“New Jersey Appellate Court Reinstates Sandy Lawsuit After Determining Insured Suffered Ascertainable Loss”

In Medhat Abbas v. Pennymac Corp., the New Jersey Superior Court reversed a grant of summary judgment in favor of a mortgage lender after determining that a policyholder suffered an “ascertainable loss.” The insured’s home was damaged by Hurricane Sandy, and the insurer issued a check to cover the loss to the owner of the promissory note and mortgage originally signed by the insured to secure the loan he used to buy his home. The insured eventually sued the mortgage lender, alleging common law fraud and a violation of the Consumer Fraud Act (“CFA”). The insured argued that the mortgage lender ignored repeated demands for the release of the funds his insurance carrier had paid to the mortgage lender, requiring him to pay $9,000 of his own funds to repair his home. The insured further alleged that he complied with all of the mortgage lender’s requests for documentation, yet the lender continued to wrongfully withhold the funds paid by the insurer in connection with the loss.

Ten days after the insured filed his complaint, the mortgage lender issued the insured a check that represented the proceeds paid by the insurance carrier in connection with the storm damage claim. The lender alleged that the decision to release the funds was completely unrelated to the insured’s complaint. The insured returned the check as a rejected settlement offer. The lender filed its answer to the complaint and moved for summary judgment.

The motion for summary judgment was granted after the motion judge found that the insured was unable to show that he suffered an ascertainable loss, as required by the CFA under N.J.S.A. 56:8-19, because the lender released the funds that were the basis of the complaint. The insured appealed this decision, and argued that the judge erred in viewing the lender’s “tardy attempt to mitigate the damages caused by [its] unconscionable business practices [as a means of] absolv[ing] [it] of liability under the Consumer Fraud Act.”

In reversing the grant of summary judgment and reinstating the lawsuit, the court pointed to case law for the proposition that “[a]n ascertainable loss under the CFA is one that is ‘quantifiable or measurable,’ not hypothetical or illusory.” Here, the court reasoned that the insured suffered a quantifiable or measurable loss when the lender failed to release the insurance proceeds in a timely fashion, without a good-faith basis for doing so. The decision of the lender to release the funds at a time of its choosing did not eliminate liability because the ascertainable loss occurred the moment the funds were wrongly withheld.

The court noted that withholding the funds until a time of the lender’s choosing “leaves the door ajar for unscrupulous operators to use unconscionable commercial practices, as long as it can close the door before the victimized consumer initiates legal action to enforce the remedial measures conferred by the Legislature in the CFA.” Here, the insured had already taken on the burden of the cost of rebuilding his home, and showed an ascertainable loss at the time he filed his complaint. Thus, summary judgment was not appropriate, and the case was remanded.