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EDPA Upholds An Insurer’s Choice of (Maritime) Law Clause (PA)

April 16, 2021

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<p style="text-align: justify;">After the recent kerfuffle in the Suez Canal, it seems as though ships running ashore and maritime law are becoming common topics of conversation. Most recently, the Eastern District of Pennsylvania addressed the impact of an insurer’s choice of law provision in an insurance contract in connection with an insured seeking coverage for damages following its ship running aground.</p>
<p style="text-align: justify;"><em><a href="https://www.wcmlaw.com/wp-content/uploads/2021/04/Great-Lakes-Insurance-SE-v.-Raiders-Retreat-Realty-Co..pdf">Great Lakes Insurance SE v. Raiders Retreat Realty Co.</a> </em>centered around a shipping vessel owned by the defendant-insured and insured by the plaintiff, with a period of coverage extending over twelve years. Throughout the coverage period, and in all the renewal documents for the policy at issue, there was a choice of law clause determining the relevant applicable law. The clause set Federal Admiralty law as governing, with New York as a backup. The insured argued, <em>inter alia</em>, that the choice of law clause was not enforceable and Pennsylvania law should apply because the clause was unreasonable based on the insurer’s lack of contacts with New York and, thus, enforcing the clause would contravene the public policy of Pennsylvania.</p>
<p style="text-align: justify;">Ultimately, the court disagreed. In reaching this conclusion the court first looked to the multiple business contacts the insurer maintained with New York, including maintaining an agent for service of process as well as multiple accounts, and its status as an insurer in New York. Beyond that, the court analyzed multiple precedential cases holding that choice of law clauses were not against public policy. Most notably, the court concluded that application of maritime law was appropriate, and that “public policy of a state where a case was filed cannot override the presumptive validity, under federal maritime choice-of-law principles, of a [choice of law provision] where the chosen forum has a substantial relationship to the parties or transaction.”</p>
<p style="text-align: justify;">Accordingly, this case shows that Pennsylvania courts are apt to uphold an insurance policy’s choice of law provision, and also provides some of the factors courts will look to in determining whether the chosen forum has a sufficient relationship to the parties.</p>
<p style="text-align: justify;">Thanks to Abby Wilson for her contribution to this post. If you have any questions or comments, please contact <a href="mailto:chayes@wcmlaw.com">Colleen Hayes</a>.</p>

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