LA Supreme Court Upholds Enforceable Insurance Forum Clauses

On May 8, 2019, the Louisiana Supreme Court held that insurance policies requiring litigation to be brought in another state, even if the policy was issued and covered losses occurring in Louisiana, are valid which could lead to major consequences for Louisiana insureds.

In Creekstone Juban I, LLC v. XL Insurance America, Inc., the Supreme Court held that forum-selection clauses are presumed to be valid and that the plaintiff failed to meet its “high burden” when seeking invalidation.  The Court interpreted a Louisiana Revised Statute to say that it only prohibits a contract from stripping Louisiana courts of jurisdiction and not from requiring a matter to be heard in another state. The decision is making waves as it could lead to harsh consequences for insureds and a few breaks for insurance companies.

Insurance Companies Will Make More Money

Insurance companies will most certainly take advantage of the Creekstone Juban I, LLC decision by mandating that all litigation take place near their home base and allow insurance companies to save on costs by using familiar local or even inhouse counsel.  Because of the increased burden of expensive travel costs which business owners will have to shoulder, settlement amounts will undoubtedly decrease leading to further profit by the insurance companies.

More Risks for the Insured

As we mentioned, the increased burden on the insured includes travel costs at a time when they are likely already treading water financially.  Additionally, an insured could be all but forced to hire a higher-priced foreign attorney to handle the matter.

What about Small Businesses?

Creekstone involved larger companies who would be less affected by the increased burdens of traveling to litigate and the court notably did not answer whether it would apply the same harsh review to a smaller claimant.  Due to the increased burden on the insured, who in this scenario would be a Louisiana business owner, and the sheer size of insurance companies who would balk at any demand or suggestion of alteration of their boiler plate policies, we would argue that it is imperative that the Louisiana legislature take a harder look at the wording of La. R.S. 22:868 for the sake of their constituents.