Appellate Division Affirmed Dismissal but Remanded for Dismissal Without Prejudice and Sanctions for AI-Generated Case Law

Amtrust N. Am., etc. v. Liberty Mutual Ins. Co., No. A-2587-24 (March 27, 2026)

In Amtrust N. Am., etc. v. Liberty Mutual Ins. Co., Amtrust appealed from a trial court’s dismissal with prejudice of its declaratory judgment action against Liberty Mutual and Ohio Underwriting Managers. By way of background, Justin McGuinness worked for Nellis Provisions, Inc. and suffered a work-related car accident in March 2022. The third-party driver had the minimum policy limit of $15,000, which was tendered to the plaintiff. He also accrued a workers’ compensation lien of just over $75,000 in medical benefits.

Amtrust, as the workers’ compensation carrier for Nellis, sought reimbursement from the defendants, alleging they issued an underinsured (UIM) and uninsured policy to Nellies. Amtrust filed a declaratory judgment. The trial court dismissed the complaint for failure to state a claim, noting Liberty Mutual and Ohio Underwriting Managers were improperly named and Ohio Security Insurance Company issued the policy; Amtrust had no public policy right to subrogation; and Amtrust was barred from recovery due to an exclusion in the policy noting UIM coverage would not be provided for workers’ compensation benefits.

Amtrust appealed and the Appellate Division affirmed the dismissal, but also remanded for an order dismissing the complaint without prejudice. The Appellate Division confirmed it appeared the proper defendant was Ohio Security Insurance Company, which was noted in one of defendants’ certifications in trial court. However, it noted the trial court should not have dismissed the complaint with prejudice on a naming mistake as it could be easily cured. As such, the other grounds for dismissal were not addressed.

The Appellate Division specifically pointed out that Amtrust’s counsel cited four cases in his brief that did not exist. The defendants pointed out in their opposition brief that they could not locate one of the cases, and in response, Amtrust’s counsel responded that one of the cases did exist with a similar citation. The Appellate Division delved into AI guidelines and violation of the Rules of Professional Conduct in citing non-existent cases. Since Amtrust’s counsel disregarded the error and failed to make an appropriate retraction, the Appellate Division found counsel violated the RPCs and falsely represented the law to the court, warranting a sanction of $1,000 imposed on Amtrust’s counsel personally.