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The Washington Supreme Courtroom’s current en banc determination in Pacific Lutheran College et al. v. Sure Underwriters At Lloyd’s London et al. appeared to the broad language of the discussion board choice clause within the governing insurance coverage insurance policies in upholding the policyholders’ rights to pick the discussion board for his or her protection go well with.
In Pacific Lutheran, 60 larger schooling establishments (the “Schools”) filed go well with within the Superior Courtroom for Pierce County, Washington, in opposition to 16 insurers (the “Insurers”) that issued all danger insurance coverage insurance policies to the Schools by means of the Instructional & Institutional Insurance coverage Directors Inc. (“EIIA”), a danger retention group. The Schools introduced go well with to get better losses incurred as a consequence of the COVID-19 pandemic. The Schools chosen the Washington state court docket based mostly on the discussion board choice provisions contained of their insurance coverage insurance policies. Particularly, the Schools relied on the insurance policies’ “go well with in opposition to the corporate” clause, which expressly allowed the Schools to file go well with “in any court docket of competent jurisdiction.” The go well with sought breach of contract damages and a declaration that the Schools’ COVID-related losses are lined underneath the insurance policies.
Subsequently, 2 of the 16 Insurers filed a grievance in opposition to EIIA in Illinois state court docket, looking for a declaratory judgment that the losses suffered by the Schools are not lined by the insurance policies. The chance retention group was not a celebration to the Washington motion as a result of it had not suffered any losses. The Insurers then filed a third-party grievance to affix the Schools within the Illinois go well with. The Schools, in flip, moved within the Washington motion to enjoin the Insurers from pursing the Illinois motion, counting on Washington’s precedence of motion rule, which supplies that within the case of parallel actions, the court docket that first obtained jurisdiction retains it, and the later-filed motion(s) can not proceed. The Insurers moved to dismiss the Washington motion based mostly on discussion board non conveniens. The superior court docket (1) enjoined the Illinois motion, and (2) denied the Insurers’ motions to dismiss. The Insurers sought direct discretionary evaluation, which was granted. In a 6-3 determination, a panel of the Washington Supreme Courtroom affirmed the superior court docket’s selections on each points. Pacific Lutheran College et al. v. Sure Underwriters At Lloyd’s London et al., 541 P.3d 358 (Wash. 2024) (en banc). Three dissenters agreed with the choice to affirm the denial of the Insurers’ motions to dismiss based mostly on discussion board non conveniens however underneath totally different reasoning. They disagreed with each the evaluation and the choice of the bulk as to the injunction.
The Washington Supreme Courtroom’s Choice
Concern 1: Discussion board Non Conveniens: (1) Clear Contract Language (Majority) or (2) Public Curiosity Concerns (Dissenting Minority)
The Washington Supreme Courtroom unanimously affirmed the Superior Courtroom’s refusal to dismiss based mostly on discussion board non conveniens. The bulk discovered the related coverage provisions governing venue and discussion board choice to be unambiguous and never in battle and famous {that a} discussion board non conveniens evaluation weighs private and non-private curiosity components, together with contract language. It then turned to the 2 clauses at difficulty within the insurance policies, clauses 36 and 41, which offer:
- Clause 36: It’s agreed that within the occasion of the failure of the Firm to pay any quantity claimed to be due hereunder or within the occasion of another dispute regarding this coverage, the Firm, on the request of the Insured, will undergo the jurisdiction of any court docket of competent jurisdiction inside the USA and can adjust to all the necessities essential to present such court docket jurisdiction and all issues hereunder shall be decided in accordance with the regulation and apply of such court docket, not together with the court docket’s regulation relating to alternative of regulation. The Firm shall not switch, change venue, or take away, or search to switch, change venue, or take away any lawsuit filed by the Insured in any such court docket.
- Clause 41: [I]t is agreed that within the occasion of the failure of the Firm to pay any quantity claimed to be due hereunder, the Firm, on the request of the Named Insured, will undergo the jurisdiction of a court docket of competent jurisdiction inside the USA and can adjust to all necessities essential to present such court docket jurisdiction and all issues arising hereunder shall be decided in accordance with the regulation and apply of such court docket. Nothing on this clause constitutes or needs to be understood to represent a waiver of the Firm’s rights to begin an motion in any court docket of competent jurisdiction in the USA, to take away an motion to a United States District Courtroom or to hunt a switch of a case to a different court docket as permitted by the legal guidelines of the USA or of any state in the USA. It’s additional agreed that . . . in any go well with instituted in opposition to the Firm upon this coverage, the Firm will abide by the ultimate determination of such Courtroom or of any Appellate Courtroom within the occasion of an attraction.
The Schools argued that clause 36 licensed the Schools to file go well with in Washington and, additional, that the Insurers wouldn’t search to switch, change venue, or take away the case to federal court docket. Thus, the Insurers’ movement to dismiss based mostly on discussion board non conveniens violated the coverage provision. The Insurers responded, arguing that the clauses are permissive consent to jurisdiction clauses that don’t foreclose a discussion board non conveniens argument. The Insurers relied closely on out-of-state selections discovering the related service of go well with clauses to not preclude a problem based mostly on discussion board non conveniens. However the majority discovered these clauses materially distinguishable from these earlier than it. “Particularly,” the court docket defined, “not one of the clauses in these instances embrace language that limits or prohibits the insurers from looking for to switch, change venue, or take away an motion, as is current within the contract clause on this case.” The bulk then harmonized the 2 clauses by stating that clause 41 doesn’t override something in clause 36, however slightly applies solely when the Insurer brings an motion. Notably, in disposing of the Insurers’ argument concerning the clauses as permissive consent to jurisdiction, the court docket didn’t take the chance to reference the Supreme Courtroom’s determination in Mallory v. Norfolk S. Ry. Co., 600 U.S. 122 (2023) (holding that that, the place a company defendant consents to private jurisdiction in a state as a prerequisite to registering to “do enterprise” within the state, that consent is legitimate, at the same time as to fits that in any other case don’t have any connection to the state) and merely famous that such a development would contravene the plain that means of the clause.
The dissent, in distinction, discovered a “clear textual battle between clause 36, underneath which the Schools might file go well with of their court docket of alternative with a assure that the Insurers won’t search elimination or switch, and clause 41, which ensures to the Insurers the precise to hunt elimination or switch.” The dissent questioned the aim of the elimination provision (clause 41) and likewise famous the excellence between a movement to switch and a movement to vary venue.
Concern 2: Antisuit Injunction
The bulk agreed with the Superior Courtroom’s utility of Washington’s precedence of motion determination and reasoning. The court docket affirmed that, the place parallel instances are filed, the primary in time ought to proceed with the later to be stayed. The dissent disapproved of making use of the doctrine to actions outdoors of Washington and argued that injunctive reduction that precludes litigation in one other state needs to be used sparingly, to keep away from “useless and vexatious” litigation, harm, fraud, or oppression.
Key Takeaways:
Pacific Lutheran is critical as a result of the choice illustrates the breadth of alternative afforded to policyholders in terms of selecting the discussion board wherein to implement their contractual proper to protection. Insurers typically conduct enterprise nationwide, if not globally, and the reasoning of the Washington Supreme Courtroom acknowledges that, as a consequence, insurers shouldn’t be heard to complain concerning the comfort of litigating in a single discussion board or one other, particularly the place they’ve chosen to incorporate broad provisions within the insurance coverage coverage that settle for go well with in any court docket of competent jurisdiction.
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