Place of Contract Not Place of Accident Remains Key Factor in Determining Which Law Governs an Insurance Policy’s Interpretation(NY/NJ).

In the case of Certain Underwriters at Lloyd’s of London v. Illinois Nat’l Insurance, et al., the Second Circuit Court of Appeals was asked to decide whether New York or New Jersey law applied to an insurance contract’s interpretation. The coverage dispute arose out of an underlying New York construction accident wherein a construction worker was injured while working on the construction of Goldman Sachs’ New York headquarters.

Continental Insurance Company insured one of the liable contractors under both a primary and an excess policy. It argued that New York law (which was more favorable to its coverage position) applied to its policies’ interpretation under the “center of gravity” test. The federal trial court judge rejected that claim and instead applied New Jersey law to the policies’ construction on the grounds that the insurance contracts were issued in New Jersey to a New Jersey domiciled company. Continental appealed the decision to the Second Circuit.

The Second Circuit has just affirmed the trial court’s decision. It agreed with the trial court that “ all of the relevant contacts” favored the application of New Jersey law since the location of the accident is not determinative of which law governs the interpretation of an insurance contract. A copy of the full decision can be found here — Continental.

So, the long and short of it is – think place of contract not place of accident when deciding which law governs the interpretation of an insurance contract.

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