Insurer Not Required to Disclose How it Selects Limits and Premium
Barry Zalma
Oct 11, 2023
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Ira Trocki sued Pennsylvania National Mutual Casualty Insurance Company (“Penn National”) for fraud related to certain insurance policies. The District Court granted summary judgment for Penn National.
In Ira Trocki, trading as Jack Trocki Development, LLC v. Penn National Mutual Casualty Insurance Company, No. 22-1483, United States Court of Appeals, Third Circuit (September 13, 2023) the Third Circuit explained what is needed to prove fraud.
FACTS
Trocki, the owner of a real estate development and management company, purchased and renewed commercial insurance policies with Penn National through an insurance broker from 2006 to 2014. Prior to each annual renewal, Penn National provided Trocki’s agent and Trocki with the renewal policy limit and premium to review.
Trocki sued Penn National in federal court, bringing two claims for fraud, one for common law fraud and one for consumer fraud under the New Jersey Consumer Fraud Act (“NJCFA”). Trocki alleged that Penn National annually increased its coverage limits and insurance premiums without notice and that it was doing so to account for inflation. Trocki initially referred to this practice as “Inflation Guard,” but now contends that he meant to refer to the practice of applying an automatic inflationary increase. The parties agree that “Inflation Guard,” an optional coverage benefit that an insured must purchase separately, was not applied to Trocki’s policies.
The District Court concluded that Trocki fell short of making a prima facie case for either fraud claim.
DISCUSSION
Summary judgment is appropriate only if the movant shows that there is no genuine dispute as to any material fact. There is a genuine factual dispute if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. All facts are to be viewed in the light most favorable to the nonmoving party.
Trocki argued that the District Court improperly granted judgment for Penn National on his claims under the NJCFA and for common law fraud. The NJCFA prohibits certain deceptive commercial behavior.
For a claim under the NJCFA, a plaintiff must demonstrate:
1. unlawful conduct by a defendant,
2. an ascertainable loss, and
3. a causal relationship between the defendant’s unlawful conduct and the plaintiff’s loss.
A cause of action for common law fraud in New Jersey has five elements:
1. a material misrepresentation of a presently existing or past fact;
2. knowledge or belief by the defendant of its falsity;
3. an intention that the other person rely on it;
4. reasonable reliance thereon by the other person; and
5. resulting damages.
Trocki’s argument was that Penn National applied some undisclosed inflation factor to increase the values of the properties covered by the Penn National policies. Trocki argued that the increase in building limit due to an automatic inflation increase is misleading and unclear in that it does not apprise the insured of why the building limit (and the premium) is being increased.
The Third Circuit concluded that the District Court correctly found Trocki could not make a prima facie claim of common law fraud or consumer fraud under the NJCFA. To start, prior to the renewal of each policy, Penn National presented Trocki with what the new policy limit and premium would be, and Trocki had the opportunity to review, and then paid the new premium.
Under New Jersey law there is no “duty to disclose” in a business transaction. Trocki was fully informed of the price and policy limits, and Penn National is not required to disclose precisely how it reached those numbers. Trocki failed to show, at a minimum, either a material misrepresentation, as required for a claim of common law fraud, or unlawful conduct, as required by the NJCFA. Judgment was affirmed.
ZALMA OPINION
Some people appear to believe that suing an insurance company is a perfect way to profit. Mr. Trocki renewed his policies annually, accepted the policy limits and premiums charged him, paid the premium and then after a few years decided to sue his insurers because Penn National failed to explain the methods it used to set the policy limits and premium. If he had a loss I doubt he would complain about the higher limits. The Third Circuit should have applied Rule 11 to this suit.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Happy Law Day
ZIFL – Volume 30, Issue 9 – May 1, 2026
Read the full article at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-may-1-2026-barry-zalma-esq-cfe-2tywc, see the video at at and at https://zalma.com/blog plus more than 5300 posts.
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
ZIFL – Volume 30, Issue 9 – May 1, 2026
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year and is written by Barry Zalma.
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FACTS
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It is Fraud to Make the Same Claim Twice
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In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
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It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
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In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
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What Must be Done after Notice of a Claim is Received by the Insurer
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