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Defense Digest

When Immunity Ends: What Galette v. NJ Transit Means for Liability Exposure

Defense Digest, Vol. 32, No. 2, June 2026

June 30, 2026

by Haleigh A. Catalano

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.

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.

Firm Highlights

Defense Victory Obtained in Workers’ Compensation Case

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Defense Victory Obtained in Workers’ Compensation Case

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Summary Judgment Obtained in Insurance Coverage Case

Thought Leadership

Commonwealth Court Reaffirms the Constitutionality of Act 111's IRE Provisions

In this case, the claimant sustained a work injury of January 6, 1994, which was acknowledged by Notice of Compensation Payable (NCP). After the claimant’s receipt of 104 weeks of temporary total disability benefits, the employer filed a Request for an Impairment Rating Examination (IRE). The IRE was performed in May 2023 and the IRE physician found that the claimant had a 5% whole person impairment, under the AMA Guides. The employer filed a Petition based on the IRE results, and the Petition was granted by the WCJ. During litigation, the claimant argued that the IRE provisions of Act 111 (Section 306(a.3) of the Act) were not applicable to her injury, since it predated June 24, 1996, the date Act 57 went into effect, and that the IRE provisions were unconstitutional. The Workers’ Compensation Judge (WCJ)) granted the Petition and the Board affirmed. On appeal to the Commonwealth Court, the claimant argued that Act 111 violated the nondelegation doctrine and that its retroactive application to the claimant’s injury was unconstitutional. The court rejected the arguments on the basis that they had already found the same arguments without merit in multiple, prior cases. The court also addressed an argument made by the claimant that Act 111 was procedurally defective under the Pennsylvania Constitution because it was only considered on two days in each House after having undergone amendments and reassignments. The court noted that the Pennsylvania Constitution requires every bill to be considered on three different days in each House. The claimant maintained that, according to the legislative history, the bill did not receive three separate days of consideration from each House when it was assigned a new bill number. The court pointed out, however, that the bill number, H.B. 1840 remained constant and was considered on three occasions by the House. Further, the court concluded that minor amendments to the bill were germane to its original subject, which was to modify the Act’s IRE process, in accordance with Protz II.

Complete Victory Obtained in a Workers’ Compensation Matter

Result

Complete Victory Obtained in a Workers’ Compensation Matter

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Thought Leadership

Florida Supreme Court Rules Florida Statute §627.70152 Does not Apply Retroactively

In a decision that resolves years of appellate uncertainty and confirms that insurers and insureds alike can rely on the legal framework in place when a policy is issued, the Supreme Court of Florida last week found that Florida Statute §627.70152, which involves an insured’s requirement to provide an insurer with pre-suit notice before filing a suit, cannot be applied retroactively. In Universal Property & Casualty Insurance Company v. Hughes, the Court was presented with the issue of whether the statutory pre-suit notice requirement applied retroactively and whether it would apply to a breach of contract of an insurance policy that was issued before the statute went into effect. Before the Court was an appeal from a homeowner, Ms. Hughes, who sued her insurance carrier, Universal Property & Casualty Insurance Company (Universal) for breach of contract under an insurance policy that was in effect from April 24, 2019 through April 24, 2020. During the policy period, Ms. Hughes suffered a loss and, on May 29, 2019, made a claim for water damage. The carrier investigated the loss and issued payment; Ms. Hughes disputed the payment, finding the amount insufficient for repairs. On July 1, 2021, Florida Statute §627.70152 went into effect, which required insureds to provide notice of intent to initiate litigation against the carrier prior to filing a lawsuit; if an insured filed the lawsuit without complying with §627.70152, a court must dismiss the case without prejudice. On August 4, 2021, Ms. Hughes filed her lawsuit against Universal for breach of contract. Universal moved to dismiss based on her failure to comply with §627.70152. Ms. Hughes contended the notice requirement could not be applied retroactively. The trial court disagreed and dismissed the lawsuit without prejudice, and Ms. Hughes appealed. During the appeal, the Fourth District Court of Appeal, in Cole v. Universal Property & Casualty, 363 So. 3d 1089 (Fla. 4th DCA 2023), ruled that Florida Statute §627.70152 did apply retroactively to policies issued before the effective date of §627.70152. However, the Sixth District Court agreed with Ms. Hughes and overturned the trial court’s ruling, finding the statute could not retroactively apply to policies issued prior to the statute effective date. Thereafter, the other district courts weighed in, with the Third District Court agreeing with the Fourth District Court, and the First, Second and Fifth District Courts agreeing with the Sixth District Court. In resolving the conflict amongst the district courts, the Supreme Court advised “as a general rule, ‘the statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.’ Hassen v. State Farm Mut. Auto. Ins. Co., 674 So. 2d 106, 108 (Fla. 1996). The Court applied the two-step test when deciding whether a statute has retroactive application: “First, the Court must ascertain whether the Legislature intended for the statute to apply retroactively. Second, if such an intent is clearly expressed, the Court must determine whether retroactive application would violate any constitutional principles.” Menendez v. Progressive Exp. Ins. Co., 35 So. 3d 873, 877 (Fla. 2010). In analyzing the Legislature’s intent, the Court must determine whether the Legislature has manifested a clear command for retroactivity in the statutory text.  In review of the statutory text, the Court found nothing in the language of the statute to indicate that the phrase “all suits” was serving another purpose of expanding its reach to suits based on policies that both predate and postdate the enactment of the statute. Buis v. Universal Prop. & Cas. Ins. Co., 394 So. 3d 738, 741 (Fla. 2d DCA 2024). Further, the Court noted the statute has an effective date, which has long been considered to be evidence against retroactive application of a statute. The Court concluded that, on its face, no provision of §627.70152 speaks to application of the statute to insurance policies issued before the statute’s effective date and therefore, the Legislature did not clearly command retroactivity of the statute to include insurance policies issued prior to the enactment of the statute. The Court briefly reviewed Universal’s argument that the presuit notice requirement was procedural, not substantive, and therefore should be applied retroactively; however, the Court agreed with the Sixth District Court’s finding that, in its entirety, §627.70152 transformed an insured’s ability to sue an insurance company under a property insurance policy and an insurer’s obligations to respond to and pay insurance claims, thus making the requirement a substantive change. The Court thereby upheld the decision of the Sixth District and disapproved the decision of the Fourth District in Cole.

Thought Leadership

The Tolling Trap: Filing Alone Will Not Toll the Statute Without Good-Faith Service

The Eastern District of Pennsylvania recently reinforced a critical limitation on bad faith claims, holding that a timely filing alone will not preserve a cause of action absent a good-faith effort to serve the original process. The plaintiff had presented a claim for underinsured motorist benefits to his auto insurer. The insurer evaluated the claim and determined that the plaintiff’s accident-related damages did not exceed the bodily injury liability insurance limits of the at-fault driver and denied his claim. Among other claims, the plaintiff sought to present a claim for insurance bad faith under 42 Pa. C.S.A. § 8371, to which a two year statute of limitation applies. He first filed a praecipe for writ of summons before the expiration of the statute of limitation. However, the plaintiff did not attempt to serve the praecipe or writ until after the statute of limitations had expired. Additionally, the service failed as the plaintiff had mailed the original process to an incorrect address. Despite receipt of the Postal Service’s failure to deliver the original process, the plaintiff did not attempt to re-serve the writ. Two months later, the plaintiff filed a complaint and then successfully served that complaint. The insurer sought to dismiss the plaintiff’s bad faith claim as time-barred by the statute of limitations. The district court agreed. Though the plaintiff had filed a praecipe for a writ of summons prior to the expiration of the statute of limitations, the statute is only tolled if there is a good faith effort to serve that original process. In this case, the court determined that the plaintiff had failed to perform a “good faith effort to serve the original process”. Additionally, though the filing and service of a complaint can serve as alternative original process when the lawsuit is commenced by the filing of a praecipe for a writ of summons, the plaintiff filed his complaint after the statute of limitations had expired. The plaintiff’s bad faith claim was therefore determined to be barred by the statute of limitations and dismissed by the court, with prejudice. A key takeaway for the defense is not to assume that the statute of limitations has been successfully tolled by a plaintiff merely because a praecipe for a writ of summons or complaint has been filed prior to the expiration of the statute. A filed complaint or writ is only part of the equation. The defense should carefully review the docket and filings to confirm that the plaintiff also performed the requisite good faith effort to serve that original process. A thorough review of the docket may reveal that the plaintiff failed to make the good-faith service efforts necessary to toll the statute of limitations.

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CLM 2026 Focus Conference

Allison joins three insurance industry leaders to discuss how cyber coverage disputes, the growing impact of social inflation on bodily injury claim valuation, and the use of artificial intelligence are reshaping the bad faith landscape. The panel will examine emerging sources of extra-contractual exposure, including evolving cyber insurance coverage issues and the challenges of accurately valuing bodily injury claims. Practical approaches to claim evaluation using AI, along with defense strategies designed to help prevent or successfully defend against bad faith litigation, will also be addressed.