Forum Shopping and COVID-19 Coverage Cases

Photo by cottonbro on

When bringing a lawsuit there is often strategy to the venue chosen. This is especially true in insurance coverage cases where the outcome can vary by jurisdiction. Another consideration is whether the disputed contract, like an insurance contract, has a forum selection clause, which dictates the venue for the dispute. In a recent case, a court addressed both these issues in deciding a motion to dismiss. The case is a COVID-19 business interruption coverage dispute.

In Mac Parent LLC v. North American Elite Insurance Co., No. 906489-20 (N.Y. Sup. Ct., Albany Cty, Mar. 29, 2021), the court ruled on the insurer’s motion to dismiss based on lack of proper service and because of another action pending in New York City. The policyholder, a restaurant holding company, sought a determination that its chain restaurants were covered under an all-risk commercial insurance policy for the loss of “millions of dollars of business income” and “extra expenses” incurred as a result of governmental orders issued in response to the global COVID-19 pandemic.

The policyholder joined other restaurants and sued the insurer in Illinois state court. The case was removed to Illinois federal court and ultimately the dispute between these two parties was severed and voluntarily withdrawn because of the policy’s forum selection clause that required all disputes to be resolved before New York courts.

Shortly after the voluntary dismissal, the insurer brought a declaratory judgment action in New York state court in New York County (Manhattan). One day later, the policyholder brought this coverage action in Albany County.

In granting the insurer’s motion to dismiss, the court focused on the New York County action and denied the insurer’s motion based on improper service. The court found that New York County was a proper and logical forum for the dispute and that the policyholder’s tie to Albany County was limited. The court also found that the New York County action was more comprehensive, which included claims for the policyholder’s breach of the forum selection clause.

The policyholder claimed that the insurer rushed into New York County knowing that after the voluntary dismissal of the Illinois action, the policyholder would not consent to New York County. The court rejected this argument based on the policyholder’s clear forum shopping when it began the action in Illinois in violation of the forum selection clause in the insurance policy.

The court dismissed the Albany County action in favor of the New York County action. The COVID-19 coverage issues will be determined by the court in New York County, which so far has been generally favorable to the insurance companies.

Leave a ReplyCancel reply