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NJCJI On Prevailing Side in NJ Supreme Court Arbitration Case

July 22, 2022News, Recent News, Top StoriesNJCJI

On July 18, 2022, the New Jersey Supreme Court issued its decision in Crystal Point Condo. Ass’n v. Kinsale Ins. Co. NJCJI and the Insurance Council of New Jersey (“ICNJ”) participated jointly as amici curiae, in support of Kinsale Insurance Company.

The Appellate Division decision in Crystal Point eschewed New Jersey’s strong public policy in favor of arbitration and allowed the plaintiff, a third-party beneficiary to a professional negligence insurance policy who was suing the carrier through a direct action, to avoid the policy’s arbitration provision. In issuing its decision, the appellate panel asked more of the arbitration provision than it would an ordinary contract, contradicting New Jersey and federal law on arbitration agreements.

NJCJI and ICNJ asked the Supreme Court to acknowledge that the plaintiff’s rights to the professional negligence insurance policy were derivative of the insured professionals’ rights. In bringing a direct action against the insured’s carrier, the plaintiffs sought to enforce the contract to their benefit, as though they stood in the shoes of the insureds. Therefore, NJCJI and ICNJ reasoned, the plaintiff should be held to all of the same policy terms as the insured, including the arbitration provision the plaintiffs wanted to avoid.

A unanimous Court agreed with NJCJI and ICNJ. In the opinion, Justice Patterson noted that the Direct Action Statute, through which the plaintiffs brought their claims, mandates that the claim is brought “under the terms of the policy” and that the judgment creditor’s rights are “purely derivative.” (internal quotations and citations omitted). Ruling otherwise would contravene the plain language of the Direct Action Statute and ignore the purely derivative nature of the plaintiff’s rights under the insurance contract. NJCJI Counsel Kayla Rowe briefed and argued the matter for NJCJI and ICNJ.

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