Third Circuit Clarifies Scope of Liability for Insurance Companies Under the Consumer Fraud Act

In a precedential decision interpreting the New Jersey Consumer Fraud Act (CFA), the Third Circuit determined that an automobile insurance carrier may be liable under the CFA for deceptively inducing one of its customers into releasing claims against another party represented by the carrier. In Alpizar-Fallas v. Favero, Defendant’s car struck Plaintiff’s vehicle, causing serious injury and damages. Both parties were insured by Defendant’s insurance company, Progressive. A Progressive claims adjuster arrived at Plaintiff’s home and presented her with a document that he claimed required her signature. The adjuster represented that by signing the document Plaintiff would expedite the claim process. Plaintiff signed the document relying on the adjuster’s statements. The document, however, was a “comprehensive general release of any and all claims” against defendant driver, also insured by Progressive. Plaintiff was not advised by the adjuster to seek counsel. Plaintiff subsequently brought a putative class action against Progressive for violation of the CFA. On Progressive’s motion, the district court dismissed Plaintiff’s claims, reasoning that the CFA did not apply to “an insurance company’s refusal to pay benefits” but only to the “sale or marketing” of the policies. On appeal, the Third Circuit reversed, holding that the district court mischaracterized...