Legal insights: Upholding forum selection clauses in insurance cases

November 23, 2023 | Jasmine de Guise

This case concerns a legal dispute involving Avantys Health Inc., an international medical insurance company (the “Insurer”) and its insureds, an American couple residing in Florida (the “Insureds”). For the purpose of this article, we will discuss the Court of Appeal’s decision on the application of the forum selection clauses and the Quebec courts jurisdiction.

Summary of Facts

The Insurer is headquartered in Montreal. The insurance policy, governed by Quebec law, included a forum selection clause dictating that disputes regarding the policy would be determined before the Quebec courts:

This policy is governed by, and will be interpreted in accordance with Canadian province of Quebec law.

Any disputes about this policy will be determined in the courts of Canadian Province of Quebec.

Conflict arose when the Insurer refused coverage for medical expenses incurred by the Insureds in Florida. Legal actions ensued, including a legal action against the Insureds by the hospital in a Florida court for unpaid medical expenses (the “Florida case“). A subsequent settlement of the Florida case occurred between the parties.

The Insurer later filed an action before the Quebec Superior Court seeking nullity of the insurance policy based on misrepresentation by the Insureds. The Insureds responded with a motion to dismiss, arguing that the Florida courts were in a better position to resolve the dispute and had jurisdiction.

The decision under appeal upheld the Insureds’ declinatory plea, dismissing the Insurer’s request for the nullity of the insurance policy based on article 43 of the Code of Civil Procedure (“CCP”):

43.[…]

If an application pertains to an insurance contract, the court having jurisdiction is the court of the domicile or residence of the insured, whether that person is the plaintiff or the defendant, or, as applicable, the court of the domicile or residence of the beneficiary under the contract. In the case of property insurance, the court of the place where the loss occurred also has jurisdiction.

[…]

The trial judge also concluded that if he had determined Quebec courts to have jurisdiction, the forum selection clause wouldn’t have hindered the application of article 3135 of the Civil Code of Quebec (“CCQ”) and the forum non conveniens doctrine:

3135.Even though a Québec authority has jurisdiction to hear a dispute, it may, exceptionally and on an application by a party, decline jurisdiction if it considers that the authorities of another State are in a better position to decide the dispute.

Lastly, the judge stated readiness to issue a stay of proceedings under article 3137 CCQ, if deemed necessary:

3137.On the application of a party, a Québec authority may stay its ruling on an action brought before it if another action, between the same parties, based on the same facts and having the same subject is pending before a foreign authority, provided that the latter action can result in a decision which may be recognized in Québec, or if such a decision has already been rendered by a foreign authority.

Decision

The Insurer appealed the lower court’s decision based on grounds that included contesting the application of article 43 CCP and article 3135 CCQ.

The Court of Appeal ruled in favor of the Insurer and declared that the Quebec Superior Court has jurisdiction to hear the Insurer’s application, highlighting two significant aspects:

  1. First, the Court of Appeal emphasizes the misapplication of article 43 CCP by the trial judge, clarifying the role of this legal disposition in determining territorial jurisdiction within Quebec, not international
  2. Second, the Court of Appeal points out the error in applying article 3135 CCQ without establishing Florida court jurisdiction and overlooking the intentions expressed in the forum selection clause.

Comments

Without completely closing the door to a challenge of the validity of the forum selection clause, this decision underlines the importance of upholding forum selection clauses in international contracts, such as insurance policies, which favors the predictability and security that the parties intended to put in place. The decision also offers clarity on different forms of jurisdiction and the precise application of legal provisions governing territorial versus international jurisdiction.

Disclaimer

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