Broad Forum Clause Favors Policyholders’ Choice of Venue

The Washington Supreme Court’s recent en banc decision in Pacific Lutheran University et al. v. Certain Underwriters At Lloyd’s London et al. looked to the broad language of the forum selection clause in the governing insurance policies in upholding the policyholders’ rights to select the forum for their coverage suit.

In Pacific Lutheran, 60 higher education institutions (the “Colleges”) filed suit in the Superior Court for Pierce County, Washington, against 16 insurers (the “Insurers”) that issued all risk insurance policies to the Colleges through the Educational & Institutional Insurance Administrators Inc. (“EIIA”), a risk retention group.  The Colleges brought suit to recover losses incurred as a consequence of the COVID-19 pandemic.  The Colleges selected the Washington state court based on the forum selection provisions contained in their insurance policies.  In particular, the Colleges relied on the policies’ “suit against the company” clause, which expressly allowed the Colleges to file suit “in any court of competent jurisdiction.”  The suit sought breach of contract damages and a declaration that the Colleges’ COVID-related losses are covered under the policies. 

Subsequently, 2 of the 16 Insurers filed a complaint against EIIA in Illinois state court, seeking a declaratory judgment that the losses suffered by the Colleges are not covered by the policies.  The risk retention group was not a party to the Washington action because it had not suffered any losses.  The Insurers then filed a third-party complaint to join the Colleges in the Illinois suit.  The Colleges, in turn, moved in the Washington action to enjoin the Insurers from pursing the Illinois action, relying on Washington’s priority of action rule, which provides that in the case of parallel actions, the court that first obtained jurisdiction retains it, and the later-filed action(s) cannot proceed.  The Insurers moved to dismiss the Washington action based on forum non conveniens.  The superior court (1) enjoined the Illinois action, and (2) denied the Insurers’ motions to dismiss.  The Insurers sought direct discretionary review, which was granted.  In a 6-3 decision, a panel of the Washington Supreme Court affirmed the superior court’s decisions on both issues.  Pacific Lutheran University et al. v. Certain Underwriters At Lloyd’s London et al., 541 P.3d 358 (Wash. 2024) (en banc).  Three dissenters agreed with the decision to affirm the denial of the Insurers’ motions to dismiss based on forum non conveniens but under different reasoning.  They disagreed with both the analysis and the decision of the majority as to the injunction.

The Washington Supreme Court’s Decision

Issue 1:  Forum Non Conveniens: (1) Clear Contract Language (Majority) or (2) Public Interest Considerations (Dissenting Minority)

The Washington Supreme Court unanimously affirmed the Superior Court’s refusal to dismiss based on forum non conveniens.  The majority found the relevant policy provisions governing venue and forum selection to be unambiguous and not in conflict and noted that a forum non conveniens analysis weighs public and private interest factors, including contract language.  It then turned to the two clauses at issue in the policies, clauses 36 and 41, which provide:

Clause 36:  It is agreed that in the event of the failure of the Company to pay any amount claimed to be due hereunder or in the event of any other dispute relating to this policy, the Company, at the request of the Insured, will submit to the jurisdiction of any court of competent jurisdiction within the United States and will comply with all of the requirements necessary to give such court jurisdiction and all matters hereunder shall be determined in accordance with the law and practice of such court, not including the court’s law regarding choice of law. The Company shall not transfer, change venue, or remove, or seek to transfer, change venue, or remove any lawsuit filed by the Insured in any such court.

Clause 41:  [I]t is agreed that in the event of the failure of the Company to pay any amount claimed to be due hereunder, the Company, at the request of the Named Insured, will submit to the jurisdiction of a court of competent jurisdiction within the United States and will comply with all requirements necessary to give such court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such court. Nothing in this clause constitutes or should be understood to constitute a waiver of the Company’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. It is further agreed that . . . in any suit instituted against the Company upon this policy, the Company will abide by the final decision of such Court or of any Appellate Court in the event of an appeal.

The Colleges argued that clause 36 authorized the Colleges to file suit in Washington and, further, that the Insurers would not seek to transfer, change venue, or remove the case to federal court.  Thus, the Insurers’ motion to dismiss based on forum non conveniens violated the policy provision.  The Insurers responded, arguing that the clauses are permissive consent to jurisdiction clauses that do not foreclose a forum non conveniens argument.  The Insurers relied heavily on out-of-state decisions finding the relevant service of suit clauses not to preclude a challenge based on forum non conveniens.  But the majority found those clauses materially distinguishable from those before it.  “Specifically,” the court explained, “none of the clauses in these cases include language that limits or prohibits the insurers from seeking to transfer, change venue, or remove an action, as is present in the contract clause in this case.”  The majority then harmonized the two clauses by stating that clause 41 does not override anything in clause 36, but rather applies only when the Insurer brings an action.  Notably, in disposing of the Insurers’ argument about the clauses as permissive consent to jurisdiction, the court did not take the opportunity to reference the Supreme Court’s decision in Mallory v. Norfolk S. Ry. Co., 600 U.S. 122 (2023) (holding that that, where a corporate defendant consents to personal jurisdiction in a state as a prerequisite to registering to “do business” in the state, that consent is valid, even as to suits that otherwise have no connection to the state) and merely noted that such a construction would contravene the plain meaning of the clause. 

The dissent, in contrast, found a “clear textual conflict between clause 36, under which the Colleges may file suit in their court of choice with a guarantee that the Insurers will not seek removal or transfer, and clause 41, which guarantees to the Insurers the right to seek removal or transfer.”  The dissent questioned the purpose of the removal provision (clause 41) and also noted the distinction between a motion to transfer and a motion to change venue. 

Issue 2: Antisuit Injunction

The majority agreed with the Superior Court’s application of Washington’s priority of action decision and reasoning.  The court affirmed that, where parallel cases are filed, the first in time should proceed with the later to be stayed.  The dissent disapproved of applying the doctrine to actions outside of Washington and argued that injunctive relief that precludes litigation in another state should be used sparingly, to avoid “needless and vexatious” litigation, injury, fraud, or oppression.  

Key Takeaways:

Pacific Lutheran is significant because the decision illustrates the breadth of choice afforded to policyholders when it comes to choosing the forum in which to enforce their contractual right to coverage.  Insurers often conduct business nationwide, if not globally, and the reasoning of the Washington Supreme Court recognizes that, as a consequence, insurers should not be heard to complain about the convenience of litigating in one forum or another, especially where they have chosen to include broad provisions in the insurance policy that accept suit in any court of competent jurisdiction.