Creature of Statute, A Joint Insurance Fund, That is Not Insurance Need Not Share with Insurer

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After 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.

In Statewide Insurance Fund, a joint insurance fund in 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) into “insurance” and require them to pay part of a settlement.

A court’s role does not include writing additional qualifications which the Legislature pointedly omitted in drafting the statute. Nor should an appellate court 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 the Department of Banking and Insurance [DOBI], this review does not permit an appellate court to ignore the clear and unambiguous language of the statute that joint insurance funds are not insurance companies or insurers.

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 the shifting of the risk of loss from the insured to the insurer. However, under some circumstances, “self-insurance” is more than “no insurance.” 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 a bond or furnishing another form of proof of the ability to pay amounts for which the self-insurer may become liable.

ZALMA OPINION

Insurance contracts are created to shift the risk of loss from one to an insurer who is licensed to do the business of insurance in a state. A JIF is a statutorily created entity to solve the problems some entities, like the city of Long Branch, find themselves facting in obtaining commercial insurance. A JIF is, by definition, not insurance. Since it is not insurance it cannot be “other insurance” to share with Star the costs of defense or indemnity of the city. No court will ever change the wording of a contract or a contract of insurance to make the contract more favorable than intended. Star tried to dip into the funds of the state and lost.