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Unfavorable Forum Selection Clauses

By Linda D. Kornfeld and Daniel H. Rylaarsdam
July 30, 2008

More and more frequently, insurers are including 'choice of forum' provisions in their policies in which these insurers identify a particular state or country where coverage litigation 'must' be pursued. Usually, the required forum is more favorable to the insurer that issued the policy, than to the insured that purchased it. For example, foreign insurers sometimes will include a British forum selection clause. This is not surprising ' British courts generally do not resolve insurance coverage disputes by jury trial or allow bad faith claims that would support an award of punitive damages. Given this favorable treatment for insurers, insurers involved in coverage litigation often are quick to argue that the law is clear with respect to how forum selection clauses should be interpreted. According to these insurers, the provisions must be strictly enforced ' there is no room for any argument regarding where coverage litigation should go forward.

While in the past few decades a body of law has developed in federal courts that provides some support for this approach, the standard is not nearly as rigid as insurers would have their insureds and courts overseeing coverage litigation believe. In fact, there are many arguments that an insured can make to overcome strict application of a forum provision contained in a relevant insurance policy.

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