Monday, November 3, 2008

Go West, Everyone -- New York DJ Action Dismissed and Sent to California

Kinder Morgan Energy Partners, L.P. v. Ace Am. Ins. Co.

(1st Dept., decided 10/30/2008)

If you had a Texas insured, a Pennsylvania insurer, and a California gas pipeline explosion with multiple deaths, bodily injuries and property damage, where would the DJ action over disputed coverage be brought?  New York, of course, right?  

Plaintiffs, headquartered in Houston, Texas, brought this declaratory judgment action against Ace American, headquartered in Philadelphia, Pennsyvlania, in New York State Supreme Court, New York County, seeking a declaration of rights under insurance policies issued by Ace in connection with coverage for a November 2004 gasoline pipeline explosion in California.  Ace unsuccessfully moved to dismiss or stay the action on grounds of forum non conveniens.

The First Department unanimously REVERSED on condition that Ace waive any statute of limitations defense in California:
In determining whether to dismiss an action on the ground of forum non conveniens, "[a]mong the factors to be considered are the burden on the New York courts, the potential hardship to the defendant, and the unavailability of an alternative forum in which plaintiff may bring suit. The court may also consider that both parties to the action are nonresidents and that the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction" (Islamic Republic of Iran v Pahlavi, 62 NY2d 474, 479 [1984, citations omitted], cert denied 469 US 1108 [1985]). 

The explosion caused physical damage in California, involved the alleged negligence of plaintiffs and nonparties there, and all of the underlying actions are pending in California, the residence of plaintiff SFPP. These facts support deference to California's stronger interest (see Flintkote Co. v American Mut. Liab. Ins. Co., 103 AD2d 501 [1984], affd 67 NY2d 857 [1986]). That the subject policies were issued in New York is but one factor to be considered (see Continental Ins. Co. v AMAX Inc., 192 AD2d 391 [1993], lv denied 82 NY2d 835 [1993]). 

Moreover, plaintiffs' claims are based on a contract allegedly requiring the procurement of insurance. The existence and terms of that contract are relevant to a determination of coverage, and the location of witnesses and documents concerning the contract, which was negotiated in and subject to the laws of California, is relevant.
Makes sense.

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