A divided Supreme Court of Louisiana has ruled that Louisiana law does not prohibit the enforcement of a forum selection clause in an insurance policy requiring litigation in New York – a result the dissent called “ridiculous.”
The Case
In August 2016, as a result of a massive flood, property commonly referred to as Juban Crossing, located in Livingston Parish, Louisiana, and consisting of high-end, multi-use facilities for retail sales, restaurants, and a theater, sustained extensive flood damage to the buildings and their contents, including loss of revenue.
Thereafter, the property owner, Creekstone/Juban I, LLC, asserted that its commercial property and casualty insurer, XL Insurance America, Inc., did not pay Creekstone the sums to which it contended it was entitled, and it sued XL Insurance in a Louisiana state court.
In response, XL Insurance moved to dismiss, arguing that its insurance contract contained a forum selection clause pursuant to which the parties agreed to litigate all issues involving the policy exclusively in New York State.
Creekstone opposed the motion, contending that the forum selection clause was invalid under La. R.S. 22:868, which provides that no insurance contract “delivered or issued for delivery” in Louisiana and covering subjects in Louisiana shall contain any provision “[d]epriving the courts of this state of the jurisdiction of action against the insurer.”
The trial court overruled XL Insurance's motion, finding that the forum selection clause violated Louisiana public policy.
After further litigation, the dispute reached the Supreme Court of Louisiana.
The XL Insurance Policy
The XL Insurance policy provided:
In the event that any disagreement arises between the “insured” and the “Company” requiring judicial resolution the “insured” and the “Company” each agree that any suit shall be brought and heard in a court of competent jurisdiction within the State of New York. The “Insured” and the “Company” further agree to comply voluntarily with all the requirements necessary to give such court jurisdiction. . . .
The “Insured” and the Company” further agree that New York law shall control the interpretation, application and meaning of this contract, whether in suit or otherwise.
The Louisiana Supreme Court's Decision
The court reversed.
In its decision, the court explained that “jurisdiction” and “venue” were distinct legal concepts. Therefore, the court continued, where parties contracted for a particular forum or venue for litigating disputes, this did “not mean” they deprived the courts of this state “of the legal authority to hear the dispute (i.e., the jurisdiction).”
The court declared that it would not extend the definition of “jurisdiction” to include “venue” or “forum.” Accordingly, the court concluded, La. R.S. 22:868 did not prohibit the forum selection clause in the XL Insurance policy because it chose New York as the venue for the dispute and did not deprive Louisiana courts of jurisdiction.
The case is Creekstone Juban I, L.L.C. v. XL Ins. America, Inc., No. 2018-CC-0748 (Louisiana May 8, 2019).
Insurance Coverage Law Center Comment
It is worth noting that two justices dissented in an opinion that began:
It is ridiculous that a Louisiana business with Louisiana customers and employees that suffers millions of dollars in damages requiring millions of dollars of repairs by Louisiana carpenters, plumbers, and painters in Louisiana insured by an insurance policy delivered in Louisiana should be required to litigate against the insurer in New York when it has been the public policy of Louisiana since 1948 that such matters should be litigated in Louisiana and that “any condition” to the contrary contained in an insurance policy is prohibited. The disdain for Louisiana business and the Louisiana Legislature is remarkable.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].