On August 22, 2017, a Texas state appellate court panel dismissed a Mexican candy and peanut manufacturer’s coverage action against its Mexican insurer and insurance broker due to lack of personal jurisdiction. See Seguros Afirme, S.A. de C.V. v. Elamex, S.A. de C.V., et al., No. 05-16-01465-CV (Tex. Ct. App. filed Aug. 22, 2017); Cooper Gay Martinez Del Rio y Asociados Intermediarios de Reaseguro S.A. de C.V. v. Elamex, S.A. de C.V., et al., No. 05-16-01436-CV (Tex. Ct. App. filed Aug. 22, 2017).
The food manufacturer, Elamex S.A. de C.V. (“Elamex”), filed a coverage action in Texas against its Mexican insurer, Seguros Afirme, S.A. de C.V. (“Seguros Afirme”), and broker, Cooper Gay Martinez del Rio y Asociados Intermediarios de Reaseguro S.A. de C.V. (“CGM”), after Seguros Afirme denied coverage for business interruption losses resulting from a fire that caused significant damage at one of Elamex’s plants in Mexico. Elamex argued that the Texas court had specific personal jurisdiction over the case because the insurance policy was procured, negotiated, and investigated in Texas, and CGM and Seguros Afirme benefitted financially from the issuance of the policy by collecting premiums, among other reasons.
The court explained that an “entity has minimum contacts with a forum state if it purposefully avails itself of the privilege of conducting activities within the state, thus invoking the benefits and protections of its laws.” Three principles guided the court’s purposeful-availment analysis: (1) only the defendant’s forum contacts are relevant, not the unilateral activities of a third-party; (2) the defendant’s contacts must be purposeful rather than random, isolated, or fortuitous; and (3) the defendant must seek some benefit, advantage, or profit by availing itself of the forum such that it impliedly consents to suit there.
Rejecting Elamex’s reasoning, the court held there was no specific personal jurisdiction because CGM and Seguros Afirme lacked the requisite minimum contacts required under Texas’s long-arm statute. The court found that Seguros Afirme and CGM did not purposefully avail themselves of any benefit from the state because there was no evidence that they solicited a Texas insured or attempted to develop business in Texas. The court discounted allegations that the policy covered two of Elamex’s properties in Texas and that two meetings occurred in Texas to investigate the claim by finding that there was no evidence substantiating that Seguros Afirme or CGM invoked the benefits and protection of Texas law. Moreover, the court pointed to the policy’s choice of law provision which stated the policy was governed by Mexican law, which suggested the parties “purposefully avoided Texas”.
This opinion follows another recent example of U.S. courts refusing to exercise jurisdiction over coverage disputes with foreign insurers. As these recent opinions recognize, however, an insured with a policy that contains a foreign choice-of-law or forum-selective clause may still be able to avoid litigating its coverage action in a foreign country if it is able to establish personal jurisdiction in a U.S. court. As demonstrated here, however, establishing personal jurisdiction requires a policyholder and its counsel to establish the factual predicate supporting minimum contacts. Insureds seeking to avoid litigating a coverage dispute in a foreign forum or under foreign law should ensure that their policies are governed by U.S. law and do not contain foreign forum-selection clauses. Working with experienced cross-border insurance coverage counsel to assist in drafting insurance provisions at the placement or renewal stage may help minimize the risk of having to litigate a coverage dispute in a foreign country. If an insured is faced with a policy containing a foreign choice-of-law or forum-selection clause, retaining such counsel may assist in overcoming jurisdictional obstacles in U.S. courts.