Plaintiff in Hurricane Sandy Case Sanctioned for Failing to Show Suit was Not Fraudulent

In a recent U.S. District Court case, a plaintiff was sanctioned after failing to prove that the lawsuit it filed against its insurer was not fraudulent. Plaintiff originally sought payment under an insurance policy issued by International Marine Underwriters for wind damage to its commercial property in Toms River, New Jersey as a result of Hurricane Sandy. The suit was one of over 250 lawsuits filed in New Jersey courts by Plaintiff’s attorneys, a Texas law firm working with local counsel, against insurers to recover for damage allegedly caused by Hurricane Sandy. Defendant alleged that the lawsuit was fraudulent because Plaintiff would not allow inspection of its property and therefore failed to comply with the Court-ordered Joint Discovery Plan, and consequently filed a motion to dismiss.

The policy issued by Defendant precluded litigation if the insured failed to comply with the policy’s terms. One of those terms required the policyholder to permit the insurer to inspect the property to appraise the extent of damage. In its initial inspection, Defendant’s adjuster allegedly found no evidence of extensive wind damage to Plaintiff’s property during inspection related to an earlier claim. Plaintiff made a claim for more than 300 times the original assessment, and the Court found it reasonable under those circumstances for Defendant to conduct another inspection. The Court dismissed the action and ordered Plaintiff to show why the Court should not impose sanctions for filing a frivolous claim. After Plaintiff failed to respond to the Court’s timely notice, the Court imposed sanctions on Plaintiff and awarded Defendant its litigation expenses.