Forum Non Conveniens

• Author: International Law Group

A fronting insurance company called Sol Insurance Ltd (Sol) wrote a policy for Nabors Industries Inc. (Nabors), a Texas corporation. The policy covered the insured for physical damage to its oil drilling operations and for business interruption worldwide. Sol reinsured with Zurich Insurance Company (ZIC), a Swiss company.

The policy contained a Texas jurisdiction clause under which ZIC and Sol waived any objection to having the state or federal courts of Texas decide disputes under the contract on the ground of improper venue or forum non conveniens. Another clause voided the policy upon its assignment without the Underwriters' prior written consent. Finally, both original insured and reinsured had a duty to provide prompt written notice to ZIC of any covered claims and to cooperate with ZIC in handling them.

In September 1999, Ace Insurance SA-NV of Belgium sued ZIC in the English courts for a declaration of non-liability under the contract of reinsurance made with ZIC. Ace later found out that ZIC has assigned all of the contract rights and liabilities of its U.S. branch to the newly formed New York corporation, Zurich American Insurance Company (ZAIC), under a Domestication Agreement. As a result, Ace joined ZAIC as second defendant.

The reinsurance contract had a "service of suit clause" which read in part as follows. "It is agreed that in the event of the failure of the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon, at the request of the Insured (or Reinsured), will submit to the Jurisdiction of a Court of competent jurisdiction within the United States."

On May 26, 1998, Nadrico Saudi Ltd. (Nadrico), one of Nabors' associated companies, had one of its wells "blow out" in Saudi Arabia while workers were installing a blow out preventer (BOP). ZIC arguably gave Ace no immediate written notice of Nabors' claim but went ahead and paid more than $12,000,000 to satisfy Nadrico's claims.

In the present action, Ace contested the claim based on breaches of the co-operation clause and the BOP warranty which it argued were incorporated into its contract. Seeking indemnity under the reinsurance contract, ZIC and ZAIC invoked the service clause and sued Ace in the Texas state courts. Both defendants moved in June 2000 to have the English proceedings stayed under the forum non conveniens doctrine in favor of adjudication in the Texas courts.

The court of first instance granted defendants' motion. He held...