Swiss Re Forum Selection Clause Found Invalid in Massachusetts

Over the years, forum selection clauses have become increasingly popular with insurance companies.  The preordained most favored forum for many insurance companies is New York.  Although valid in New York, forum selection clauses may not be valid with respect to litigation filed in other jurisdictions.  The Massachusetts Superior Court in Home Market Foods, Inc. v. AIG Specialty Insurance Company, et al., denied Swiss Re’s motion to dismiss, holding that the policy’s forum selection clause requiring litigation in New York under New York law was void under Mass. G.L. c. 175, § 22.

Although Massachusetts has statutorily prevented the use of forum selection clauses for policies issued to Massachusetts policyholders for quite some time, this is one of the first times that this longstanding Massachusetts statute has been tested.

The dispute arose over fire damage at Home Market Foods’ Massachusetts production facility.  Home Market Foods filed suit against its all-risk property insurers for breach of contract and bad faith after the insurers refused to fully cover the loss.  One excess carrier, Swiss Re, attempted to dismiss the case, arguing that its forum selection clause required all disputes to be litigated in New York under New York law.  The court denied Swiss Re’s motion to dismiss, invalidating Swiss Re’s forum selection clause and enforcing G.L. c. 175, § 22—which prohibits insurers from including policy provisions that deprive Massachusetts courts of jurisdiction.

This victory has nationwide implications for policyholders, as it demonstrates that the “boilerplate” fine print used by insurers to force litigation into their preferred forum is not absolute. Across the country, numerous states contain similar statutory provisions rejecting the use of forum selection clauses.  This is especially important where insurance company conduct is wrongful as New York law is considered policyholder-unfriendly when it comes to bad faith.  Sophisticated insureds should leverage these specific state statutes and public policies to invalidate such one-sided insurance clauses. Doing so ensures that disputes are heard in favorable jurisdictions where the losses actually occurred and where powerful local laws, like Massachusetts’ Chapter 93A bad faith insurance protections, remain fully in play. The Home Market Foods case shows that policyholders can succeed in resisting litigation in an insurer’s chosen forum.