JUNE 2014 BAD FAITH CASES: COURT FINDS INSURER COULD NOT ASSERT FORUM SELECTION CLAUSE AFTER IT CONSENTED TO REMOVAL TO FEDERAL COURT (Western District)
In Roman v. UniGroup Worldwide, the plaintiff insured contracted with the defendant shipping company and its agents to transport his household property from Israel to Pittsburg. Along with the shipping contracts, he also took out a policy with the defendant insurer.
Plaintiff brought both statutory bad faith claims pursuant to the Pennsylvania Bad Faith statute, 42 Pa.Cons.Stat. § 8371, the Pennsylvania Unfair Insurance Practices Act, 40 P.S. § 1171.5(a), and Pennsylvania Unfair Insurance Practices Regulations, 31 Pa. Code § 146, et seq. Id. at ¶¶ 104-122 and common law breach of the implied duty of good faith, alleging that the insurer unreasonably refused to settle a claim by not investigating, adjusting, and paying the losses related to the claim promptly.
Plaintiff originally filed the action in state court, but the defendant shipping company filed a notice to remove to the Western District of Pennsylvania. The shipping company’s agents and the insurer both consented to the removal. The insurer filed a motion to dismiss for failure to state a claim based on an alleged violation of a forum selection clause.
The insurer argued that the insurance contract contains a forum selection clause designating Israel as the exclusive forum for resolving disputes and a governing law clause requiring application of British law.The defendant further argued that Plaintiff could not state a valid claim under British law due to violations of Britain’s Marine Insurance Act of 1906.
Specifically, they alleged that he had violated the Act’s affirmative duty to disclose risks by failing to notify the insurer of Hurricane Sandy’s impending landfall.
The Court held that the motion to dismiss for failure to state a claim was improper. Even if the forum selection clause was found to be valid, it would not deprive the District Court of jurisdiction, but rather, the Court could exercise its jurisdiction to decide the validity of the clause and then subsequently dismiss the case on a motion for summary judgment.
Further, the Court found that the insurer consented to the jurisdiction of the federal court by consenting to the notice of removal.
Magistrate Judge Eddy cited the Third Circuit decision Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 202 (3d Cir. 1983) for the proposition that a forum selection clause would be presumptively valid unless: (1) it is the result of fraud or overreaching, (2) enforcement would violate a strong policy of the forum, or (3) enforcement would result in litigation in a jurisdiction so seriously inconvenient as to be unreasonable.
Considering these factors, the Court found that it had insufficient information to make an informed decision regarding the validity of the forum selection clause. It recognized that there were inconsistencies in the language of the forum selection clause and also that there were still questions of fact involving whether the clause was properly signed and executed. Therefore, the court denied the motion to dismiss and ordered that the parties proceed to discovery.
Date of Decision: Report and Recommendation of Magistrate Judge April 14, 2014 (Eddy, M.J.) adopted by District Court, May 28, 2014
