On March 9, 2018, the Fifth Circuit held that Louisiana law does not void a mandatory New York forum clause in a policy issued to a Louisiana policyholder covering property located in Louisiana.
Al Copeland Investments, LLC owns and operates a food manufacturing facility located in Louisiana, which suffered property damage. As a result, Copeland submitted a reimbursement claim under a policy issued by First Specialty, which was denied. Copeland sued in the Eastern District of Louisiana to recover damages and costs incurred as a result of the property damage, and First Specialty moved to dismiss - arguing that the policy's forum-selection clause required litigation in New York state court.
The policy provided:
Applicable Law; Court Jurisdiction
The laws of the State of New York, without regard to any conflict of laws rules that would cause the application of the laws of any other jurisdiction, shall govern the construction, effect, and interpretation of this insurance agreement.
The parties irrevocably submit to the exclusive jurisdiction of the Courts of the State of New York and to the extent permitted by law the parties expressly waive all rights to challenge or otherwise limit such jurisdiction.
Copeland argued that Louisiana law prohibited forum selection clauses from being enforced in a policy insuring Louisiana property owned by a Louisiana policyholder. The Court held that Louisiana law only "prohibits provisions in an insurance contract that would deprive Louisiana courts of jurisdiction. It went on to state that "venue" and "forum" are separate and distinct from "jurisdiction"; therefore, the policy's venue/forum provision did not violate La. R.S. § 22:868, which provides that “[n]o insurance contract delivered or issued . . . in [Louisiana] . . . shall contain any condition, stipulation, or agreement . . . [d]epriving the courts of [Louisiana] of the jurisdiction of action against the insurer.”
Yes - jurisdiction and venue are separate and distinct legal concepts. See LA. CODE CIV. PROC. ANN. art. 41 (defining venue as “the parish where an action or proceeding may properly be brought and tried under the rules regulating the subject”); LA. CODE CIV. PROC. ANN. art. 1 (“Jurisdiction is the legal power and authority of a court to hear and determine an action or proceeding involving the legal relations of the parties, and to grant the relief to which they are entitled.”). However, the Fifth Circuit's ruling will, in effect, deprive Louisiana courts of jurisdiction because they will no longer be hearing insurance coverage disputes where the policy contains a venue or forum-selection clause.
It is important for policyholders to request that any similar forum-selection clauses be removed from their policies. And, if they are forced to litigate coverage issues, to argue that the forum-selection clause is unreasonable under the other circumstances recognized by the Fifth Circuit:
1. The incorporation of the forum-selection clause into the agreement was the product of fraud or overreaching;
2. The party seeking to escape enforcement will for all practical purposes be deprived of his day in court because of the grave inconvenience or unfairness of the selected forum; or
3. The fundamental unfairness of the chosen law will deprive the plaintiff of a remedy.
Sarah Stogner routinely helps policyholders with insurance coverage issues. She splits her time between New Orleans and Midland, Texas and would be happy to answer any questions you might have about the Copeland case, or other risk management issues.