Earlier this week, I had to travel over 3,500 miles round trip to Minneapolis to take issue with a health insurance company suing my Florida policyholder client in Minnesota federal court in an effort to gain an unwarranted strategic and economic advantage. During my several years of insurance policyholder representation, the well-reasoned rule of thumb has always been that, unless there is a valid forum selection clause in an insurance contract or some out of the ordinary circumstance, insurance disputes are to be resolved in the state in which the insurance contract was delivered.
Consider, for a moment, if this was not the case: Florida policyholders would be forced to travel to Illinois in order to recover owed insurance benefits from State Farm, Massachusetts in order to recover from Liberty Mutual, and New Jersey in order to recover from Chubb. Thankfully, the law does not favor such results.
The Supreme Court of the United States has said this on the subject:
Turning to this case we think it apparent that the Due Process Clause did not preclude the California court from entering a judgment binding on [the Texas insurance company]. It is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with [California]. … The contract was delivered in California, the premiums were mailed from there and the insured was a resident of that State when he died. It cannot be denied that California has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims. These residents would be at a severe disadvantage if they were forced to follow the insurance company to a distant State in order to hold it legally accountable. … Often the crucial witnesses … will be found in the insured’s locality.1
And the Florida legislature is onboard with protecting Florida policyholders from having to “follow the insurance company to a distant State in order to hold it legally accountable” for benefits owed under the insurance contract. Insurance companies are not allowed to conduct their insurance business in Florida without acknowledging that the State of Florida will regulate such business to ensure, in part, that the insurance contract is properly applied. More specifically, Florida law provides that:
(1) No person shall act as an insurer… in this state except as authorized by subsisting certificate of authority issued to the insurer by the office… .
(2) No insurer shall … solicit insurance applications or otherwise transact insurance in another state or country unless it holds a subsisting certificate of authority issued to it by the office authorizing it to transact the same kind or kinds of insurance in this state.
(3) This state hereby preempts the field of regulating insurers and their agents and representatives. . . .2
Non-Florida insurance companies agree to submit themselves to Florida law when they seek and obtain the required authorization to conduct their insurance business in Florida.3 So, absent a valid forum selection clause or some bizarre circumstance, non-Florida courts should honor the preemption language of Section 624.401 of the Florida Statutes and heed the wisdom of the Supreme Court of the United States by dismissing or transferring actions commenced by insurance companies in jurisdictions foreign to policyholders for no apparent reason other than driving up the cost of litigation for the policyholder in an effort to win the war of attrition.
The rule of thumb (litigating insurance disputes where the policy is delivered) is practically hornbook. After having had to take a trip to Minnesota earlier this week to educate an insurance company as to hornbook law, however, I thought it worthwhile to remind folks of the rule of thumb. At the very least, this reminder may spare me from someday having to again travel 3,500+ miles to sort out procedural nonsense before being able to litigate the substance of a coverage dispute.
1 McGee v. Int’l Life Ins. Co., 355 U.S. 220, 222-223 (1957).
2 Fla. Stat. § 624.401.
3 Indeed, it would be a crime for non-Florida insurance companies to conduct their insurance business in Florida without the requisite certificate of authority. Fla. Stat. § 624.401(4)(a) (“Any person who acts as an insurer, transacts insurance, or otherwise engages in insurance activities in this state without a certificate of authority in violation of this section commits a felony of the third degree…”).