Casualty

Key Points:

• The U.S. Supreme Court ruled that New Jersey Transit Corporation is not an arm of the state and cannot claim interstate sovereign immunity.
• Plaintiffs can now sue NJ Transit in the state where an accident occurs, expanding litigation venues.
• Forum selection risk increases, including plaintiff-friendly jurisdictions.
• Expect higher defense costs and broader exposure in multi-state incidents.

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The United States Supreme Court’s decision in Galette v. New Jersey Transit Corporation, 607 U.S.(2026), marks a significant shift in how liability exposure is assessed for public transportation entities operating across state lines. In a unanimous ruling issued just last month, the Court held that NJ Transit does not qualify as an “arm of the state” for purposes of sovereign immunity. As a result, it can be sued in courts outside New Jersey.

This ruling has substantial consequences, particularly for insurers, risk managers, and defense counsel handling casualty and liability claims. Sovereign immunity is a tool used to protect states and certain state entities from being sued without consent, especially in federal or out-of-state courts. Historically, organizations tied to state governments have used this doctrine to limit where they can be sued.

Galette arose from separate accidents involving NJ Transit buses outside New Jersey state lines. One of the central cases involved Cedric Galette, who was injured in 2018, in Philadelphia, when a vehicle he occupied was struck by an NJ Transit bus. He filed suit in Pennsylvania. NJ Transit argued that, as an arm of the State of New Jersey, it could not be sued in another state’s courts. Lower courts rejected that position, and the issue ultimately reached the Supreme Court.

The Supreme Court unanimously affirmed the decisions of the lower courts. Writing for the majority, Justice Sonia Sotomayor emphasized that sovereign immunity protects the state itself, not every entity it creates. The key question the Court addressed in its opinion was whether the state structured the entity as legally separate from the state itself. In this case, the answer was yes. In simpler terms, the Court found that NJ Transit should not be treated the same as the State of New Jersey when it comes to lawsuits. This decision has broader implications for how liability risk is evaluated across a range of public and quasi-public entities.

Several factors informed the Court’s decision. First, the Court found that NJ Transit is a separate corporate entity with the power to sue and be sued, enter contracts, and hold property. Second, the Court found that it is financially independent: its debts and liabilities are not obligations of the State of New Jersey. Third, although the state exercises oversight, the Court found that this oversight did not override NJ Transit’s legal separateness. Taken together, the Court reasoned, these characteristics placed NJ Transit squarely outside the scope of sovereign immunity.

This decision carries immediate implications for casualty and insurance professionals. Most importantly, it expands litigation exposure; plaintiffs are no longer limited to suing NJ Transit in New Jersey. Instead, they may bring claims in the state where an accident occurs. This increases the likelihood of cases being filed in jurisdictions with more favorable laws, higher jury awards, or procedural advantages for plaintiffs, and creates uncertainty in claims handling. Insurers will now be required to account for variability in legal standards, jury behavior, and damages depending on where a case is filed. What might have been a predictable exposure in one jurisdiction can become far less certain in another.

The decision in Galette will also lead to an increased risk of forum shopping. Plaintiffs may strategically choose venues they believe will offer better outcomes, particularly in high-value bodily injury cases, complicating defense strategy and affecting every aspect of a case from early evaluation to settlement posture.

The Court’s reasoning is not limited to NJ Transit: it signals that other quasi-public entities, like regional transportation authorities or public utilities, may face similar challenges if they attempt to use sovereign immunity as a shield to lawsuits. Courts will look closely at how an entity is structured, including its financial independence and legal status, rather than relying on labels or general affiliations with a state.

For insurers, this decision raises important underwriting and risk assessment questions. Entities previously viewed as benefiting from immunity protections may now present broader and more complex exposure. Policy terms, limits, and pricing may need to be revisited to respond to an increased risk landscape.

The Galette opinion also holds cost implications for insurers and defense counsel. Defending cases in a variety of jurisdictions typically increases costs, as the need for local counsel and varied procedural rules are factors that now must be considered. In jurisdictions known for higher verdicts, indemnity exposure may rise as well. These factors are particularly relevant in matters involving bodily injury, mass transit incidents, and multi-party accidents.

In response to Galette, insurers and defense teams should place greater emphasis on early case strategy. Determining where a case may be filed and whether venue can be challenged will be critical issues to tackle early on. Coverage for public or quasi-public entities should take into consideration the possibility of multi-state exposure, increased defense obligations, and the potential for higher verdicts depending on the jurisdiction.

The broader significance of Galette lies in its message: courts are willing to scrutinize claims of sovereign immunity and will not extend protections automatically. Entities that operate with a degree of independence, even if those entities are publicly created, may be treated more like private actors for liability purposes.

For insurance professionals, the takeaway is straightforward: assumptions about immunity-based defenses should be revisited. Organizations that were once considered relatively insulated by sovereign immunity can now face expanded exposure, more complex litigation, and higher costs. In an environment where jurisdiction can significantly influence outcomes, Galette underscores the importance of anticipating not just whether a claim will be filed, but where it will be litigated.

Haleigh works in our Roseland, NJ office. He can be reached at (973) 618-4153 or HACatalano@MDWCG.com.