Insurance policies almost invariably contain a “fraud clause” allowing an insurer to void or deny an insurance claim if the insured misrepresents or conceals a material fact, either before or after a loss occurs. Such conduct also gives rise to a claim under the Insurance Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-4(a), and is punishable as a crime, pursuant to N.J.S.A. 2C:21-4.6(a).
The decision of our Supreme Court in Longobardi v. Chubb Insurance Co. of New Jersey, 121 N.J. 530 (1990), nearly 30 years ago, made clear that, pursuant to a fraud clause, an insured’s material misrepresentation during an insurer’s post-loss investigation can serve as an affirmative defense to coverage. Left unaddressed, however, was the following question: Can an insurer cite an insured’s alleged misrepresentation made during the post-denial coverage litigation, as a basis to invoke the fraud clause and bring an IFPA claim?
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