USA – NEW JERSEY Trends and Developments Contributed by: William (Bill) Wilson and Craig R. Rygiel, Mound Cotton Wollan & Greengrass
Applying the “knowingly exploits” theory of equitable estoppel under which a non-signatory is prevented “from embracing a contract, and then turning its back on the portions of the contract, such as an arbitration clause, that it finds distasteful”, the trial court deter- mined that “all of HCC’s claims seek to enforce the Kinsale Policy or assert claims based on the Kinsale Policy” (id at *5). As part of its analysis, the trial court also considered and rejected HCC’s argument that it was “not receiving a direct benefit under the Kinsale Policy because it pleads a contribution claim, rath- er than a subrogation claim” (id). While recognising that not all courts have adopted the “direct benefits” requirement, the trial court nonetheless found that HCC’s argument would fail even if the “direct benefits” requirement applied as HCC was bringing a subroga- tion claim, at least with respect to the excess cover- age provided by Kinsale. These decisions are a reminder that, under federal law, any doubts regarding arbitrability will be decided in favour of arbitration. New Jersey Court Rejects Attempt To Limit the Rule Announced in Statewide Insurance Fund v Star Insurance Co., 289 A.3d 448 (N.J. 2023) In National Union Fire Insurance Company of Pitts - burgh, Pa. v Somerset County Joint Insurance Fund , No 24-916, 2025 WL 36358 (D.N.J. Jan. 6, 2025), the District of New Jersey addressed an issue of first impression concerning a priority-of-coverage dispute between a public entity joint insurance fund and a commercial general liability insurance company. At issue was whether the rule announced in Statewide Insurance Fund v Star Insurance Co. , 289 A.3d 448 (N.J. 2023) applies when a joint insurance fund also maintains reinsurance. After analysing the joint insurance fund enabling stat- ute, the New Jersey Supreme Court held in Statewide Insurance Fund that a joint insurance fund provides “self-insurance” to public entities and that “‘[s]elf- insurance’ is not insurance” (289 A.3d at 449). The court thus found that this “self-insurance” coverage does not qualify as “insurance” when evaluating the availability of coverage under an “other insurance” provision.
In Somerset County Joint Insurance Fund, the joint insurance fund sought to preclude National Union from obtaining documents and communications related to its reinsurance policy. Seeking to distinguish Statewide Insurance Fund , National Union intended to argue that the Somerset County Joint Insurance Fund maintained reinsurance coverage pursuant to which it was only responsible for the first USD250,000 in coverage. According to National Union, this meant that the remaining limit of coverage constituted “insur- ance” rather than “self-insurance”. Rejecting this argument, the federal court held that “[f]our related and unambiguous statutory provisions demonstrate that even when a joint insurance fund obtains a reinsurance contract to reallocate risk that its members would otherwise directly bear, the fund does not convert to providing ‘insurance,’ but contin- ues to be a platform for participating members to ‘self- insure’” (id at *4). Because it found that the existence of reinsurance did not alter the analysis under State- wide Insurance Fund, the court held that the discovery sought by National Union regarding the reinsurance contract was not relevant. Choice of Law Applicable to an Insurance Policy In De Chacon v Caesars Entertainment Corp. , No A-2376-023, 2025 WL 3640133 (N.J. Super. Ct. App. Div. Dec. 16, 2025), the Appellate Division had occa- sion to consider what state’s law applied to a claim arising out of an assault that took place at a New Jer- sey casino. The assailant, a New York resident, was insured under a homeowner’s insurance policy, which was issued to his parents, who also were New York residents, and covered property located in New York. Contending that New York law applied, the insurer denied coverage on the basis that the assailant pled guilty to assault. “Under New York law, an insured who pleaded guilty to assault is not entitled to insurance coverage caused by the assault because the issue of his intent to inflict bodily injury is no longer in ques- tion” (id at *6). In contrast, “[u]nder New Jersey law, an insured who pleaded guilty to assault may still be entitled to insurance coverage for damages caused by the assault” (id). Not surprisingly, the insured argued that New Jersey law applied. Thus, there was an actual conflict between New Jersey and New York
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