Forum-selection clauses, which determine where suits must be filed, are becoming much more common among excess line carriers. These are often inserted by redundant underwriters and can cause large additional costs for the policyholder who must litigate in a distant location.
A recent example is a case where a vineyard in Napa was damaged by a wildfire and is now being sued by an excessive carrier in New York federal court. The complaint states:
Company Mt. Hawley brings this action for a declaratory judgment as to the rights and obligations of the parties under the terms of a $10 million commercial property insurance policy issued by SMV, policy no. MCP0170029, which represents more than $10 million in insurance that SMV has purchased from other insurers. SMV suffered certain losses in the St. Helens, California wildfire that began on September 27, 2021 (the “Glass Fire”). SMV asserts that the covered losses from the Glass Fire are sufficient to achieve and fully exhaust coverage under the excess excess policy of Mt. Hawley. Mt. Hawley investigated SMV’s claims, but SMV recently said it would no longer honor the terms of the policy or cooperate with the investigation, and accused Mt. Hawley in breach of contract and bad faith for failure to pay claim. Mount Hawley disputes the allegations. Therefore, there is a triable factual dispute as to the payment obligations of Mt. Hawley, if any, in accordance with the terms of the parties’ insurance contract.
How did a California wildfire dispute at a Napa vineyard end up in New York federal court? The Mount Hawley policy contained a forum selection clause, as noted in complaint:
Excess Commercial Property Policy Mt. Hawley issued by SMV, discussed in more detail below, includes a New York forum selection clause that provides in part:
any named Insured… shall submit to the jurisdiction of a court of competent jurisdiction in the State of New York and shall comply with all requirements necessary to submit to such court’s jurisdiction… Nothing in this clause shall constitute or be construed as a waiver of the Company’s right to submit an action in US District Court.
The vineyard is trying to avoid a trial in New York because it claims it never received the contract, did not approve the forum selection clause, and did not know about it before the fire. In his own a short speech against the rally in New Yorkvineyard noted:
Mount Hawley filed a motion to dismiss the California lawsuit on jurisdictional grounds. SMV’s opposition to this motion rests in part on the facts that Mt. Hawley did not disclose to SMV or its agent, Arthur J. Gallagher & Co. (“AJG”) that the policy of Mt. until the fire.
The lesson is to analyze the post-loss policy for these and other clauses that may require another state’s law to apply. We will be following this case because it raises an interesting point: how do you know about a clause in a policy if it is not provided to you before the loss occurs?
Thought for the day
Men are like wine – some turn to vinegar, but the best get better with age.
— Pope John XXIII
