USA – NEW JERSEY Trends and Developments Contributed by: Jeffrey M. Pollock, Pollock Law, LLC
Arbitration and the boundary of what counts as insur- ance stay active. Federal courts in New Jersey con- tinue to enforce arbitration provisions in commercial policies under federal law, and hold that joint insur- ance funds providing self-insurance are not “insur- ance” for coverage analysis, most recently in National Union Fire Insurance Co of Pittsburgh , PA v Somerset County Joint Insurance Fund (D.N.J., 21 August 2026). Public entities and pooled risk-sharing arrangements should not assume that coverage doctrines built for commercial policies transfer. Climate, coast and the economics of rebuilding New Jersey’s sea levels rise at roughly twice the global average, and exposure concentrates where the economy does: the ports, the shore counties and the industrial waterfront. That physical fact now drives regulation. In January 2026, the Department of Environmental Protection adopted the NJPACT REAL rules, which require new coastal development to sit roughly four feet above FEMA’s 100-year base flood elevation and impose assessment obligations in pro- jected inundation zones. They follow the Inland Flood Protection Rule of 2023 and carry a contested hard- ship exception for affordable housing. These rules will change coverage litigation more than environmental practice. Higher rebuilding standards enlarge ordinance or law claims, because restor- ing a damaged structure to current code now costs materially more than restoring it as it stood. They also sharpen the boundary G.E.M.S. Partners narrowed, since the line between excluded flood and covered water damage decides who absorbs that difference. Read ordinance or law sublimits, and the definitions of flood and surface water, as the provisions likeliest to carry the cost of New Jersey’s adaptation policy. Federal courts were never the friendlier forum The premise that federal courts in New Jersey favour policyholders less is not new, and the pandemic litiga- tion exposes the mechanism precisely. When district courts in this Circuit tried to return novel state-law coverage questions to the state courts that owned them, the Third Circuit stopped them. In DiAnoia ’ s Eatery v Motorists Mutual Insurance Co (18 August 2021), the court holds that the district courts abused their discretion under the Declaratory Judgment Act,
vacates the remand orders, and directs renewed con- sideration of the Reifer factors. Burlington Stores v Zurich American Insurance Co (D.N.J. 2022) illustrates the downstream effect, where the court retains jurisdiction over a New Jersey COV- ID-19 coverage dispute. Reasoning that the governing principles of New Jersey insurance law summarise easily and travel across states, and that federal deci- sions had by then supplied ample guidance, the court declines to abstain. That states the structural problem in a sentence. Federal courts generated most of that guidance by predicting state law, and it hardened into consen- sus before the New Jersey Supreme Court spoke. The reasoning turns circular in a way that is easy to miss: novelty defeats abstention only until enough federal courts answer the novel question, at which point the answer is no longer novel. The Reifer fac- tors and the guidance of State Auto Insurance Cos v Summy direct federal courts to hesitate where state law remains undetermined, and New Jersey practice runs the other way. Erie prediction is not a neutral technology, and the cases show its bias: • In G . E . M . S . Partners v AmGUARD Insurance Co (D.N.J. 2024), the court predicts that the New Jersey Supreme Court would define “flood” and “surface water” in a way that narrows the coverage grant, on a question the state’s highest court has never decided. • In Ascot Specialty Insurance Co v Mason , Griffin & Pierson (D.N.J., 18 August 2025), the court applies a purely objective standard to a professional liability prior knowledge exclusion, displacing New Jersey’s hybrid subjective-objective formulation in favour of the policy’s own language. • In Kimmel v Massachusetts Bay Insurance Co (D.N.J. 2025), the court holds that replacement cost estimates standing alone do not establish actual cash value, raising the evidentiary burden on a first-party insured at summary judgment. Federal courts also reach results that favour policy- holders, and intellectual honesty requires saying so.
340 I NSURANCE L I T IGATI O N 2026
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