STATEWIDE INSURANCE FUND v. STAR INSURANCE COMPANY
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4148-19
STATEWIDE INSURANCE
FUND, a joint insurance fund
in the State Of New Jersey,
Plaintiff-Respondent,
v.
STAR INSURANCE COMPANY
and MEADOWBROOK, INC.,
Defendants-Appellants.
_____________________________
Argued September 29, 2021 – Decided October 21, 2021
Before Judges Whipple, Geiger, and Susswein.
On appeal from the Superior Court of New Jersey, Law
Division, Monmouth County, Docket No. L-1645-17.
Thomas E. Schorr argued the cause for appellants
(Dilworth Paxson, LLP, attorneys; Thomas E. Schorr,
on the briefs).
Francis X. Donnelly argued the cause for respondent
(Turner, O'Mara, Donnelly & Petrycki, PC, attorneys;
Francis X. Donnelly and Tricia E. Habert, on the brief).
PER CURIAM
This insurance coverage dispute arose because of a tragic incident that
took place on a Long Branch beach in 2012, where a twelve-year-old boy, Ezra
Cornman, suffocated 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, alleging they were
negligent and knew or should have known Ezra's activity could result in the
harm that found him.
At the time of the incident, Long Branch was a member of Statewide
Insurance Fund (Statewide), a joint insurance fund (JIF), formed pursuant to our
joint insurance fund statute, N.J.S.A. 40A:10-36 to -51. Statewide provided
Long Branch $10,000,000 in general liability coverage per occurrence. Long
Branch also purchased a policy, effective January 1, 2012, to January 1, 2013,
with $10,000,000 in coverage per occurrence under policy number CP 0641963
from defendants Star Insurance Company and Meadowbrook Inc. (collectively,
Star).
On April 28, 2017, Statewide filed a complaint against Star in the law
division seeking a declaratory judgment for excess insurance coverage. Star
removed the action to the United States District Court for the District of New
A-4148-19
2 Jersey on June 7, 2017. Long Branch also filed a companion declaratory
judgment action similar to Statewide's in March 2017, which was deemed moot
after Statewide and Star agreed to fund a settlement as Ezra's case approached
trial. This settlement included agreed-upon methods to determine when the self-
insurance retention (SIR) limit of $1,000,000 would be reached, and how each
insurer would fund the settlement in the interim. Because of this settlement,
Long Branch is not a party to this appeal and our opinion only addresses the
primacy of coverage here.
In March 2018, Statewide filed an amended complaint alleging that under
N.J.S.A. 40A:10-36, their coverage was not considered "insurance" for the
purposes of applicable "other insurance clauses." United States District Judge
Michael A. Shipp, on March 13, 2018, consolidated Long Branch's later-moot
and Statewide's actions. Almost one year later, on February 28, 2019, Judge
Shipp abstained from deciding both parties' summary judgment motions and
remanded the matter to the Superior Court. Plaintiff filed their motions for
summary judgment on February 27 and 28, 2020 in the Law Division.
The court heard oral argument on April 9, 2020, for both motions and on
June 5, 2020, denied Star's motion and granted Statewide's, meaning Star was
A-4148-19
3
solely responsible for payment of the settlement on behalf of Long Branch. This
appeal followed.
Our review of a ruling on summary judgment is de novo, applying the
same legal standard as the trial court. Conley v. Guerrero, 228 N.J. 339, 346
(2017). Thus, we consider, as the trial judge did, "whether the evidence presents
a sufficient disagreement to require submission to a jury or whether it is so one-
sided that one party must prevail as a matter of law." Liberty Surplus Ins. Corp.
v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007) (quoting Brill v.
Guardian Life Ins. Co., 142 N.J. 520, 536 (1995)).
If there is no genuine issue of material fact, we must then "decide whether
the trial court correctly interpreted the law." DepoLink Court Reporting & Litig.
Support Servs. v. Rochman, 430 N.J. Super. 325, 333 (App. Div. 2013) (quoting
Massachi v. AHL Servs., Inc., 396 N.J. Super. 486, 494 (App. Div. 2007)).
On appeal, Star argues that although Statewide is a JIF under N.J.S.A.
40A:10-36 and -48, Statewide still must adhere to the terms of its contract. Star
argues that JIFs, as insurers, are obligated to follow the general rules of
insurance contract interpretation and each policy's "other insurance" clauses are
mutually repugnant.
A-4148-19
4
Star first argues the court misinterpreted N.J.S.A. 40A:10-48. In doing
so, Star offers an erroneous reading of the statute that militates against
Statewide, and by extension, Long Branch, being self-insured. N.J.S.A. 40A:10-
48, however, provides:
A joint insurance fund established pursuant to the
provisions of this act is not an insurance company or an
insurer under the laws of this State, and the authorized
activities of the fund do not constitute the transaction
of insurance nor doing an insurance business. A fund
established pursuant to this act shall not be subject to
the provisions of Subtitle 3 of Title 17 of the Revised
Statutes.
Star asserts the first sentence provides the natural and logical predicate
for the second sentence's explicit statement that JIFs are not subject to the
regulations applicable to insurers admitted to sell policies in New Jersey.
According to Star, then, under one interpretation of N.J.S.A. 40A:10- -48, JIFs
provide insurance to their members but are not subject to extensive insurance
regulations. Star alternatively argues Statewide could hold itself out as a low-
cost insurer, draft an insurance policy, include another insurance clause, and
disregard the policy terms. We disagree. Statewide is statutorily protected from
being considered insurance by third parties per the Legislature.
The trial court found that:
A-4148-19
5
[T]his [c]ourt agrees that joint insurance funds are not
insurance companies or insurers. There can be no
stronger indication of the Legislature's intent than the
clear an[d] unambiguous language of the relevant
statu[t]es. N.J.S.A. 40A:10-48 undeniably states that
joint insurance funds are not insurance companies or
insurers. . . . Assuming the Legislature intended joint
insurance funds to be treated like insurance companies
as suggested by Star, the Legislature could have altered,
amended and/or supplemented the language contained
in the enabling statute and/or N.J.S.A. 40A:10-48 by
specifically including such language in the legislation.
However, they chose not to include any such language.
It is not this [c]ourt's role to write in additional
qualifications which the Legislature pointedly omitted
in drafting N.J.S.A. 40A:10-36 [to -51], and/or
specifically N.J.S.A. 40A:10-48. Nor should this
[c]ourt engage in conjecture or surmise concerning the
Legislature's intent that would circumvent the plain
meaning of the statutes. While joint insurance funds
are subject to review and regulation by [Department of
Banking and Insurance] [DOBI], this review does not
permit this [c]ourt [to] ignor[e] the clear and
unambiguous language of the statute that joint
insurance funds are not insurance companies or
insurers. This strict interp[retation] of N.J.S.A.
40A:10-48 remains consistent with rationale set forth
in Shapiro1 and West[ville]2.
1
Shapiro v. Middlesex Cty. Mun. Joint Ins. Fund, 307 N.J. Super. 453, 458
(App. Div. 1998).
2
Borough of Westville, N.J. v. City of Philadelphia, 89 F. Supp. 3d 636, 640
(2015) ("Joint insurance funds are explicitly not insurers under New Jersey law:
'A joint insurance fund established pursuant to the provisions of this act is not
an insurance company or an insurer under the laws of this State, and the
A-4148-19
6
Star argues the trial court's interpretation suggests the Legislature meant
to allow JIFs the opportunity to "not actually afford[] genuine insurance" to its
customers. We disagree.
There is a difference between self-insurance and no insurance. As has
been observed, the term "self-insurance" is ambiguous. 1A Couch on Insurance
§ 10:1, at 10:3 (3d ed., 2010). In some respects, "so-called self-insurance is not
insurance at all. It is the antithesis of insurance." Am. Nurses Ass'n v. Passaic
Gen. Hosp., 192 N.J. Super. 486, 491 (App. Div. 1984), aff'd in part, rev'd in
part, 98 N.J. 83 (1984).
The essence of an insurance contract is the shifting of
the risk of loss from the insured to the insurer. The
essence of self-insurance, a term of colloquial currency
rather than of precise legal meaning, is the retention of
the risk of loss by the one upon whom it is directly
imposed by law or contract.
[Ibid.]
However, under some circumstances, "self-insurance" is more than "no
insurance." See ibid.
In a sense, all risks not otherwise insured are "self-
insured." However, many formal procedures exist
whereby an entity can become recognized as a self-
insurer. This is most commonly accomplished by filing
authorized activities of the fund do not constitute the transaction of insurance
nor doing an insurance business.'").
A-4148-19
7
a bond or furnishing another form of proof of the ability
to pay amounts for which the self-insurer may become
liable. To meet the conceptual definition of self-
insurance, an entity would have to engage in the same
sorts of underwriting procedures that insurance
companies employ. These underwriting procedures
include: (1) estimating likely losses during the period;
(2) setting up a mechanism to create sufficient reserves
to meet those losses as they occur; and (3) arranging for
commercial insurance for losses that are beyond a
preset amount.
[Couch, § 10:1, at 10:3 to 10:4.]
Long Branch had an SIR—a dollar amount specified in a liability
insurance policy that must be paid by the insured before the insurance policy
will respond to a loss . An SIR limits an entity's exposure to losses below the
point at which its insurer becomes liable under an excess policy. Star is the
excess policy. Absent some other policy to cover those losses, it may be more
accurate to say the entity is uninsured. In American Nurses Association v.
Passaic General Hospital, a hospital had a "self-insured sum" of $100,000,
before its liability insurance, which covered its nurses, would be implicated. 98 N.J. 83, 88-90 (1984). A nurse was separately covered by her own policy, which
made "other insurance" primary. Id. at 86-87. Her insurer contended that the
hospital's "self-insured sum" qualified as "other insurance." Id. at 88-89.
A-4148-19
8
The Court disagreed. Noting that the "tendency has been not to regard
self-insurance as 'insurance,'" the Court concluded that nothing in the hospital's
policy required it to pay the first $100,000 of a judgment against the nurse, nor
was the hospital otherwise obligated to pay the first $100,000. Id. at 89.
Furthermore, the hospital's decision to investigate the claim, which arose out of
its insurance package, did not compel it to pay the first $100,000. Id. at 90.
In short, Star contends Statewide used the word "insurance" in its
contracts, held itself out to the public as providing low-cost insurance, is
insurance because it has an "other insurance" clause, and is disregarding its own
terms. These are incorrect premises. Statewide does not hold itself out as an
insurer "at large" to everyone. We discern no legal error in the judge's
conclusion.
Relying on Sahli v. Woodbine Board of Education, 193 N.J. 309 (2008),
and Shapiro v. Middlesex County Municipal Joint Insurance Fund, 307 N.J.
Super. 453 (App. Div. 1998), Star asserts that because Statewide worked with
Star to settle Ezra's tort claim, and included an "other insurance" clause, that
Statewide is not a self-insurer who can benefit from the statutory protection. We
disagree.
A-4148-19
9
In Sahli, our Supreme Court primarily addressed whether "a school board
attorney is entitled to indemnification under N.J.S.A. 18A:16-6, which provides
for indemnification in defense of a civil action for 'any person holding any
office, position or employment' with a board of education." Sahli, 193 N.J. at
312. There, the attorney, Sahli, was working for the school board as both a
"Board solicitor" and "secretary pro tem." Id. at 313. The Court held Sahli was
entitled to indemnification in the civil suit under N.J.S.A. 18A:16-6 for his
position as the volunteer secretary pro tem, but not as a Board solicitor. Ibid.
The Court performed a thorough analysis of the Board indemnification
statute. Id. at 313-21 (discussing N.J.S.A. 18A:16-6). Then, the Court
addressed whether a JIF is required under its policy to reimburse Sahli for his
attorney's fees defending him. Id. at 321-22. The Court, however, did not
address whether the Joint Fund is a JIF. Therefore, Sahli is not applicable to the
issue presented here. We also reject Star's next argument that Shapiro held a
"JIF may be considered to be acting as an insurer." Shapiro, 307 N.J. Super. at
453. Shapiro primarily addressed antitrust and tortuous interference claims and
is also inapplicable here.
Star next argues the terms of the policies are repugnant. When two
policies that provide coverage each have a clause declaring the policy is excess
A-4148-19
10
over any other policy, the provisions are "mutually repugnant" and are
disregarded. W9/PHC Real Estate LP v. Farm Fam. Cas. Ins. Co., 407 N.J.
Super. 177, 199 (App. Div. 2009) (citation omitted). The result is that "the
carriers stand on equal footing, with each sharing payment of liability equally
until the limit of the smaller policy is exhausted." Ibid. (citing Universal
Underwriters Ins. Co. v. CNA Ins. Co., 308 N.J. Super. 415, 418-19 (App. Div.
1998)).
Our inquiry goes further, however. We examine "the 'Other-Insurance'
clause of each policy to determine whether there exists language which may
govern the contribution each party should make." Universal Underwriters, 308 N.J. Super. at 417. But an insurance policy must be read as a whole, Hardy ex
rel. Dowdell v. Abdul-Matin, 198 N.J. 95, 103 (2009), and will be enforced as
written when its terms are clear, Mem'l Props., LLC v. Zurich Am. Ins. Co., 210 N.J. 512, 525 (2012). "In assessing the meaning of provisions in an insurance
contract, [we] first look to the plain meaning of the language at issue." Oxford
Realty Grp. Cedar v. Travelers Excess & Surplus Lines Co., 229 N.J. 196, 207
(2017) (citing Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195 N.J.
231, 238 (2008)). "The words of an insurance policy should be given their
ordinary meaning, and in the absence [of an] ambiguity, [this court] should not
A-4148-19
11
engage in a strained construction to support the imposition of liability."
Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530, 537 (1990). "If the language
is clear, that is the end of the inquiry." Oxford, 229 N.J. at 207 (quoting Chubb,
195 N.J. at 238).
The two clauses at issue state, starting with Statewide:
3. Other Insurance.
The insurance afforded by this policy is excess
over any other valid and collectible insurance or
self-insurance.
....
When this insurance is excess of other insurance,
we will pay only our share of the amount of loss,
if any, that exceeds the sum of:
(1) The total amount that all such other
insurance would pay for the loss in the
absence of this insurance; and
(2) The total of all deductible and self-
insured amounts under all that other
insurance.
The language of Star's "other insurance" clause provides:
The Other Insurance Conditions of Section IV—
Commercial General Liability Conditions of the
Commercial General Liability Coverage Form CG 0001
. . . are deleted in their entirety and replaced with the
following:
A-4148-19
12
Other Insurance
a. This Insurance is excess over, and shall not
contribute with any of the other insurance, whether
primary, excess, contingent or on any other basis. This
condition will not apply to insurance specifically
written as excess over this Coverage Part.
There are two reasons the clauses are not mutually repugnant. First, as
the trial court found and as N.J.S.A. 40A provides:
When giving the words of each policy's other insurance
clause their plain and ordinary meaning, this [c]ourt
agrees the language of the Star policy's "other
insurance" clause is only excess over other "insurance."
As previously noted, this [c]ourt accepts the rationale
set forth in American Nurses and Moore that self-
insurance is not insurance. Rather, it has been
recognized as the antithesis of insurance.
A plain reading of the respective policies indicates
Statewide's policy contains an "other insurance" clause
which renders such coverage excess over "any other
valid and collectible insurance . . . ," which
encompasses the Star policy. However, the other
insurance clause in the Star policy does not reference
"self-insurance," which is included in the Statewide
other insurance clause. When negotiating and drafting
its policy, specifically the other insurance clause, Star
could have provided that the other insurance clause
would be triggered by "valid and collectable insurance
or self-insurance" in a similar manner as Statewide.
However, this language was not written into the Star
policy. It is not the responsibility of this [c]ourt to
rewrite a better policy and allow Star to trigger its other
insurance clause based upon the presence of the
antithesis of insurance, self-insurance. Assuming Star
A-4148-19
13
wanted to include self-insurance as triggering the other
insurance clause, it should have been included in the
policy and will not be written into the policy at
summary judgment on a coverage motion.
[Emphasis added.]
Again, the argument here returns to converting Statewide from a JIF to a
commercial insurer, which contradicts the goal of N.J.S.A. 40A:10-48. Star
only argues here that "[i]t is not possible to sensibly read the clauses in such a
manner as to permit one policy to be primary to the other." When reading the
clauses, the sensible conclusion is that Star did not include self-insured JIFs in
their clause, while Statewide did. And Statewide is not an insurer under N.J.S.A.
40A:10-48. Thus, Star's argument fails here as well.
All the remaining arguments raised by Star were found to lack sufficient
merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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