Statewide Insurance Fund v. Star Insurance Company
Annotate this CaseThis insurance coverage dispute between a public entity joint insurance fund (JIF) and Star Insurance Company (Star), a commercial general liability insurance company, turned on whether the JIF provided “insurance” to its members or, instead, the JIF members protect against liability through “self-insurance.” That distinction was pertinent here because Star’s insurance policy included a clause under which its coverage obligations began only after coverage available through “other insurance” has been exhausted; the clause, however, did not mention “self-insurance.” Star argued the JIF provided insurance and therefore Star’s coverage was excess to the JIF; the JIF disagreed, contending that because its members were instead “self-insured,” Star’s coverage was primary. The New Jersey Supreme Court found that under the plain language of N.J.S.A. 40A:10-48, a JIF “was not an insurance company or an insurer under New Jersey law, and its “authorized activities . . . do not constitute the transaction of insurance nor doing an insurance business.” By the statute’s plain terms, JIFs cannot provide insurance in exchange for premiums, as insurance companies typically do; instead, JIF members reduce insurance costs by pooling financial resources, distributing and retaining risk, and paying claims through member assessments. Therefore, JIFs protect members against liability through “self-insurance.” “Self-insurance” is not insurance. The Court affirmed the grant of summary judgment to the JIF and denial of summary judgment to Star.