FEDERAL COURT IN NORTHERN DISTRICT RETAINS SURPLUS LINES INSURANCE CASE ON PUBLIC POLICY GROUNDS

Last Monday, a Federal District Court in the Northern District of Texas denied a motion to transfer venue to a New York court based in part on the ground that Texas has a compelling interest in maintaining jurisdiction over out-of-state insurers who do business in Texas as surplus lines carriers.  In JetPay Merch. Services, LLC v. Chartis Specialty Ins. Co., 3:13-CV-0401-M, 2013 WL 3387517 (N.D. Tex. July 8, 2013), an insured sued Chartis and the procuring agent in the Dallas Division of the Northern District of Texas over a claim dispute.  The dispute raised questions concerning whether the surplus lines policy was issued properly, and whether the agent was a properly licensed surplus lines broker.

Chartis sought to transfer venue to the Southern District of New York where it and the agent have their principal places of business, arguing venue was proper there and it was a “clearly more convenient” venue than Dallas.  The court acknowledged that either Dallas or New York would both be proper under the federal venue statute, but denied the transfer to New York. Upon weighing the private and public factors affecting the transfer decision, the court found that some of the factors, such as access to witnesses, favored transfer.  Nevertheless, the court’s analysis suggests that the interest of the state of Texas in regulating and monitoring the activities of unauthorized insurers and surplus lines brokers in the state was the single decisive factor, even though the case involved complicated choice of law questions which may ultimately result in application of New York law.