In Crystal Point Condo. Assoc. v. Kinsale Ins. Co., the New Jersey Appellate Division issued a critical ruling on arbitration and direct actions against insurance companies. A condominium in Jersey City was found to have structural issues. So, the condo association sued certain professionals responsible for the sub-par construction and received default judgments because both defendants had gone out of business. The debtors’ insurance company (both debtors had the same insurer) refused to cover the debt. Thus, the condo association filed a declaratory action against the insurer under N.J.S.A. 17:28-2. But the contract between the insurer and the debtors had an arbitration clause. The condo association wanted to proceed in the courts, but the insurer sought to compel arbitration. The Appellate Division sided with the condo association and remanded for further litigation on the complaint.
