City of Westlake v. Republic Fire & Cas. Ins. Co.

664 F.Supp.3d 665

CITY OF WESTLAKE, et al. v. REPUBLIC FIRE & CASUALTY INSURANCE CO. et al.

CASE NO. 2:22-CV-05910

United States District Court, W.D. Louisiana, Lake Charles Division

Signed March 27, 2023

Patrick Jody Lavergne, Jeanette Elizabeth DeWitt-Kyle, Russell J. Stutes, Jr., Russell Joseph Stutes, III, Stutes & Lavergne, Lake Charles, LA, for City of Westlake et al.

John David Harpole, Taylor Wellons et al., Baton Rouge, LA, Jonathan B. Womack, Paula M. Wellons, Taylor Wellons et al., New Orleans, LA, for Republic Fire & Casualty Insurance Co.

Leah Nunn Engelhardt, Charles P. Blanchard, Charles Donald Marshall, III, Rachel Ann Meese, Valerie Moss Andrews, Chaffe McCall et al., New Orleans, LA, for Starr Surplus Lines Insurance Co.

MEMORANDUM RULING

JAMES D. CAIN, JR., UNITED STATES DISTRICT JUDGE

Before the Court is "Starr Surplus Lines Insurance Company's Motion to Sever under Fed. R. Civ. P. 21 and to Transfer Under 28 U.S.C. § 1404(a)," (Doc. 19) wherein Defendant Star Surplus Lines Insurance Company ("Starr Surplus") moves to sever and transfer this action to the United States District Court for the Southern District of New York.

Also, before the Court is "Plaintiffs' Motion for Partial Summary Judgment on Choice of Law" (Doc. 29), wherein Plaintiffs, City of Westlake, National Golf Club of Louisiana, Inc., Westlake Volunteer Fire Department, and Westlake Fire Department (collectively referred to as "Westlake"), move this Court to grant its motion and hold that Defendant, Starr Surplus Lines Insurance Company's "choice of law" policy provisions is invalid, its invocation of New York law is barred, and Louisiana law applies to this case.

INTRODUCTION

On or about August 27, 2020, Hurricane Laura made landfall near Westlake, Louisiana. On October 9, 2020, Hurricane Delta made landfall near Westlake, Louisiana. During the relevant time period, the Westlake properties¹ were insured by Starr Surplus. Plaintiffs are the insureds to the Westlake properties. Westlake alleges that Starr Surplus failed to make timely and adequate payments.

For purposes of these two motions, Starr Surplus contends that Westlake violated the Policy's forum-selection clause by filing this lawsuit in Louisiana. Starr Surplus moves to transfer the lawsuit to New York, apply New York law, and sever the case between Westlake and Defendant, Republic.²

Starr Surplus bases its motion to sever this lawsuit from Defendant Republic Fire and Casualty Insurance Company ("Republic"), also a Westlake property insurer, because Republic insured certain Westlake properties under a separate policy of insurance. In addition, Republic is not a signatory party to Starr Surplus's forum-selection clause. Starr Surplus contends that these Defendants should be severed because the claims against Republic concern a separate insurance contract, insuring different property, but more so to facilitate the transfer of a distinct action against Starr Surplus to the New York federal court.

The Starr Surplus policy contains the following provision:

e. Choice of Law and Choice of Venue:

No suit, action, or proceeding regarding this Policy for the recovery of any claim shall be sustainable in any court of law our equity unless the Insured shall have fully complied with all the requirements of this POLICY. The COMPANY agrees that any suit, action, or proceeding against it for recovery of any claim under this POLICY shall not be barred if commenced within the time prescribed in the statutes of the State of New York, Any suit, action, or proceeding against the COMPANY must be brought solely and exclusively in a New York state court or a federal district court sitting within the State of New York. The laws of the State of New York shall solely and exclusively be used and applied in any such suit, action, or proceeding, without regard to choice of law or conflict of law principles.³

. . .

g. Conflict of Wording:

If there is conflict between the specific sections or endorsements and general conditions in this POLICY, the conditions of the specific sections or endorsements shall prevail.⁴

Conversely, Westlake contends that (1) the Starr Surplus policy's forum-selection clause is invalid as against public policy, (2) and Louisiana's law expressly prohibits the use of another state's law.

LAW AND ANALYSIS

These motions are intertwined and will be addressed together. While Starr Surplus argues that Westlake violated the forum-selection clause by filing this lawsuit in Louisiana as opposed to New York and that New York law should apply, Westlake argues that the forum-selection and choice of law clause are invalid.

Starr Surplus relies on In re Mt. Hawley Ins. Co., 2022 WL 5360188, 2022 U.S. App. LEXIS 28212 (5th Cir. Apr. 28, 2022), wherein the Fifth Circuit Court of Appeal ruled that an insurance policy's forum-selection clause is enforceable and requires transfer to the contractually chosen forum. Id. Mt. Hawley also involved a commercial insurance claim by a Louisiana insured alleging breach of contract and bad faith under Louisiana Revised Statutes 22:1892 and 22:1973 for property damage caused by Hurricanes Laura and Delta. The Fifth Circuit ordered this Court to transfer the Mt. Hawley lawsuit to New York based on the insurance policy's forum-selection clause. Starr Surplus also cites several other cases for the same proposition: Krishana Inc. v. MT Hawley Ins. Co., 2022 WL 266713, *1, 2022 U.S. Dist. LEXIS 15975, *3 (W.D. La. Jan. 27, 2022), vacated and ordered transferred pursuant to writ of mandamus, Ram Krishana Inc. v. MT Hawley Ins. Co., 2022 WL 5435477, 2022 U.S. Dist. LEXIS 187766 (W.D. La. Apr. 29, 2022). See also, Brooks & Brooks Invs. LLC v. Mt. Hawley Ins. Co., 2022 WL 17476969, *1-2, 2022 U.S. Dist. LEXIS 219247, *4-6 (E.D. La. Dec. 2, 2022); Burk Holding Co. v. Mt. Hawley Ins. Co., 2023 WL 183898, *3-5, 2023 U.S. Dist. LEXIS 6398, *9-14 (E.D. La. Jan. 13, 2023) (same); William B. Coleman Co. v. Mt. Hawley Ins. Co., 2022 WL 2806438, *2-3, 2022 U.S. Dist. LEXIS 126413, *6-9 (E.D. La. July 18, 2022).

Starr Surplus reminds this Court that it followed the U.S. Fifth Circuit's mandate in In re Mt. Hawley Ins. Co. and transferred an insurance-claim case—which alleged property damage from Hurricanes Laura and Delta and claimed violations of La. R.S. 22:1892 and 1973—to the Southern District of New York, according to a similar forum-selection provision in a surplus lines policy. Of significance, the Court notes that the Mt. Hawley suit did not involve a Louisiana public body/political subdivision.

So, what makes this case any different, if anything? Louisiana law and its strong public policy against forum selection clauses, particularly in a contract involving a public body/political subdivision.

Endorsement 27

Star Surplus argues that Westlake violated the policy because it filed suit in this Court as opposed to a court in New York. Star Surplus maintains that the policy's Choice of Law and Choice of Venue is mandatory and moves to transfer this lawsuit to New York. Westlake asserts that Endorsement 27 (sometimes referred to as a "Service of Suit Endorsement") modifies the policy and has a purpose.⁵ Endorsement 27 provides as follows:

In the event of failure of the Insurer to pay any amount claimed to be due hereunder, the Insurer, at the request of the Insured, will submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this condition constitutes or should be understood to constitute a waiver of the Insurer'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 transfer of a case to another court as permitted by the laws of the United States or of any state in the United States . . . and that in any suit instituted against the Insurer upon this policy, the Insurer will abide by the final decision of such court or of any appellate court in the event of an appeal.

. . .

Nothing herein shall be held to vary, alter, waive or change any of the terms, limitations, exclusions or conditions of the POLICY, except as herein above set forth.⁶

Westlake contends that Endorsement 27 is a permissive forum selection clause that controls and overrides the forum selection clause in the policy's general conditions. The Court agrees that Endorsement is a permissive forum selection clause. See Waste Management of Louisiana, L.L.C. v. Jefferson Parish ex rel. Jefferson Parish Council, 594 Fed. App'x. 820, 821 (5th Cir. 2014). City of Rose City v. Nutmeg Ins. Co., 931 F.2d 13, 15 (5th Cir. 1991). The Fifth Circuit further reaffirmed that a similar "Service of Suit clause gives the insured the right to choose which forum will hear [the insured's] action." International Ins. Co. v. McDermott, Inc., 956 F.2d 93, 96 (5th Cir. 1992).

Westlake chose to file suit in Louisiana and had every contractual right to do so under Endorsement 27. The Court finds that Westlake has not violated the policy because it filed suit in this Court.

Louisiana Public Policy

Westlake is a political subdivision under Louisiana Constitutional Article VI, § 44. Louisiana Revised Statute § 9:2778 declares null and void forum selection clauses providing for venue or jurisdiction outside of Louisiana in contract with public bodies. Louisiana Revised Statute § 9:2778 states the following:

A. The legislature finds that with respect to public contract involving the state or a political subdivision of the state, provisions in such agreements requiring disputes arising thereunder to be resolved in a forum outside of this state or requiring their interpretation to be governed by the laws of another jurisdiction are inequitable and against the public policy of this state.

B. The legislature hereby declares null, void, unenforceable, and against public policy, any provision in a contract, subcontract, or purchase order, as described in Subsection A, which either:

(1) Requires a suit or

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