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The insurer may not force the state to finance its obligation



Following a tragic incident on a Long Branch beach in 2012, in which a 12-year-old boy, Ezra Cornman, was strangled after digging a hole in the sand with his family. Ezra's family sued the City of Long Branch (Long Branch) and its employees, primarily the Long Branch Beach Patrol, claiming they were negligent and knew or should have known that Ezra's activity could lead to the injury that found him.

IS Statewide Insurance Fund, a joint insurance fund of the State of New Jersey v. Star Insurance Company and Meadowbrook, Inc., No. A-4148-19, Superior Court of New Jersey, Appellate Division (October 21) 2021) Star Insurance Company asked an appellate court to treat a Joint Insurance Fund (JIF) as "insurance" and demand that they pay part of a settlement.

A JIF IS NOT INSURANCE

That at the time of the incident was Long Branch Member of the Statewide Insurance Fund (Statewide), a joint insurance fund (JIF), formed in accordance with New Jersey's Common Insurance Fund Statute, NJSA 40A: 10-36 to -51. Statewide provided Long Branch with $ 10,000,000 in general liability coverage per event. Long Branch also purchased insurance, valid from January 1, 2012 to January 1, 2013, with $ 10,000,000 in coverage per event under insurance number CP 0641963 from Defendants Star Insurance Company and Meadowbrook Inc. (collectively Star).

On April . 28, 2017, Statewide Star sued to request a declaratory judgment for excess insurance coverage. Long Branch also filed a declaratory ruling similar to Statewide's in March 2017, which was considered impossible after Statewide and Star agreed to fund a settlement as Ezra's case approached. This settlement included agreed methods to determine when the self-insurance retention limit (SIR) of $ 1,000,000 would be reached and how each insurer would finance the settlement in the meantime.

Statewide claimed that according to the N.J.S.A. 40A: 10-36, their coverage was not considered "insurance" for applicable "other insurance clauses". The court rejected Star's claim and granted Statewide, meaning that Star was solely responsible for the payment of the settlement on behalf of Long Branch.

COURT DECISION

Star argued that although Statewide is a JIF under the N.J.S.A. 40A: 10-36 and -48, Statewide must still comply with the terms of its contract. Star claims that JIFs, as insurers, are required to comply with the general rules for interpreting insurance policies and that each insurance "other insurance" clause is mutually contradictory.

A joint insurance fund established in accordance with the provisions of the law is not an insurance . companies or an insurer under New Jersey law. The Fund's authorized activities do not constitute insurance transactions or insurance activities.

The district court found that: "joint insurance funds are not insurance companies or insurers. There can be no stronger indication of the legislator's intention than the clear and unambiguous language of the relevant statutes

While common insurance funds are subject to review and regulation by the Department of Banking and Insurance [DOBI] this review does not allow a court of appeal to disregard the clear and unambiguous. unambiguous language in the statutes to joint insurance ssor is not an insurance company or insurer.

There is a difference between self-insurance and no insurance. As has been observed, the term "self-insurance" is ambiguous. The essence of an insurance contract is to shift the risk of loss from the insured to the insurer. But in some circumstances, "self-insurance" is more than "no insurance." In a way, all risks that are not otherwise insured are "self-insured". However, there are many formal procedures where an entity can be recognized as a self-insurer. This is usually accomplished by filing a bond or providing some other form of proof of ability to pay amounts for which the insurer may be liable.

Long Branch had a SIR amount in dollars specified in a liability insurance that must be paid by the insured before the insurance responds to a damage. An SIR limits a company's exposure to losses during the time when its insurer becomes liable under a deductible. Star is the surplus policy. In the absence of any other insurance to cover these losses, it may be more accurate to say that the unit is uninsured.

ANALYSIS

the contribution to be paid by each party

When the court gave the words in each insurance's second insurance clause its clear and ordinary meaning, the court agreed that the language of the Star policy "other insurance" clause only exceeds other "insurances". Since self-insurance is not insurance, it has been recognized as the opposite of insurance.

A court may not rewrite a better insurance policy and allow Star to trigger its second insurance clause based on the existence of the opposite of insurance, self-insurance. Assuming that Star wanted to include self-insurance as a trigger for the second insurance clause, it should have been included in the insurance and will not be included in the insurance in the summary assessment of an insurance motion. is that Star did not include self-insured JIFs in its clause, while Statewide did. And Statewide is not an insurer under the N.J.S.A. 40A: 10-48. Thus, Star's argument failed.

Insurance contracts are created to shift the risk of loss from one to an insurer licensed to conduct insurance business in a state. A JIF is a statutory entity for solving the problems that some entities, such as the city of Long Branch, find themselves obtaining commercial insurance. A JIF is by definition not an insurance. Since it is not insurance, it can not be "other insurance" to share with Star on the costs of the city's defense or compensation. No court will ever change the wording of a contract or insurance contract to make the contract more favorable than intended. Star tried to dive into state funds and lost.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

He is available at http://www.zalma.com and zalma@zalma.com. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award. For the past 53 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claimants to become professionals in insurance claims.

Go to training available at https://claimschool.com; articles at https://zalma.substack.com, the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr Zalma on Twitter at https://twitter.com/bzalma ; Go to Barry Zalma videos at https://www.rumble.com/zalma; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ T the last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud- letter -2 / podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4


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