Unreported / Non-Citable
Background
Assma Group sued Mt. Hawley Insurance Company for breach of contract and violations of the Texas Insurance Code and Deceptive Trade Practices Act. On May 27, 2024, a thunderstorm with hail and damaging winds struck the Arlington area, allegedly causing $125,914.72 in damage to Assma’s commercial property, including roof and air conditioning system damage. Assma promptly reported the loss to Mt. Hawley in June 2024 and requested coverage under its commercial property insurance policy.
Mt. Hawley retained an independent adjuster who documented hail damage to the roof and water damage to interior ceiling tiles. However, Mt. Hawley also retained a structural engineering firm that concluded the hail did not damage the air conditioning system and that the interior staining resulted from maintenance or condensation rather than the storm. On August 1, 2024, Mt. Hawley issued a partial denial, asserting the covered loss did not exceed the policy deductible. After Assma retained its own public adjuster in January 2025, communications between the parties ceased.
Mt. Hawley removed the case to federal court and filed a motion to transfer venue to the U.S. District Court for the Southern District of New York, citing a forum selection clause in the insurance policy requiring any litigation to be brought exclusively in New York state or federal courts. Assma opposed the transfer, arguing the clause was invalid, ambiguous, and unreasonable because the parties had no nexus to New York.
The Court’s Holding
The court granted Mt. Hawley’s motion to transfer venue, holding that the forum selection clause was mandatory, valid, and enforceable. Applying New York law (as specified in the policy’s choice-of-law provision), the court found the clause language unambiguous: it clearly stated that any litigation “shall be brought only in the state or federal courts of New York.” The court rejected Assma’s Bremen v. Zapata Off-Shore Co. challenges, finding no fraud, overreaching, or unreasonableness simply because the parties lacked a New York nexus.
The court emphasized that forum selection clauses enjoy a “strong presumption” of enforceability under Fifth Circuit precedent. It further held that the clause did not violate Texas public policy, rejecting Assma’s argument that it would allow evasion of Texas insurance regulatory statutes. The court noted that Chapter 225 of the Texas Insurance Code applies only to surplus lines policies, not the insurers themselves, and cited Fifth Circuit authority in Noble House holding that forum selection clauses are not inconsistent with Texas public policy.
Applying the Atlantic Marine framework, the court found that because the forum selection clause was valid and mandatory, the public-interest factors—including judicial economy and the Southern District of New York’s familiarity with New York law—favored transfer. The court also declined to apply a 21-day stay required by Local Rule 62.2, finding it infringed on the court’s inherent authority to manage its docket and lacked statutory foundation.
Key Takeaways
- Forum selection clauses in commercial insurance policies are enforceable even when the parties have no nexus to the designated forum state.
- Texas public policy does not prevent enforcement of forum selection clauses in insurance disputes, despite Texas’s regulatory interest in protecting policyholders.
- A mandatory, valid, and enforceable forum selection clause receives “controlling weight in all but the most exceptional cases” under the Atlantic Marine framework.
- District courts retain inherent authority to manage their dockets free from local rules that circumvent federal venue statutes and the separation of powers.
Why It Matters
This decision reinforces that commercial insureds cannot easily escape forum selection clauses through policy arguments or invocation of local regulatory interests. For insurance companies, it confirms that contractual forum selection clauses—particularly those specifying New York courts—will be enforced even when disputes arise from property damage in other states. For policyholders contesting coverage, the ruling emphasizes that the time to challenge a forum selection clause is before or during contract formation, not after a loss occurs.
The court’s analysis of the Atlantic Marine framework in the insurance context also clarifies that merely having a local interest in the original forum is insufficient to overcome a valid forum selection clause. The decision strengthens the enforceability of choice-of-forum and choice-of-law provisions in commercial insurance policies nationwide, signaling that such contractual allocations of dispute resolution will be given substantial deference by federal courts.