SEPTEMBER 2017 BAD FAITH CASES: FEDERAL REMAND WHERE POLICY’S FORUM SELECTION CLAUSE ALLOWS INSURED OR ASSIGNEE TO CHOSE COURT; ANTI-ASSIGNMENT CLAUSE INEFFECTIVE WHERE ASSIGNMENT IS POST-OCCURRENCE (Philadelphia Federal)
This action originated from a bad faith suit filed in the Philadelphia County Court of Common Pleas. The insured alleged that the insurer refused to defend and indemnify in a separate Lehigh County action which resulted in a judgment of $500,000 against the insured. The insured assigned its rights against the insurer to the instant plaintiff-assignee.
The insurer removed the matter to federal court. Plaintiff filed a motion to remand, arguing that the insurance policy contained a “Service of Suit Amendment” whereby the insurer agreed to litigate in any forum chosen by the insured. The insurer argued that the Service of Suit Amendment pertains only to the original insured party, and not to an assignee.
The insurer further argued that the policy contained an anti-assignment clause, which further limits the plaintiff-assignee’s rights to enforce the forum selection clause.
Courts in the Third Circuit had not previously decided the question of whether an assignee could enforce a forum selection clause against an insurer. The Court held that “where an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of his rights.”
The Court further ruled that per Pennsylvania law, “an insurer may not limit an insured’s ability to assign his or her rights under a policy after the occurrence of the event which gives rise to the insurer’s liability.” Because the assignment here occurred after the event that created liability, the plaintiff-assignee could enforce the forum selection clause against the insurer, despite the presence of an anti-assignment clause in the policy.
Lastly, the Court denied plaintiff-assignee’s request for attorneys’ fees, because the insurer did not lack an objectively reasonable basis for seeking removal.
