SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

Chubb Custom Insurance Company, et al. v. The Prudential Insurance Company of America, et al. (A-47-07)

Argued April 7, 2008 -- Decided June 26, 2008

LONG, J., writing for a unanimous Court.

The Court considers whether a service of suit clause in an insurance policy operates effectively as a forum selection clause, affording the insured absolute control over the question of the jurisdiction in which a coverage dispute will be litigated.

Chubb Custom Insurance Company (Chubb) issued a professional liability insurance policy to Prudential Insurance Company of America (Prudential) with a policy limit of $50 million. Pursuant to the policy, Chubb agreed to indemnify Prudential and its subsidiaries and their directors, officers and employees. The policy included Endorsement 1, a “Service of Suit Clause,” which stated that in the event Chubb failed to pay any amount claimed to be due under the policy, it would submit, “at the request of the insured,” to the “jurisdiction of any court of competent jurisdiction within the United States of America and [would] comply with all requirements necessary to give such Court jurisdiction and all matters arising hereunder [would] be determined in accordance with the law and practice of such Court.” To cover the $50 million policy limit, Chubb participated in a quota share program with other insurers, who agreed to provide the coverage in nearly equal parts. Three additional tiers of excess coverage existed involving a number of other insurers. All excess policies generally followed the form of Chubb’s policy.

After a trial in Ohio in 2002, Prudential Securities was found guilty of the unauthorized reallocation of assets in numerous retirement accounts. The award included compensatory damages and punitive damages. Prudential sought coverage from the insurers. Citing one of the policy’s exclusions, the insurers denied coverage because the jury found that Prudential Securities had engaged in fraud.