PersaudBramante Apartments, L.L.C. v. Underwriters at Lloyd's of London

Background

A December 2019 fire extensively damaged an apartment building owned by PersaudBramante Apartments, L.L.C. The insurers determined that the replacement cost was $2,680,607.76 and the actual cash value was $1,734,112.74. They paid the actual cash value. After the owner submitted proof that it had spent more than $2.9 million repairing the property, it sought the replacement-cost amount. The insurers refused, and the owner sued for breach of contract and a declaration that the insurers owed the full replacement cost, less prior payments.

The lawsuit named Underwriters at Lloyd’s of London, Ironshore Specialty Insurance Company, Steadfast Insurance Company, and First Specialty Insurance Corporation, also known as First Specialty Insurance Company. First Specialty later merged with SwissRe Corporate Solutions Capacity Insurance Corporation and became known as SwissRe. The other three insurers answered the amended complaint; SwissRe filed the motion at issue.

Motion and arguments

SwissRe sought dismissal under Rule 12(b)(6), which concerns whether a complaint states a legally sufficient claim. It argued that the insurance policy contained a mandatory forum-selection clause requiring the parties to litigate in New York. SwissRe alternatively argued that the lawsuit was untimely under the policy’s time-of-suit provision, although the court did not resolve that issue.

The owner argued that the policy binder it received did not contain the choice-of-law or forum-selection provisions and that there was a factual dispute about whether those provisions were part of its policy or whether it had notice of them. It also argued that Minnesota’s standard fire-insurance statute prohibited an insurance contract covering Minnesota property from requiring litigation outside Minnesota.

Court’s analysis

The court first rejected the owner’s argument that there was a legitimate dispute about which policy applied. The binder was a collection of provisions and endorsements relating to multiple insurers and did not purport to be a complete policy for SwissRe. It listed the same policy number as the policy SwissRe submitted, and the court found that the binder did not contain provisions applicable to SwissRe.

The SwissRe policy stated that New York law governed and that the parties submitted to the “exclusive jurisdiction of the Courts of the State of New York.” The court held that Minnesota’s standard fire-insurance statute did not prohibit forum-selection clauses. In the court’s view, the statute required a Minnesota court to appoint an appraiser in certain circumstances but did not require lawsuits to remain in Minnesota. The court also found that the owner’s cited Washington decision was based on different statutory language and did not apply.

The court concluded that the clause was mandatory and valid. It rejected the owner’s arguments that the clause was unenforceable because the owner did not personally negotiate it or because the policy was a contract of adhesion. The evidence showed that the owner’s broker negotiated the policy and that the policy was a manuscript policy, meaning it was custom-designed for the insured rather than a preprinted form drafted solely by the insurer. The court also noted that the owner did not claim that enforcement would deprive it of its day in court, or identify a sufficient Minnesota public-policy reason to disregard the clause.

The court explained that enforcing a forum-selection clause requiring litigation in a nonfederal forum ordinarily requires dismissal on forum non conveniens grounds, rather than dismissal for failure to state a claim. Forum non conveniens is a procedure allowing a court to dismiss when the parties’ chosen foreign forum is the proper place to litigate. The court interpreted the policy’s reference to the courts “of the State of New York” as requiring New York state-court litigation, rather than litigation in either state or federal court located in New York.

Disposition

The court held that the forum-selection clause must be enforced and that dismissal without prejudice was appropriate. The order expressly granted the Motion to Dismiss and dismissed PersaudBramante Apartments’ claims against First Specialty Insurance Corporation, now known as SwissRe, without prejudice. The court did not decide the underlying replacement-cost dispute or SwissRe’s time-of-suit argument. The claims against the other insurers were not disposed of by this order.