USA – NEW JERSEY Trends and Developments Contributed by: Jeffrey M. Pollock, Pollock Law, LLC
New Jersey: A Policyholder Reputation That Has Outlived Its Evidence The claim worth testing New Jersey’s courts carry a reputation, built over four decades, as among the most hospitable in the United States to policyholders. That reputation rests on real landmarks: (i) the continuous-trigger doctrine for pro- gressive injury; (ii) the rule that courts read exclusions narrowly against the insurer that drafted them; and (iii) a reasonable expectations doctrine that overrides literal language. Businesses insuring New Jersey risks still price that reputation into where they sue and what they accept to settle. The decisions of the last four years are significantly less policyholder-friendly. Although New Jersey has not become an insurer’s jurisdiction, the recent court rulings are worth noting for both carriers and policy- holders. This article addresses how counsel should plan, plead and resolve coverage disputes. It argues further that the federal courts sitting in New Jersey, which practitioners have long assumed to be the tougher forum, treat policyholders more sceptically than the state courts do, and always have. The pandemic cases set the pattern The COVID-19 pandemic produced the largest simul- taneous test of first-party coverage in New Jersey’s history, and policyholders lost it comprehensively. The Appellate Division moves first in Mac Property Group v Selective Fire and Casualty Insurance Co (App Div, 20 June 2022), holding that closure orders cause no direct physical loss of or damage to restaurants, a bakery, a gym and a childcare centre. The court rejects civil authority coverage, declines to apply regulatory estoppel to virus exclusions, and enforces the exclu- sions as written. One opinion addresses and rejects every doctrinal lever a policyholder might pull. The Supreme Court closes the question in AC Ocean Walk v American Guarantee and Liability Insurance Co (24 January 2024). A casino operator seeking roughly USD50 million loses unanimously, and loses at the pleadings stage. The Court holds both that the closure caused no direct physical loss or damage and, inde- pendently, that the contamination exclusion applies on the face of the complaint. That second holding matters more than the first, because it converts a
fact-intensive coverage dispute into a Rule 4:6-2 (e) question. The Third Circuit reached the same destination a year earlier by a different route. In Wilson v USI Insurance Service LLC (6 January 2023), it consolidates appeals from businesses across New Jersey and Pennsylva- nia and predicts that neither state’s highest court will treat loss of intended use as physical loss. The federal prediction thus precedes the state court’s answer by more than a year, a pattern this article takes up below. The posture deserves more attention than the out- come. A jurisdiction genuinely committed to constru- ing coverage grants broadly and exclusions narrowly does not ordinarily resolve a novel first-impression exclusion dispute on the pleadings. Policyholder counsel should read AC Ocean Walk as a signal about procedure as much as substance: • Exclusions now defeat a complaint before discov- ery, where they once served as affirmative defenc- es requiring a record. • Pleading the insurer’s own drafting history, under- writing materials or regulatory representations no longer reliably survives a motion to dismiss. • The reasonable expectations doctrine did not res- cue a sophisticated commercial policyholder that The narrow-construction canon is where the erosion shows clearest. In Norman International v Admiral Insurance Co (10 August 2022), the Supreme Court enforces a designated-counties exclusion barring claims “in any way connected with” the insured’s operations in excluded territory. The Court holds that the phrase requires no causal relationship, because a tangential link suffices. It holds further that an insurer may rely on undisputed extrinsic facts to defeat the duty to defend rather than confining itself to the four corners of the complaint. That relocates the burden significantly. The mere potential for coverage on the face of the pleadings had long triggered New Jersey’s duty to defend, and courts resolved doubts in the insured’s favour. Nor- man International lets an insurer look outside those sophisticated brokers advised. Exclusions are now read broadly
337 I NSURANCE L I T IGATI O N 2026
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