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Allstate Insurance Company v. Charles

A-3689-05T5 (N.J. Super. App. Div. 2007) (Unpublished)

BUSINESS LAW; CONSUMER FRAUD ACT — A claim that a party omitted a material fact with intent that others rely on it, within the meaning of the Consumer Fraud Act, requires a showing that the defendant acted with knowledge because intent is an essential element of the fraud.

A customer received two notices about her automobile insurance premiums. One came from her premium financing company and told her that if she did not make a missed payment by a certain date, her insurance would be canceled. The other came directly from the insurance company, warning her that if she did not pay an additional small amount on account of an automobile she had added to the policy, her insurance coverage would be canceled. Apparently, she never opened the envelope from the insurance company. She then went to her insurance broker’s office and asked an employee if she owed anything more than what the premium finance company claimed. The employee looked in her file, made some phone calls, and told the customer that all she owed was what the premium finance company had called for. The customer made the payment, but never paid the small amount owed directly to the insurance company.

The insurance company canceled the policy for failure to pay the small amount owed to it. The customer’s daughter was involved in an automobile accident “for which there was no coverage due to the cancellation.” The insurance company for the other party in the accident sued and, in turn, the customer sued the insurance broker. “The essence of the complaint was that the [broker’s] employee was guilty of an omission, rather than in intentional misstatement. There was no claim that the [broker’s] employee was poorly trained or incompetent to perform her job duties. There was no claim that [the broker] obtained or sought to obtain any benefit from [the customer’s] reliance on the alleged misstatement.

The lower court concluded that the Consumer Fraud Act (CFA) “did not apply to an insurance producer acting in its professional capacity, and that in any event, the complaint did not state a claim under the CFA.” The Appellate Division agreed. It found “no evidence that [the broker’s] employee made any ‘omission of any material fact with intent that others rely’ on it, within the meaning of the CFA. Such a claim requires a showing ‘that the defendant acted with knowledge, and intent is an essential element of the fraud.’” Consequently, the “[t]he facts alleged could not possibly constitute consumer fraud under the CFA.”

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