured’s social security number is relevant as to the claimant’s identity and loss history, the causation of injuries and the medical necessity of treatment.

Plaintiff does not dispute Ohio Casualty’s entitlement to a correct social security number. He argues, however, that this identifier is not relevant or material to the payment of PIP benefits for injuries suffered in a covered accident. We disagree. The identity of the insured is obviously relevant to any claimed loss, and a social security number is a pertinent identifier for purposes of a legitimate investigation into a claimant’s litigation and medical history. The knowing assertion of a false social security number is therefore a material misrepresentation which entitles the insurer to void the policy and obtain reimbursement for moneys paid as benefits under the policy.

Plaintiff next argues that Ohio Casualty is estopped from denying coverage because it failed to investigate or verify the falsity of the social security number, which was readily ascertainable, until many months after he filed his application for PIP medical benefits. He contends that it is inequitable to require him to repay PIP benefits because such a result would benefit those insurers which do not diligently investigate applicants or claims of coverage.

Plaintiff’s argument is misconceived. The applicable doctrine on claims of misrepresentation or fraud is waiver rather than estoppel. Merchants Indem. Corp. v. Eggleston, 37 N.J. 114, 130, 179 A.2d 505 (1962). Waiver may prohibit an insurer from denying payments under the policy or disclaiming coverage if the insurer fails to act with diligence. As stated by the Supreme Court,

... if a carrier receives information suggesting fraud or breach of contract, it must seek the facts with reasonable diligence, and having acquired them it must within a reasonable period decide whether to continue to perform. What is a reasonable time depends upon the circumstances.

[*5]  [Merchants, supra, 37 N.J. at 131, 179 A.2d 505.]

In Hunt v. Hosp. Serv. Plan, 59 N.J.Super. 219, 225-26, 157 A.2d 575 (Law Div.), rev'd on other grounds, 33 N.J. 98, 162 A.2d 561 (1960), cited by plaintiff, the insured represented she was the sole and unconditional owner of an automobile purchased in part with moneys from her son, who was the driver in an accident giving rise to a liability claim. The insurer continued representation of the insured in the liability action without a reservation of rights for over nine months after receiving information about the son’s ownership interest before seeking a declaratory judgment for denial of coverage. The Supreme Court held that continued representation of the insured for such a substantial period after learning of the claimed material breach of contract constituted a waiver of the right to disclaim coverage.

The instant case is clearly distinguishable from both Hunt and Merchants. Nothing in the record leads to an inference that Ohio Casualty waived its right to cancel the policy and seek reimbursement. On the contrary, its investigator certified that an investigation was commenced promptly after suspicions were aroused regarding plaintiff’s identity and this led to the discovery that he had supplied a bogus social security number.

Plaintiff’s argument that it is inequitable to permit Ohio Casualty to withhold PIP benefits and recoup past payments of PIP benefits is totally without merit. To the contrary, it would offend equity to permit plaintiff to benefit from a willful and material lie.

The right rule of law, we believe, is one that provides insureds with an incentive to tell the truth. It would dilute that incentive to allow an insured to gamble that a lie will turn out to be unimportant.

[Longobardi, supra, 121 N.J. at 541-42, 582 A.2d 1257.]

The remaining cases cited by plaintiff are distinguishable or not pertinent.

In Montoya v. Gateway Ins. Co., 168 N.J.Super. 100, 401 A.2d 1102 (App.Div.1979), we held that the plaintiff’s status as an illegal alien did not preclude him from recovery of PIP medical benefits. Here the issue is not plaintiff’s status but his knowing misrepresentation by providing a bogus social security number. In Progressive Cas. Ins. Co. v. Hanna, 316 N.J.Super. 63, 719 A.2d 683 (App.Div.1988), the insurer failed to ask questions designed to elicit a material fact and later tried to disclaim for failure to disclose that fact. In this case Ohio Casualty required its insured to provide a social security number on its PIP application, and the plaintiff knowingly supplied false information.

We now address the motion judge’s award of treble damages under the New Jersey Insurance Fraud Prevention Act (NJIFPA). N.J.S.A. 17:33A-1 to -30. The Act specifies that upon a finding of fraud an insurance company is entitled to recover compensatory damages including “reasonable investigation expenses, costs of suit and reasonable attorneys fees.” N.J.S.A. 17:33A-7(a). Furthermore, the insurer may recover treble damages “if the court determines that the [insured] has engaged in a pattern of violating this act.” N.J.S.A. 17:33A-7(b). The Act defines “pattern” as “five or more related violations” of the Act, and “[v]iolations are related if they involve either the same victim, or same or similar actions on the part of the person ... charged with violating [the Act].” N.J.S.A. 17:33A-3(j).

[*6]  As to what constitutes a “pattern of violation,” guidance is gleaned from Merin v. Maglaki, 126 N.J. 430, 599 A.2d 1256 (1992), in which the defendant attempted to defraud Prudential Insurance Company by falsely claiming that his wife died in an automobile accident in the Philippines. He submitted six separate falsified documents: a claim form stating that his wife died in the fictional accident; an authorization to release information to Prudential; a bogus accident report of the Manila Police Department; a forged death certificate; a false autopsy report; and a falsified receipt for a burial permit in the Philippines. The Court noted that each of the falsified documents enhanced the fraudulent and sophisticated claim for death benefits and held that the NJIFPA authorized a sanction “for each material false statement knowingly submitted in support of a fraudulent claim for insurance proceeds that significantly enhances the credibility of or evidentiary support for the claim.” Id. at 432, 599 A.2d 1256.

In the instant case the trial judge made no findings and stated no reasons for the imposition of treble damages despite the requirement of R. 1:7-4(a). See also Cameco v. Gedicke, 157 N.J. 504, 509-10, 724 A.2d 783 (1999); Bennett v. Lugo, 368 N.J.Super. 466, 478, 847 A.2d 14 (App.Div.2004). We assume he adopted the argument made by Ohio Casualty that plaintiff was engaged in a pattern of violating N.J.S.A. 17:33A-3(j) by giving the same false social security number when he applied for PIP benefits and using the same number on the medical provider forms for reimbursement for treatment. In this case, however, the use by plaintiff of the same false social security number in forms submitted to health care providers for payment for their services did not “significantly enhance” the credibility of the social security number given by plaintiff in his PIP application or provide additional evidentiary support for his PIP claim. The repeated use of the bogus identifier simply replicated the same falsehood. In Merlin the Supreme Court stated it would be unreasonable to impose additional penalties under the NJIFPA “for each instance that the same misrepresentation appears in a single document or for false assertions that substantively repeat information contained in other misrepresentations in the same document.” Id. at 439, 847 A.2d 14. In our view, it also would be unreasonable to impose treble damages where a single misrepresentation is repeated in ancillary documents relating to the same claim. Accordingly, we hold that on the record below there was an insufficient showing of a pattern of violation for the imposition of treble damages under N.J.S.A. 17:33A-7(b).

Finally, we are constrained to remand the matter for further hearing on the issue of Ohio Casualty’s damages under the NJIFPA. N.J.S.A. 17:33A-7 specifies that when there is fraud, the insurer shall recover “reasonable investigation expenses, costs of suit and attorneys fees.” The motion judge made no findings as to the reasonableness of such claims by Ohio Casualty and simply adopted the insurer’s calculation of damages. We therefore remand the issue.

[*7]  Affirmed in part. Reversed and remanded in part.