Progressive auto insurance claims vehicle. Photo: Ken Wolter/Shutterstock.com

New Jersey's Consumer Fraud Act is applicable to a claim that a Progressive auto insurance policyholder was misled into signing a release of her injury claim, the U.S. Court of Appeals for the Third Circuit has ruled in a precedential decision.

The case concerns a woman who suffered injuries in a crash in which her insurance company, Progressive Garden State Insurance Co., also was the insurer for the other driver. A consumer fraud claim was dismissed in U.S. district court based on case law holding that the act does not apply to the denial of insurance benefits. But the appeals court said the plaintiff's claim falls squarely under the CFA, since she relied on false representations of a Progressive agent she believed was looking out for her interests.

Ana Lidia Alpizar-Fallas, who was seriously injured when the car she was riding in was rear-ended in December 2014, was contacted the day after the crash by a claims adjuster from Progressive, who asked her to sign forms that would “expedite the processing” of her claim. But the Progressive agent, Brian Barbosa, did not communicate with her in her native Spanish, and she failed to realize she signed a general release of all claims relating to personal injuries from the crash.

Alpizar-Fallas brought suit against Progressive Garden State Insurance, Barbosa and the driver of the other car, Frank Favero. She brought claims under the New Jersey Unfair Claims Settlement Practices Regulations and the CFA. The defendants removed the case to the U.S. District Court for the District of New Jersey, where Judge Michael Shipp ruled in August 2017 that the New Jersey Supreme Court would likely find that the Consumer Fraud Act did not apply to Alpizar-Fallas' allegations. He relied on Myska v. New Jersey Manufacturers Insurance, a 2015 New Jersey Appellate Division ruling in which an insurance company denied claims for lost value of policyholders' cars after they were damaged in accidents.

But Third Circuit Judges Kent Jordan, Thomas Vanaskie and Marjorie Rendell said Shipp misapplied the Myska case. In the present case, the allegations that Barbosa falsely represented the nature of the documents signed by Alpizar-Fallas, and that Barbosa and others at Progressive have engaged in the same pattern of unlawful conduct with respect to others in similar circumstances, “fall squarely within the language of the CFA,” Rendell wrote for the court.

“These facts, taken together, amount to an allegation of fraud in connection with the subsequent performance of a consumer contract, a situation explicitly covered by the language of the CFA,” Rendell wrote.

The appeals court also rejected Progressive's argument that Alpizar-Fallas failed to conform with the heightened pleading standards of Federal Rule of Civil Procedure 9(b) and did not allege an ascertainable loss, as required under the CFA.

Alpizar-Fallas met the Rule 9(b) standard because she alleged the precise events surrounding her consumer fraud claim and pleaded the time, date and place of appellees' conduct and provided a detailed description of that conduct, Rendell said.

And Alpizar-Fallas alleged in her complaint that she and other class members were stripped of their rights to pursue claims against Progressive policyholders because of the appellees' conduct. In this case, the plaintiff is unable to recover for her losses from the accident, which are detailed in the complaint. She needed and will continue to need medical care, has suffered an impairment of her earning capacity, and has suffered pain, suffering, mental anguish and embarrassment, which are sufficient to demonstrate an ascertainable loss, Rendell said.

The suit was brought on behalf of a class of present and former Progressive policyholders who were involved in motor vehicle accidents with other parties also insured by Progressive.

“As a result of this decision, we're back with, essentially, our entire case,” said Charles Gormally of Brach Eichler in Roseland, who represents Alpizar-Fallas and the putative class.

The case may not have been viable without the CFA claim, because of its fee-shifting provision, he said.

The incidence of abusive tactics by agents in auto accident cases where both drivers have the same insurance company “may appear as some kind of random occurrence but actually happens a lot,” Gormally said.

Kymberly Kochis of Eversheds Sutherland in New York, who argued for Progressive Garden State Insurance Co., did not return a call about the case.