Coverage Dispute Under NJ Direct Action Statute Must Be Arbitrated If Required By The Policy

On July 18, 2022, the New Jersey Supreme Court issued a decision interpreting New Jersey's Direct Action Statute, N.J.S.A. 17:28-2, and held that a claimant that pursues a cause of action directly against a carrier for coverage under the Direct Action Statute must abide by the terms of the policy with the insured, including a binding arbitration provision. The decision is important in that it signals the Court's willingness to enforce appropriate arbitration provisions in insurance policies. The case is Crystal Point Condo. Assoc., Inc. v. Kinsale Ins. Co., A-76-20, __ N.J. __ (July 18, 2022).

In this case, the plaintiff Crystal Point Condominium Association obtained two default judgments against defendants in a construction defect lawsuit. It then filed a separate lawsuit against the insurers of those two defendants under the Direct Action Statute. Kinsale moved to dismiss the lawsuit because Crystal Point did not show that either of the defendants