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Capogrosso v. State Farm Insurance Co.

2009 WL 3447068 (U.S. Dist. Ct. D. N.J. 2009) (Unpublished)

CONSUMER FRAUD — In federal court, Consumer Fraud Act allegations “sound in fraud,” and are subject to the particularity requirements of the federal civil procedural rules and if a complaint is conclusory in nature, the Consumer Fraud Act claims must be dismissed.

A woman sued her landlord and the Department of Housing and Urban Development. She alleged personal injury and property damage resulting from a water pipe that burst in her apartment. She filed a separate complaint against her insurance company alleging that it violated the Consumer Fraud Act (CFA) when it refused to pay her claim. In that suit, she claimed the insurer violated the Unfair Claim Settlement Practices regulations arising under the Unfair Trade Practices Act (UPTA) and “regulations” promulgated by the Department of Insurance and Banking. Several of her CFA claims against the insurance company alleged the company committed a fraud, namely, misrepresentation in relation to her Renters and Personal Articles Policy. She also alleged that counsel for the insurance company violated the CFA when the attorney sent correspondence with misrepresentations. The insurance company moved to dismiss.

The United States District Court dismissed the CFA complaint in its entirety. First, it held that CFA allegations “sounding in fraud” were subject to the particularity requirements of Federal Rule of Civil Procedure 9(b). Under that rule, a plaintiff alleging fraud must state the circumstances of the alleged fraud with sufficient particularity to place the defendant on notice of the precise misconduct with which it is charged. Here, the Court agreed with the insurance company that the woman failed to assert a causal nexus between her loss and the alleged misrepresentation in relation to the policies. Further, it held that in filing her pleading, the woman failed to say when the alleged misrepresentation occurred, which policy terms constituted misrepresentations, and what facts demonstrated the alleged loss incurred by her. She also failed to identify the specific regulations of the Department of Insurance and Banking that were violated. Thus, the Court ruled that since her complaint was conclusory in nature, the CFA claims had to be dismissed.

Second, it held that there is no individual cause of action under the UPTA; therefore, to the extent that her claim fell under the UPTA, the claim had to be dismissed. Third, although insurance companies that sell insurance policies are subject to the CFA, New Jersey courts have consistently held that the payment of insurance benefits is not subject to the CFA. Accordingly, it dismissed the CFA claims insofar as they pertained to the payment of insurance benefits. Fourth, it held that pro se litigants are not entitled to attorney’s fees under the CFA.

Finally, the Court rejected the woman’s claim that the insurance company’s conduct during the litigation, including a letter sent by opposing counsel, constituted a violation of the CFA. The Court pointed out that letters sent by counsel to advance the objective of litigation are covered by the “litigation privilege” and are not actionable. Here, the attorney’s letters were sent in the course of judicial or quasi-judicial proceedings by an authorized participant in this matter with the objective of advancing the litigation. Thus, the Court deemed the correspondence as logically related to the action and within the scope of the litigation. This barred any claim relating to the letter.

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