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2013 Bad Faith Cases: District Court Confirms Arbitration Award in Favor of Insurer Finding Insured Attempted To Make Fraudulent Claim (New Jersey Federal)

In Fed. Ins. Co. v. Von Windherburg-Cordeiro, defendant was an insured under a $1.5M Voluntary Accident Insurance Policy, providing coverage for, amongst other things, ‘permanent total disability.’ In 2005, defendant gave notice of a claim for permanent total disability benefits as a result of injuries suffered from a fall down an escalator at the Munich Airport in Munich, Germany. Plaintiff denied defendant’s claim. Defendant filed a demand for arbitration disputing the denial of her claim and asserting claims for breach of contract, equitable reformation, insurance bad faith, and violations of the New Jersey Consumer Fraud Act. Plaintiff filed a counterclaim in the arbitration for common law fraud founded upon representations made by defendant during the claim investigation and the arbitration. The arbitration panel entered an award in plaintiff’s favor on all of the defendant’s claims and a partial award as to liability on plaintiff’s counterclaim for fraud. The panel chair concluded that defendant’s claimed disabilities and limitations were largely or entirely feigned for the purpose of financial gain, and that defendant had engaged in deliberate deception. Plaintiff was separately awarded fees and costs.

Plaintiff filed a motion to confirm the arbitration awards. Defendant opposed plaintiff’s motion to confirm, but failed to raise any viable arguments in support of her position, with her filings focusing primarily on the believed misconduct of her attorneys and unsubstantiated allegations of arbitrator partiality. Defendant also failed to move to vacate the arbitration award, thereby forfeiting the right to oppose confirmation of the award when sought by the opposing party.

Plaintiff also sought to dismiss defendant’s counterclaims and strike defendant’s answer for failing to comply with the Federal Rules of Civil Procedure. Due to the arbitration clause in the insurance contract, the court dismissed the counterclaim entirely, as it should have been raised in an arbitration setting. The court did, however, allow the answer to stand, given defendant’s pro se status, but deemed all allegations which defendant failed to deny admitted.

Date of Decision: November 26, 2013

Fed. Ins. Co. v. Von Windherburg-Cordiero, Civil Action No. 12-2491 (JAP), 2013 U.S. Dist. LEXIS 168482 (D.N.J. Nov. 27, 2013) (Pisano, J.).