On June 20, 2007, the Superior Court of New Jersey, Appellate Division reaffirmed that New Jersey Courts do not consider a Service of Suit Clause in an insurance policy to constitute an exclusive forum selection clause in favor of the insured. Chubb Custom Ins. Co., et al., v. The Prudential Insurance Company of America, et al., C.A. No. A-4125-05TI.
The lower court had dismissed an insurer’s declaratory judgment action on the basis of forum non conveniens. It grounded its decision in large part on its opinion that public policy and the “clear intent” of the relevant policy’s Service of Suit clause mandated interpreting such a clause as an exclusive forum selection clause effectively giving the insured the choice of venue no matter who files first.
The appellate court, however, found this interpretation inconsistent with the law of New Jersey and the majority of states. Quoting a New York appellate court decision, the court held that a Service of Suit Clause does not affect a proper forum selection analysis:
[A] service of suit clause does not state that the defendant [insured] has the exclusive right to select the court where all disputes arising under the contract are to be resolved. The [clause] does not by its terms preclude [the insurer] from filing an action to adjudicate its rights under the contract, nor does it prescribe the forum for the action. It is unreasonable to infer that [the insurer] has no rights in that regard.
The Court went on to overrule the lower court’s dismissal on the basis of forum non conveniens, holding that, where an insurer files a declaratory judgment action in its state of residence, its choice of forum is entitled to deference and the balance of public and private interests does not favor the insured’s second-in-time choice of forum.
The Court’s full opinion is available here.
