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In re AIU Insurance Company – Case Brief Summary (Texas)

In In re AIU Insurance Company, 148 S.W.3d 109, 111, 47 Tex. Sup. Ct. J. 1093 (Tex. 2004), the Louis Dreyfus Corporation, which had its offices in New York, obtained pollution insurance from AIU Insurance for itself and its subsidiaries, including Dreyfus Natural Gas. AIU, 148 S.W.3d at 111.

AIU is a New York Corporation with its principal place of business in New York. Id. The insurance policy contained a forum-selection clause by which the parties agreed that all disputes would be resolved in the State of New York. Id.

Dreyfus Natural Gas is a Delaware corporation with its principal place of business in Texas. Id. Dreyfus merged with a company which had a contamination suit pending in Hidalgo County Texas prior to issuance of the policy, and Dreyfus was added as a defendant. Id. AIU provided a defense under a reservation of rights and disputed coverage. Id.

Dreyfus sued AIU in Hidalgo County for a declaratory judgment that the environmental contamination claims against it were covered. Id. AIU sued for declaratory judgment in New York and moved to dismiss the Texas suit based on the insurance policy's forum-selection clause. Id.

Dreyfus opposed the motion to dismiss because most of the witnesses lived in Texas, the action involved the application of Texas insurance law, and Texas had a strong public interest in having the insurance coverage rates litigated in Texas and the proceeds distributed in Texas. Id.

The Hidalgo County trial court denied the motion to dismiss and the court of appeals denied mandamus relief. Id.

The Supreme Court held that Dreyfus failed to meet its heavy burden of proof to "clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." Id. at 112-13.

New York is not a "remote alien forum"; it was foreseeable to Dreyfus that a subsidiary would be required to litigate in New York; and litigation in New York did not deny Dreyfus its day in court. Id. at 113-14.

Additionally, the Texas Insurance Code does not require that actions be litigated only in Texas. Id. at 114.

In the absence of evidence of fraud or overreaching, or that AIU or Dreyfus chose New York as a means of discouraging claims, the court concluded that the trial court abused its discretion in not enforcing the forum-selection clause. Id. at 114-15.

The Supreme Court also determined that AIU did not have an adequate remedy by appeal, and therefore, mandamus relief was available. Id. at 115.