March Madness will soon be upon us and to borrow a basketball cliche, the New Jersey Supreme Court recently reiterated the proposition that filing a bogus insurance claim isn’t a “no harm, no foul” situation.

In the State of New Jersey v. Robert Goodwin, the criminal defendant drove an SUV belonging to Girlfriend #1 to pick up Girlfriend #2 and they parked it on a Newark Street near Girlfriend #2’s home.  The defendant claims he later found the SUV in the same place burned to a crisp, and told Girlfriend #1 to call the police and report the SUV stolen, which she did.  The police determined that the SUV had been set on fire with gasoline and that the ignition had not been tampered with.

Girlfriend #1 filed an insurance claim, and during the claim investigation, the defendant admitted to the insurance investigator that he had parked the SUV where it had been found but lied about it being stolen because he didn’t want to get in trouble with Girlfriend #1.  Although he denied that torched the SUV, the claim was denied because of the misrepresentation.

The defendant was arrested and tried, and the jury acquitted him of arson and theft charges but found him guilty of an insurance fraud charge and he was sentenced to seven years in jail.  The Appellate Devision reserved his conviction, finding that he couldn’t be convicted of insurance fraud if he was acquitted on the arson and because the insurance company discovery the fraud before paying the claim.

On appeal, the Supreme Court analyzed the relevant statute, which stated one “is guilty of the crime of insurance fraud if [he] knowingly makes, or causes to be made . . . a false . . . statement of material fact . . . as part of . . . a claim for payment . . .pursuant to an insurance policy.”

The Court determined that the legislature did not intend to define the term “false statement of material fact” to only those cases in which an individual succeeded in inducing an insurance company to pay a false claim and that a statement is “material” if it could have reasonably affected the decision by an insurance company to provide insurance coverage to a claimant.  The Court also found that a conviction of arson was not necessary to establish insurance fraud because the defendant’s false statements still had the potential to reasonably impact the insurance claim.  As such, the conviction was reinstated.

Please write to Mike Bono for more information.