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                                                         SUPERIOR COURT OF NEW JERSEY
                                                         APPELLATE DIVISION
                                                         DOCKET NO. A-3475-18T2








          Third-Party Plaintiff-Respondent,



     Third-Party Defendant-Appellant.

     Improperly pled as Monmouth County Joint Insurance Fund.
            Argued December 12, 2019 – Decided October 28, 2020

            Before Judges Suter and DeAlmeida.

            On appeal from the Superior Court of New Jersey, Law
            Division, Monmouth County, Docket No. L-3351-17.

            Jessica V. Henry argued the cause for third-party
            defendant/appellant (Cleary Giacobbe Alfieri Jacobs
            LLC, attorneys; Jessica V. Henry, of counsel and on the

            James A. Paone, II argued the cause for third-party
            plaintiff/respondent (Davison, Eastman, Muñoz, Paone,
            PA, attorneys; James A. Paone, II, of counsel and on
            the brief; Kaitlyn R. Campanile, on the brief).

      The opinion of the court was delivered by


      Third-party defendant Monmouth County Municipal Joint Insurance Fund

(JIF) appeals from the March 8, 2019 order of the Law Division denying its

motion to dismiss the third-party complaint of defendant/third-party plaintiff

Brian Chabarek, Esq. We vacate the order and remand.


      The following facts are derived from the record. Plaintiff Debby Dailey,

an employee of defendant Borough of Highlands, filed a complaint in the Law

Division against the borough and three municipal officials seeking damages for

physical injuries she suffered when she fell through the attic floor of a building

owned by the municipality. Dailey alleges she was directed by Chabarek, the

township attorney, and defendant Brian Geoghegan, the borough administrator,

to enter the building, which had previously been deemed unsafe and in need of

demolition by defendant Paul Vitale, the borough code official. According to

plaintiff, the defendants sent her into the building to retrieve an archived file,

even though they were aware that other borough employees had been injured as

a result of the dangerous condition of the structure.

      Chabarek requested defense and indemnification as a third-party

beneficiary of an insurance policy issued to the borough by JIF, a statutory

organization in which the borough is a member. JIF, through its administrator,

declined Chabarek's request, taking the position that the policy excludes

coverage for damages for personal injuries arising out of rendering a

professional service. Chabarek thereafter filed a third-party complaint against

JIF, seeking a declaratory judgment that he is entitled to defense and

indemnification coverage under the policy.

      JIF moved to dismiss the third-party complaint, arguing the borough had

agreed on behalf of its third-party beneficiaries to arbitrate coverage disputes

under the policy.    In support of its argument, JIF relied on the following

provisions of the policy:


No person or organization has a right under this Policy:

a.     To join us as a party or otherwise bring us into a
suit asking for damages from any Member Entity; or

b.    To sue us under this Policy unless all of its terms
have been fully complied with.

A person or organization may sue us to recover on an
agreed settlement or on a final judgment against a
Member Entity obtained after actual trial . . . . An
agreed settlement means a settlement and release of
liability signed by us, the Member Entity and either the
claimant or the claimant's legal representative.


Should an irreconcilable difference of opinion arise as
to the rights and obligations under the Policy, it is
hereby agreed, that, as a CONDITION precedent to any
right of action under or on account of this Policy, such
difference shall be submitted to arbitration. Such
arbitration may be requested or demanded by either you
or us. The requests or demand for arbitration shall be
made in writing and in accordance with the Notice
provisions of CONDITION 11 of these POLICY
CONDITIONS.         In the event that arbitration is
requested or demanded, then we shall appoint one
arbitrator and you shall appoint one arbitrator within
thirty (30) days of the receipt of the written request or
demand for arbitration. The two arbitrators thus
appointed shall promptly confer the appointment of an
impartial umpire.

If either you or we fail to appoint an arbitrator within
thirty (30) days after being required [sic] by the other

            party in writing to do so, or if the arbitrators fail to
            appoint an umpire within thirty (30) days of request in
            writing by either of them to do so, or for any other
            reason there shall be a lapse or failure in the naming of
            an arbitrator or an umpire or in filling a vacancy, then
            such arbitrator or umpire, as the case may be, shall at
            your or our request be appointed by a Judge of the
            Superior Court of New Jersey sitting in either the
            County in which our offices are located or in the County
            in which your offices are located in accordance with the
            provisions of the New Jersey Arbitration Act . . . .

            The arbitration shall take place at our offices, unless
            some other location is mutually agreed upon by both of
            us. The applicant shall submit its case within one
            month after the appointment of the umpire by the
            arbitrators or the Court and the respondent shall submit
            its reply within one month after service of the
            applicant's submission. The arbitrators and umpire are
            relieved from all judicial formality and may abstain
            from following the strict rules of law. They shall settle
            any dispute under this agreement according to an
            equitable rather than a strictly legal interpretation of its
            terms, and their decision shall be final and not subject
            to appeal.

            Each party shall bear the expense of its arbitrator and
            shall jointly and equally share with the other the
            expenses of this [sic] umpire and of the arbitration.

It is unclear from the record whether the municipality took a position on JIF's


      The trial court issued an oral opinion denying the motion, relying

primarily on the holding in Atalese v. U.S. Legal Services Group, 219 N.J. 430

(2014). The trial court observed that in Atalese,

            the Supreme Court has held that the absence of any
            language in the [arbitration] provision that plaintiff was
            waiving her statutory right to seek relief in a court of
            law renders such a provision unenforceable. An
            arbitration provision, like any other comparable
            contractual provision that provides for surrendering of
            a constitutional or statutory right, must be sufficiently
            clear to a reasonable consumer.

In addition, the trial court reasoned that

            [a]s in the case of Atalese, the provision at issue does
            not explain what arbitration is nor does it indicate how
            arbitration is different from a proceeding in a court of
            law. . . . Most importantly, there is nothing in the plain
            language that would be clear and understandable to the
            average consumer that he or she is waiving statutory
            rights for a jury.

      Thus, the court concluded, there was no evidence of a "mutual assent to

waive adjudication by a court of law." A March 8, 2019 order memorializes the

court's decision.

      This appeal followed. JIF raises the following arguments:




             (C) THE TRIAL COURT ERRED                     IN ITS
             APPLICATION   OF    CONSUMER                   FRAUD



      We apply a de novo standard of review to the trial court's determination

of the enforceability of a contract provision. Goffe v. Foulke Mgmt. Corp., 238

N.J. 191, 207 (2019). "The enforceability of arbitration provisions is a question

of law; therefore, it is one to which we need not give deference to the analysis

by trial court." Ibid.

      Federal and state statutes express a general policy favoring arbitration.

Atalese, 291 N.J. at 440; see also 9 U.S.C.A. §§ 1 to 16; N.J.S.A. 2A:23B-1 to

-32. "The public policy of this State favors arbitration as a means of settling

disputes that otherwise would be litigated in a court." Badiali v. N.J. Mfrs. Ins.

Grp., 220 N.J. 544, 556 (2015). "Because of the favored status afforded to

arbitration, '[a]n agreement to arbitrate should be read liberally in favor of

arbitration.'" Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A.,

168 N.J. 124, 132 (2001) (quoting Marchak v. Claridge Commons, Inc., 134 N.J.

275, 282 (1993)). Although enforcement is favored, that "does not mean that

every arbitration clause, however phrased, will be enforceable." Atalese, 219

N.J. at 441.

      A valid arbitration clause "must state its purpose clearly and

unambiguously." Id. at 435. In addition, an agreement to arbitrate "must be the

product of mutual assent," which "requires that the parties have an

understanding of the terms to which they have agreed." Id. at 442 (quoting

NAACP v. Foulke Mgmt., 421 N.J. Super. 404, 424 (App. Div. 2011)). A party

"cannot be required to arbitrate when it cannot fairly be ascertained from the

contract's language that she knowingly assented to the provision's terms or knew

that arbitration was the exclusive forum for dispute resolution." Kernahan v.

Home Warranty Adm'r of Fla., Inc., 236 N.J. 301, 322 (2019).

      In Atalese, the Supreme Court invalidated an arbitration provision of a

consumer contract of adhesion because it: (1) did not include an explanation that

the plaintiff was waiving her right to seek relief in court; (2) did not explain

what arbitration is or how it differs from seeking judicial relief; and (3) lacked

the plain language necessary to convey to the average consumer that he or she

is waiving the right to sue in court. 219 N.J. at 446. The Court noted that "an

average member of the public may not know – without some explanatory

comment – that arbitration is a substitute for the right to have one's claim

adjudicated in a court of law." Id. at 442. Thus, an arbitration clause "in some

general and sufficiently broad way, must explain that the plaintiff is giving up

her right to bring her claims in court or have a jury resolve the dispute." Id. at

447. "No particular form of words is necessary to accomplish a clea r and

unambiguous waiver of rights." Id. at 444.

      The Court later recognized that its holding in Atalese was primarily driven

by the fact that it was examining a consumer contract. The Court explained:

            We were guided essentially by twin concerns. First, the
            Court was mindful that a consumer is not necessarily
            versed in the meaning of law-imbued terminology
            about procedures tucked into form contracts. The
            decision repeatedly notes that it is addressing a form
            consumer contract, not a contract individually
            negotiated in any way; accordingly, basic statutory
            consumer contract requirements about plain language
            implicitly provided the backdrop to the contract under
            review. And, second, the Court was mindful that plain
            language explanations of consequences had been
            required in contract cases in numerous other settings
            where a person would not be presumed to understand
            that what was being agreed to constituted a waiver of a
            constitutional or statutory right.


            The consumer context of the contract mattered.

            [Kernahan, 236 N.J. at 319-20.]

      We do not agree with the trial court's conclusion that the circumstances

here are equivalent to those before the Court in Atalese. Chabarek is not a

consumer and did not sign a contract of adhesion. He is not a party to the JIF

policy. He is, instead, a third-party beneficiary of a contract between JIF and

the municipality. "Nonsignatories of a contract . . . may . . . be subject to

arbitration if the nonparty is an agent of a party or a third[-]party beneficiary to

the contract." Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 333

N.J. Super. 291, 308 (App. Div. 2000), rev'd on other grounds, 168 N.J. 124

(2001). For example, we have upheld application of an arbitration provision in

an insurance policy against the insured's minor son. Allgor v. Travelers Ins.

Co., 280 N.J. Super. 254 (App. Div. 1995). Chabarek, as an employee of the

municipality seeking defense and indemnification under its insurance policy, is

bound by the terms of the policy to which the municipality agreed.

      It is the municipality's assent to arbitration, not Chabarek's, that is critical

to deciding JIF's motion. We, therefore, vacate the March 8, 2019 order and

remand for resolution of JIF's motion based on a determination of whether JIF

and the municipality agreed by mutual assent to arbitration of coverage disputes

under the policy. If so, Chabarek is bound by that agreement.

      In order to determine whether JIF and the municipality mutually assented

to submit coverage disputes to arbitration, the trial court must consider "the

contractual terms, the surrounding circumstances, and the purpose of the

contract." Marchak, 134 N.J. at 275. Municipalities are authorized by statute

to join other local government units to form a JIF for the purpose of providing

liability insurance. N.J.S.A. 40A:10-36. Each member municipality has the

authority to appoint an insurance commissioner who is eligible for election to

the JIF's executive committee. N.J.S.A. 40A:10-37. JIF has the statutory

authority to provide insurance to its members by self-insurance, as happened

here. N.J.S.A. 40A:10-42.

      The record does not reflect the extent to which the municipality negotiated

the terms of the policy. Nor does the record illuminate the role played by the

municipality's JIF commissioner, who may have been a member of its executive

board, in formulating JIF's desire to have coverage disputes under its policies

decided by arbitration. That interest presumably is shared by the municipality,

given that arbitration would reduce costs and preserve resources for the

organization of which the municipality is a member.

      In addition, the sophistication of the parties may bear on whether they

knowingly and voluntarily agreed to a contract's terms. See McMahon v. City

of Newark, 195 N.J. 526, 546 (2008) (enforcing a contract between sophisticated

parties). While sophistication alone is a not a sufficient ground on which to

enforce an arbitration provision, Garfinkel, 168 N.J. at 136, the heightened

scrutiny given to an arbitration provision in a consumer contract is not warranted

where, as presumably is the case here, both parties to the contract were

represented by counsel at the time the agreement was executed.

      We leave to the trial court's discretion whether an evidentiary hearing is

necessary to determine whether JIF and the municipality mutually assented to

arbitrate coverage disputes under the policy. The issue may be amenable to

resolution by submission of affidavits if the municipality agrees with JIF's


      The March 8, 2019 order is vacated and the matter is remanded to the trial

court for further proceedings consistent with this opinion. We do not retain


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