In an important New Jersey policyholder decision, the U.S. Court of Appeals for the Third Circuit recently addressed New Jersey’s Consumer Fraud Act (CFA) and ruled the CFA applies to an insurer’s deceptive claims handling practices as well as the sale of insurance policies.1


Alpizar-Fallas was injured in an auto accident involving her car and a vehicle driven by Favero. Both were insured by Progressive.

The day after the accident, a claims adjuster from Progressive (Barbosa) visited Alpizar-Fallas at home to inspect the damage to her car. He also had her sign certain paperwork which he said would “expedite the processing of the property damage claim.” Relying on the adjuster’s statements that her accident had a “questionable issue of liability” and that her signature was “necessary” to move the property damage claim forward, she signed the documents.

However, the document Alpizar-Fallas signed was a broadly written comprehensive release of all claims including her injury claims against the driver of the other vehicle. Alpizar-Fallas did not know the legal implications of the release. The adjuster did not explain the document, did not advise her to seek legal counsel before signing, nor did he communicate with her in Spanish, her native language. Further he required that she sign the document in his presence at her home.

Alpizar-Fallas sued Favero in state court, seeking damages for her injuries. She amended the complaint to include a class action claim against Progressive and the adjuster under the New Jersey Unfair Claims Settlement Practices Regulations (UCSPR)2 and New Jersey’s Consumer Fraud Act (CFA).3 She alleged that Barbosa falsely represented the nature of the document she signed; that she reasonably relied upon the materially false representations; others at the insurance company have engaged in this pattern of unlawful conduct; and this practice has stripped present and former Progressive policyholders of their rights to pursue claims against other Progressive policyholders. The action was removed to the District Court for District of New Jersey.

Progressive and Barbosa moved to dismiss the class action, arguing that (a) the UCSPR does not provide a private right of action, (b) the UCSPR bars CFA claims, (c) the CFA does not apply to schemes to defraud policyholders of their benefits and personal injury claims, and (d) Alpizar-Fallas failed to plead an “ascertainable loss” as required by the CFA. An ascertainable loss to support a CFA claim is either an out-of-pocket loss or showing of loss in value that is quantifiable or measurable. Defendants also argued that Alpizar-Fallas did not allege a violation of the CFA because the insurer and its adjuster were acting pursuant to Favero’s insurance policy, not Alpizar-Fallas’ policy, when Barbosa had her sign the release documents.

District Court Decision

The District Court granted Defendants’ motion and dismissed the Complaint. First, the District Court dismissed Alpizar-Fallas’ class action claim to the extent it alleged a violation of the UCSPR because that set of regulations does not provide a private right of action. Next, the District Court dismissed the CFA claim because, in its analysis, the CFA only applied to the “sale or marketing” of insurance policies. The District Court cited a prior Third Circuit decision which held the CFA covers the performance of insurance policies,4 but ultimately followed a more recent New Jersey Superior Court Appellate Division case, which noted the CFA does not apply to an insurance company’s refusal to pay benefits.5 The District Court compared Alpizar-Fallas’ allegations to the facts in the Myska decision, where the plaintiff attacked an insurance company’s “systematic practice of denying, obfuscating coverage of, or otherwise avoiding claims by New Jersey consumers.”

Third Circuit Decision

On appeal, Alpizar-Fallas argued the District Court erred in dismissing her CFA claim because the allegations of her complaint set forth the type of harm the CFA is designed to remedy. In response, Progressive and Barbosa maintained the CFA claim is precluded by the UCSPR, that her allegations are not within the scope of the CFA and that her pleading failed to conform to the requirements of the CFA.

Based on the facts presented, the Third Circuit reversed the District Court’s decision and predicted the New Jersey Supreme Court would extend the CFA to include fraudulent claims handling alleged in the Complaint. The Third Circuit also noted the CFA is geared toward constant expansion of consumer protection and should be construed liberally in favor of consumers.


As the Third Circuit highlights, the scope of CFA extends to deter and punish deceptive insurance practices. The court made clear this embodies subsequent performance of the insurance contract and insurer misconduct during claims handling. The CFA allows treble damages and attorney’s fees for this type of misconduct. While we await further developments with the proposed Insurance Fair Conduct Act, the Third Circuit’s broader application of the CFA under Alpizar-Fallas may buttress New Jersey policyholders’ claims against their first-party insurers.
1 Alpizar-Fallas v. Favero, 908 F.3d 910 (3d Cir. 2018).
2 N.J. Admin. Code §§ 11:2-17.1 to -17.15.
3 N.J. Stat. Ann. §§ 56:8-1 to -210.
4 Weiss v. First Unum Life Ins. Co., 482 F.3d 254 (3d Cir. 2007).
5 Myska v. NJ Manufacturers Ins. Co., 440 N.J. Super. 458 (N.J. App. 2015).