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Pursuant to the New Jersey Code of Criminal Justice (Code), one can be charged with the offense of insurance fraud for knowingly making a false or misleading statement of material fact in connection with an insurance claim. That third-degree offense may be elevated to the second degree by aggregating five “acts” of insurance fraud, the total value of which exceeds $1,000.
In State Of New Jersey v. Randi Fleischman, A-4 September Term 2006, Supreme Court of New Jersey (March 26, 2007) the Supreme Court of New Jersey was provided with its first opportunity to construe N.J.S.A. 2C:21-4.6’s penalizing of a false “statement” as an “act of insurance fraud” that can be accumulated to elevate insurance fraud to a second-degree offense.
The State indicted defendant Randi Fleischman for second-degree insurance fraud. The factual underpinnings for the charge were based on various items of false information contained in defendant’s statements to the police and to her automobile insurer in connection with a stolen car claim.
FACTS
On December 4, 2003, after she made arrangements for a friend to dispose of her 2000 Chrysler Sebring, the defendant contacted the Edison Police to report that her car had been stolen. Defendant also telephoned her automobile insurer, Liberty Mutual Insurance Company (Liberty Mutual), to report that her car had been stolen. In response to questioning about the claim, she told her insurer that she still possessed the automobile’s keys and that she had not been trying to sell her car.
On December 12, 2003, defendant filed with Liberty Mutual an Automobile Theft Affidavit, in which she swore that the automobile had been stolen from the Menlo Park Mall parking lot, and that she had no information about the car’s whereabouts. Fleischman’s affidavit also stated that she did not own any other automobile and that her car had not been for sale.
Fleischman subsequently confessed that her car had not been stolen and withdrew her insurance claim. She was later indicted for insurance fraud. She moved to dismiss the second-degree insurance fraud count (Count One). The motion court found that the State presented only three acts of insurance fraud: defendant’s fraudulent report to Liberty Mutual; the false affidavit that she submitted to Liberty Mutual; and defendant’s fraudulent police report. Accordingly, the court dismissed Count One, leaving intact the remaining charges.
The Appellate Division affirmed Count One’s dismissal, holding that each lie told in support of one fraudulent claim in a single document cannot reasonably be seen as a separate act of insurance fraud, but rather only as a component of the one fraudulent claim.
Pursuant to the statute a person commits “insurance fraud” when one knowingly makes, or causes to be made, a false, fictitious, fraudulent, or misleading statement of material fact in . . . any record, bill, claim or other document, in writing, electronically, orally or in any other form, that a person attempts to submit, … a claim for payment, reimbursement or other benefit pursuant to an insurance policy . . . [(Emphasis added).]
The offense is elevated from the third to the second degree when a person commits five or more acts of insurance fraud and the aggregate value of “property, services or other benefits obtained or sought” exceeds $1,000. N.J.S.A. 2C:21-4.6(b). The statute further provides:
Each act of insurance fraud shall constitute an additional, separate and distinct offense, except that five or more separate acts may be aggregated for the purpose of establishing liability pursuant to this subsection. Multiple acts of insurance fraud which are contained in a single record, bill, claim, application, payment, affidavit, certification or other document shall each constitute an additional, separate and distinct offense for purposes of this subsection. [Ibid. (emphasis added).]
Thus, the breadth of the phrase “act of insurance fraud” for grading purposes depends, in part, on the breadth of the term “statement,” in subsection a. of the Act.
No definition of “statement” answers the question posed by this appeal. The statute’s reference to a “statement” is, to the New Jersey Supreme Court, ambiguous.
Although it is evident that the Legislature intended to curb insurance fraud, the Supreme Court could not ignore that the Legislature created two separate offenses of different degrees. The Supreme Court rejected the argument that more than five “acts” of insurance fraud were perpetrated by defendant when she made three statements in support of her fraudulent insurance claim. Therefore, the Supreme Court held that when a defendant provides to officials in connection with a fraudulent claim a document or oral narrative that contains a material fact or facts relating to the claim, each such document or narration is a “statement” equating to an “act” of insurance fraud.
Although there can be multiple “statements” in a single document the Supreme Court rejected the assertion that the Legislature intended every discrete fact within a narrative assertion about a single claim would amount to an “act” of insurance fraud.
Because defendant’s oral and written statements related to a single claim of a stolen automobile, the State presented three “acts” of insurance fraud to the grand jury: defendant’s report to the police, defendant’s oral report of the alleged theft to Liberty Mutual, and defendant’s affidavit submitted to Liberty Mutual in support of her claim.
ZALMA OPINION
To me, insurance fraud, is a crime. Adding grades of fraud is an attempt by the Legislature to make some types of insurance fraud more criminal than other types of fraud. As silly as this grading system is, it is the law of New Jersey, and the defendant could not be charged with a higher degree of fraud because she only made three fraudulent statements. This was a “hard fraud” that was premeditated. The Legislature should do what other states do: declare insurance fraud of any degree or amount a felony subject to five years in state prison.
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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com
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