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The New Jersey Appellate Division ruled recently in Myron Corp. v. Atlantic Mutual Ins. Corp that N.J. Rule of General Application 4:42-9(a)(6) provides for the award of counsel fees even if the court action takes place in a state outside of New Jersey. In an apparent effort to discourage forum shopping, the Appellate court’s ruling was made in a case where a policyholder sought to recover attorney’s fees and court costs from defending against its insurance company’s two out-of-state declaratory judgment actions.

While the out-of-state action was pending, the policyholder brought an action at the New Jersey trial court level seeking a ruling that the insurer had a duty to defend and indemnify under its insurance policy. The New Jersey trial court held that the insurance company had a duty to defend and indemnify the policyholder in the out-of-state litigation. The policyholder then sought to recover its attorney fees and court costs from the New Jersey court for both of the out-of-state actions under New Jersey Rule of General Application 4:42-9(a) (6), that provides for the award of counsel fees “in an action upon a liability or indemnity policy of insurance, in favor of a successful claimant.”

The New Jersey Appellate Division in applying this New Jersey rule to an out-of-state case decided a case of first impression. It also expanded the rule to “third party beneficiaries” that may also “sue an insurer to establish coverage and may recover counsel fees if successful.”

While the Appellate Court’s ruling may yet be appealed to the Supreme Court, it is likely that this summer, insurance companies bringing declaratory judgment actions in states outside New Jersey will strongly consider moving them to a New Jersey forum.