The Appellate Division of the Supreme Court refused to grant an injunction to the insurer to prevent a pending suit in Washington state. North Am. Elite Ins. Co. v. Space Needle, LLC, 2021 N.Y. LEXIS 6792(N.Y. App. Div. Dec. 2, 2021).
In 2019 Seattle based Space Needle, LLC procured a policy from Elite, a New Hampshire company authorised to sell insurance in the state of Washington. The policy covered business interruption with limits of $160 million and provided that the laws of the State of New York “shall govern the construction and interpretation” of the policy and that the parties submitted to the “exclusive jurisdiction” of New York State courts.
In March 2020, Space Needle notified Elite of a business interruption loss claim due to the city and state governments’ COVID-related closure of the Space Needle to the public. Space Needle requested a coverage determination under Washington law concerning the policy coverage provisions and exclusions.
Elite sued in New York seeking a declaration that it owed no coverage to Space Needle for its COVID-related losses under the policy. Elite also moved for a preliminary injunction to prevent a similar suit from going forward in Washington. The Supreme Court denied Elite’s motion because it did not show a likelihood of success on the merits or the balance of equities in seeking to enforce the New York exclusive forum selection clause.
The Appellate Division agreed. As an insurer authorised to sell insurance in Washington, Elite was required to comply with the Washington Insurance Code’s prohibition against choice-of-law and forum selection clauses in policies sold in Washington. The code provided that no insurance issued in Washington “shall contain any condition, stipulation or agreement (a) requiring it to be construed according to the laws of any other state or country . . . or (b) depriving the courts of this state of the jurisdiction of action against the insurer. . .” Elite did not demonstrate that the equities tip in its favor where it was attempting a blatant end run around of Washington’s prohibition against choice-of-law and forum selection clauses. The clauses were void under the Washington law with which Elite agreed to comply. Elite should have known that by participating in the Washington insurance market, it had an obligation not to include such clauses.