Federal Court Finds Selling Products in New Jersey Is Insufficient to Establish Personal Jurisdiction in Case Regarding Insurance Coverage for Underlying New Jersey Action

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A U.S. district judge ruled in a coverage dispute that an allegation that a company sold products in New Jersey is insufficient to establish personal jurisdiction in a related insurance coverage action. In Ohio Security Insurance Co. v. Premium Food Group Inc., the court ruled that the fact that the insureds sought coverage for an underlying suit filed in New Jersey was not sufficient to exercise specific personal jurisdiction over two New York corporations.

Underlying Litigation

In April 2021, Rebecca Lancia and her husband sued a number of parties, including Amazon Inc. and Nut Cravings Inc., on the basis that Ms. Lancia suffered multiple strokes after consuming unwashed poppy seeds sold by these companies. Premium Food Group Inc. was not a listed defendant in the underlying action but sold poppy seeds to Nut Cravings Inc.

Before the filing of the complaint, Premium Food’s insurer, Ohio Security, added Nut Cravings as an additional insured. Ohio Security ultimately agreed to defend Nut Cravings under a reservation of rights. Ohio Security then filed a declaratory action in August 2021 in New Jersey federal court, arguing that Nut Cravings was not an insured under Premium Food’s policies with Ohio Security. Premium Food and Nut Cravings moved to dismiss the action, arguing that the New Jersey federal court had no jurisdiction over the dispute.

No Personal Jurisdiction Established

As a preliminary matter, the court determined that general jurisdiction did not exist. To determine specific personal jurisdiction, the court needs to establish that a defendant purposefully directed its activities in New Jersey, that the litigation arose out of those activities, and that the exercise of jurisdiction is in accordance with fair play and substantial justice.

Ohio Security argued that both defendants were subject to specific personal jurisdiction because they participated in, and sought coverage for, the underlying action brought by Ms. Lancia in New Jersey. The court began its analysis with Premium Food and ruled that Ohio Security’s argument regarding jurisdiction failed because Premium Food was not a named defendant in the underlying action filed by Ms. Lancia. In addition, the court determined that general allegations that Premium Food did business in New Jersey were not sufficient to establish personal jurisdiction over Premium Food because the alleged New Jersey contacts were immaterial to the coverage dispute. Rather, the court ruled that the coverage dispute involved insurance policies that were executed in New York between a New Hampshire corporation and two New York corporations. None of the parties was “at home” in New Jersey, and no New Jersey contacts were involved in the execution of the subject policies. Accordingly, the court held there was no personal jurisdiction over Premium Food.

With regard to Nut Cravings, while it had relevant contacts with New Jersey, the court decided that the company’s commercial activities in New Jersey were not the basis for the insurance coverage dispute. The court focused on the fact that the coverage dispute arose out of insurance policies purchased in New York by a New York company from a New York broker. Given these contacts, the court ultimately concluded that the coverage dispute belonged in New York federal court, and the entire case was transferred to the U.S. District Court for the Southern District of New York.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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