Policy’s Forum Selection Clause Found Binding on Assignee of Insured


In Kostelac v. Allianz Global Corporate & Specialty AG, 2013 WL 1668245 (11th Cir. Apr. 17, 2013) (unpub.), the 11th Circuit Court of Appeals addressed the application of the forum non conveniens doctrine to a coverage lawsuit in the Southern District of Florida that arose out of the crash in Florida of an aircraft manufactured by a German company.  The aircraft manufacturer’s insurer denied the manufacturer’s coverage demand, under a policy issued in Germany, in connection with a Florida lawsuit brought by the pilot injured in the crash and his spouse, both Virginia residents.  The manufacturer reached a $2.95 million consent judgment with the underlying plaintiffs and assigned its rights under the policy to them in exchange for an agreement not enforce the award against it. The underlying plaintiffs then sued the insurer in Florida to collect on the judgment.  The insurer moved to dismiss, arguing that the coverage dispute should be heard in Germany under the doctrine of forum non conveniens and due to the policy’s forum-section clause.  Understandably reluctant to preside over a dispute “involv a contract between two German companies,” the district court granted the motion to dismiss on a forum non conveniens rationale and specifically noted that less deference was owed to the plaintiffs’ choice of forum because the plaintiffs were Virginia residents and therefore not suing in their home forum. 

The 11th Circuit rejected this reasoning and found that the district court abused its discretion when it found that the Virginia residents’ decision to sue in Florida lessened the usual deference to the plaintiffs’ choice of forum.  Adopting a sweeping view of what constitutes a party’s “home forum,” the 11th Circuit pronounced that “[w]hen a United States citizen sues in a United States District Court, he is suing in his home forum.”  Accordingly, the 11th Circuit found that American citizens who seek redress in American courts against a foreign defendant are entitled to a “strong presumption” in favor of their choice of forum, whether they actually reside in the relevant district.  The plaintiffs’ victory on the correct application of the forum non conveniens doctrine was their only prize, however, as the 11th Circuit nonetheless affirmed the dismissal of plaintiffs’ suit on the strength of the policy’s forum-selection clause, which required that disputes over the policy be litigated in Germany.

Because they were the assignees of the insured, the Virginia plaintiffs were bound by the forum-selection clause to the same extent as the insured.  For the same reason, the reasonableness of enforcing the forum-selection clause was judged from the perspective of the parties to the contract – the insured and insurer.  Accordingly, it made no difference that the plaintiffs did not have an opportunity to negotiate the forum-selection clause.  Also, the pertinent inquiry was whether it would be unfair or inconvenient to require the German insured to litigate in Germany, not the Virginia plaintiffs.   Having failed to overcome the presumption that the forum-selection clause that they inherited as assignees was valid and enforceable, the 11th Circuit concluded the plaintiffs “must honor their bargains” and litigate in a German court.

Thus, Kostelac provides a useful reminder that while forum non conveniens arguments can be challenging, a forum selection clause can provide insurers with a much more reliable method of managing where coverage litigation will proceed.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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