A Rare Narrowing Of The Consumer Fraud Act’s Scope: Medical Malpractice Insurance Not Covered

 by:  Peter J. Gallagher (@pjsgallagher)

It is not every day that a New Jersey court limits the scope of the New Jersey Consumer Fraud Act (“CFA”), so when one does, it is worth writing about. Anyone who litigates in New Jersey knows about the CFA and, depending on whether you are on the plaintiff’s side or the defendant’s side, either loves it or hates it. (I am mostly on the defendant’s side, but occasionally find myself representing a plaintiff, so my relationship with the CFA is “complicated.”) Because it is remedial legislation, the CFA is liberally construed to afford the greatest protection to consumers. This philosophy has led courts to apply the CFA (and its treble damages and prevailing party’s attorney fees) to a seemingly ever growing, and very rarely contracting, variety of disputes. In fact, many years ago, the New Jersey Supreme Court observed that: “The history of the Act is one of constant expansion of consumer protection.”

With this in mind, we turn to the Law Division’s published decision in Khan v. Conventus Inter-Insurance Exchange. That case was a putative class action in which plaintiff, a doctor, alleged that defendant violated the CFA in connection with the sale of medical malpractice insurance and the administration of the policy after it was purchased. Plaintiff purchased a policy from defendant and, as part of her initial membership, was required to make a one-time contribution, equal to the first year’s premium, to defendant’s surplus fund. (Defendant is not a traditional insurance carrier, but is instead a “non-profit physician member-owned risk sharing exchange.”) Plaintiff elected to make this contribution in installments over a ten-month period, with the understanding that if she cancelled her policy before the final payment was made, she would still be responsible for the full surplus fund contribution. Plaintiff eventually cancelled her policy before the ten-month period passed and defendant demanded that she immediately pay her entire surplus fund contribution rather than allowing her to pay it off in installments as originally agreed upon by the parties. Plaintiff sued alleging that this attempt to accelerate the surplus fund payment was a breach of contract and a violation of the CFA. She sought to bring her claims as a class action.

Before addressing whether plaintiff could sustain a class action and be appointed class representative, the court first had to decide whether the CFA applied to “transactions involving the purchase and sale of medical malpractice insurance.” Because the court held that it did not, it never had to reach the class certification issues.

 

 

Continue reading “A Rare Narrowing Of The Consumer Fraud Act’s Scope: Medical Malpractice Insurance Not Covered”

“Warriors . . . come out to playyyyyy” (or “What Are The Insurance Implications Of Driving Your Mom’s Car To A Street Fight?”)

 by:  Peter J. Gallagher (@pjsgallagher)

 

One of the most ridiculously entertaining movies of the late-1970’s/early-1980’s was “The Warriors.” You need to watch it to fully appreciate how ridiculous and entertaining it was but it involves a running battle between street gangs through a post-apocalyptic-looking New York City. (To give just a glimpse of how ridiculous it was, the members of one of the gangs, the “Hi Hats,” were dressed like mimes.) The quote in the title of this post is one of the two most well-known lines from the movie (bonus points if you know the other one, answer below).

I was reminded of “The Warriors” when I read the opening sentences of the Appellate Division’s recent decision in Cannon v. Palisades Insurance Company:

“This case involves a street fight between two groups of combatants, some of whom were employed as telemarketers with two local companies. Not surprisingly, the challenge to fight, the acceptance of that challenge, and negotiations over the combat site were all done telephonically.”

A gang of telemarketers could have easily fit into “The Warriors.” Regardless, with an opening sentence like that, I had to read the rest of the opinion. Ultimately, the facts of Cannon are unique and not likely to be useful to you in any future matter. But, that doesn't mean you should not read on, and read the decision yourself if you have the time.

 

Continue reading ““Warriors . . . come out to playyyyyy” (or “What Are The Insurance Implications Of Driving Your Mom’s Car To A Street Fight?”)”