Forum the Bell Tolls: Plaintiffs Lose Challenge to Validity of Forum Selection Clause in Their Auto Insurance Policy

Pensylvania - Insurance Coverage

In O'Hara v. First Liberty Ins. Corp., 2009 Pa. Super. 214 (2009), the Pennsylvania Superior Court considered a claim brought by "forum shopping" plaintiffs to recover underinsured motorist ("UIM") benefits against the First Liberty Insurance Corporation ("Liberty"), their automobile insurance carrier.

The plaintiffs lived in Delaware County, Pennsylvania. On March 29, 2007, plaintiff Diane O'Hara was involved in a motor vehicle accident in Delaware County. At the time of the accident, the plaintiffs were insured under a policy issued by Liberty. The policy included UIM coverage and contained a clause providing that if plaintiffs elected to bring suit against Liberty, the suit "must be brought in a court of competent jurisdiction in the county and state of your legal domicile at the time of the accident." After receiving the maximum liability amount available to her from the other driver's insurance company, Ms. O'Hara submitted a UIM claim to Liberty, which was denied.

Despite the forum selection clause contained in their policy, the plaintiffs filed suit against Liberty in Philadelphia County for breach of contract and loss of consortium. Liberty responded to the complaint by preliminary objection, arguing that Philadelphia County was not the proper venue for the plaintiffs' suit. The trial court agreed, sustained Liberty's preliminary objection, and transferred the matter to Delaware County. The plaintiffs appealed, contending the trial court committed an error of law in transferring the matter to Delaware County on the basis of the forum selection clause in their policy.

In its analysis of the plaintiffs' primary legal argument, the Superior Court first noted the well settled, general proposition that when the language of a contract (including an insurance contract) is clear and unambiguous, a court is required to give effect to that language. Applying this proposition, the Superior Court concluded that the forum selection clause in the plaintiffs' policy "clearly and unambiguously" stated that any lawsuit against Liberty had to be brought in the county and state of the insured's "legal domicile," in this case Delaware County. The court, thus, concluded that because the forum selection clause was clear and unambiguous, it was required to give effect to the language and enforce the provision.

The Superior Court also considered the plaintiffs' alternative argument that the forum selection clause was unenforceable as a matter of public policy because Pennsylvania has a strong policy in allowing a plaintiff his choice of forum. The court noted that, although a plaintiff's choice of forum is to be given great weight, and the party challenging the choice of forum has the burden to demonstrate the choice was improper, a plaintiff's choice of forum is not absolute, and if there exists any proper basis for a court's decision to transfer venue, the decision must stand. The court further noted that to be contrary to public policy, a contract must tend to injure the public or be against the public good, or it must be inconsistent with good morals, and that only in the clearest of cases may a court declare a contract void as against public policy. In rejecting the plaintiffs' argument, the Superior Court concluded that the plaintiffs failed to demonstrate that requiring them to litigate their lawsuit in the county in which they lived and in which the accident occurred would be contrary to public policy.

Although the Superior Court did not specifically consider the reasons why the plaintiffs in O'Hara brought suit in Philadelphia County, the plaintiffs undoubtedly were "shopping" for a more plaintiff-friendly forum. They likely were hoping to present their case to a more potentially favorable jury than what they might have encountered in Delaware County, a generally more conservative forum, or, at least, they were attempting to leverage a more sizable settlement from their insurance carrier, being cognizant that Philadelphia County juries are well known for awarding substantial plaintiffs' verdicts. From a defense perspective, fortunately, the trial court (and the Superior Court on appeal) recognized that the forum selection clause in the plaintiffs' policy was clear and unambiguous and enforceable as a matter of law. The Superior Court also appropriately recognized there was no sound public policy reason for allowing the plaintiffs to litigate their claim in Philadelphia County rather than in their home county where the accident occurred.

O'Hara bodes well for the enforceability of similarly written forum selection clauses in other auto insurance policies, as well as in policies for other lines of insurance. Further, the O'Hara decision now provides appellate level legal precedent to challenge preliminarily future claims brought by other "forum shopping" plaintiffs who likewise may seek to bring suit in a more plaintiff-friendly venue.

*Chris is an associate in the firm's Harrisburg, Pennsylvania, office who can be reached at (717) 651-3531 or cjconrad@mdwcg.com.

Defense Digest, Vol. 16, No. 1, March 2010