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CURRENT CONTRACTUAL AND INSURANCE ISSUES FOR CORPORATE COUNSEL Presented to ACC America South/Central Texas Chapter Oct

CURRENT CONTRACTUAL AND INSURANCE ISSUES FOR CORPORATE COUNSEL Presented to ACC America South/Central Texas Chapter October 3, 2007. BY James L. Walker Marc Rietvelt JACKSON WALKER, L.L.P 112 E. Pecan Street Suite 2500 San Antonio, Texas (210) 978-7700.

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CURRENT CONTRACTUAL AND INSURANCE ISSUES FOR CORPORATE COUNSEL Presented to ACC America South/Central Texas Chapter Oct

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  1. CURRENT CONTRACTUAL AND INSURANCE ISSUES FOR CORPORATE COUNSELPresented to ACC America South/Central Texas Chapter October 3, 2007 BY James L. Walker Marc Rietvelt JACKSON WALKER, L.L.P 112 E. Pecan Street Suite 2500 San Antonio, Texas (210) 978-7700 Austin  Dallas  Fort Worth  HoustonSan Angelo  San Antonio Member of GLOBALAW™

  2. Jury Waiver Clauses in Commercial Contracts • Validity of Jury Waiver Clauses • Bench Trial or Arbitration? • Procedural Matters

  3. Validity of Jury Waiver Clauses • Jury Waiver Clauses are valid in Texas. In re Prudential Ins. Co. of America, 148 S.W.3d 124 (Tex. 2004). • Texas follows the majority rule. • Be careful in California or Georgia.

  4. Bench Trial or Arbitration? • Arbitration Pros • Finality • Speed • Privacy • Arbitration Cons • No judicial review • Limited discovery • Few or no rules of evidence • Cost

  5. Bench Trial or Arbitration? (cont’d) • Bench Trial Pros • Speed • Appellate review • Stare Decisis • Rules of Evidence • Transparent decision making • Bench Trial Cons • Fuller discovery • Public record

  6. Procedural Matters • Draft a waiver that is conspicuous. • If jury demanded, promptly move to strike. • Mandamus is available. • Use a forum selection clause as well.

  7. Forum Selection Clauses • Forum Selection Clauses Under the Early “Ouster” Doctrine • The Current Texas Forum Selection Clause Rule • Procedural Matters

  8. A. Forum Selection Clauses Under the Early “Ouster” Doctrine • Under the “ouster” doctrine, Texas courts would not enforce any agreement among the parties to “oust” a court from exercising legally-established jurisdiction over the dispute. • In International Travelers Association v. Branum, the Texas Supreme Court held: “We are convinced that it is utterly against public policy to permit bargaining in this State about depriving courts of jurisdiction.” 212 S.W. 630, 631 (1919). • Texas law began to change in the 1990s.

  9. B. The Current Texas Forum Selection Clause Rule • Texas recently began enforcing forum selection clauses and now honors them almost to the exclusion of any objection. In re AIU Insurance Co., 148 S.W.3d 109 (Tex. 2004). • Under current law, Texas courts now recognize that: “[E]nforcement of a forum selection clause is mandatory unless the party opposing enforcement clearly shows that enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching.” In re Tyco Elec. Power Sys., Inc., No. 05-04-01808-CV, 2005 WL 237232, at *4 (Tex. App.—Dallas Feb. 2, 2005, orig. proceeding).

  10. C. Procedural Matters • Special Appearance or Motion to Dismiss • A motion to dismiss is the correct procedural mechanism to enforce a forum selection clause. • A special appearance addresses jurisdiction, not contractual forum selection clauses. • If a party decides to challenge personal jurisdiction in addition to seeking enforcement of the forum selection clause, the party should file both a special appearance and a motion to dismiss (be careful of due order of pleading).

  11. Mandamus • Parties may seek mandamus of courts that refuse to enforce forum selection clauses. • The Texas Supreme Court has found “no meaningful distinction between . . . forum selection clauses and arbitration clauses.” In re AIU Insurance Co., 148 S.W.3d 109, 116 (Tex. 2004). • Thus, the jurisprudence relating to arbitration applies equally to forum selection.

  12. Waiver of Forum Selection Clauses • By analogizing forum selection clauses to arbitration provisions, the Supreme Court has made proving waiver of a forum selection clause extremely difficult. • In forum selection, as in arbitration, waiver will be found only when (1) the party seeking it has substantially invoked the judicial process; and (2) the party opposing it suffers actual prejudice as a result.

  13. Pleading Fraud To Avoid the Forum Selection Clause • Doctrine of Severability prevents a party from avoiding the effect of a forum selection clause by arguing that the entire contract was product of fraud. • In order to attack the validity of the forum selection clause on the basis of fraud, a party must prove that the fraud related to the forum selection clause itself.

  14. What’s Next?? • The freedom of contract trend has brought about many changes already, and it remains to be seen what other issues formerly viewed as “utterly against” public policy, may yet be found subject to contract or negotiation among parties. • Courts currently reason that venue is fixed by law and cannot be altered by any agreement or contract among the parties. Is venue next?

  15. Punitive Damages Waivers • State of the Law Nationally • Recent Texas Developments

  16. State of the Law Nationally • Most states hold that punitive damages waiver clauses violate public policy. • A few states, on the other hand, have held that contractual punitive damages waivers are enforceable.

  17. Recent Texas Developments • Texas courts of appeals have reached conflicting decisions, and the Texas Supreme Court has not spoken to the issue. • The Fifth Circuit Court of Appeals has certified questions to the Texas Supreme Court regarding whether insuring for punitive damages is against public policy in Texas. Fairfield Insurance Co. v. Stephens Martin Paving, 381 F.3d 435 (5th Cir. 2004).

  18. Significant Recent Decisions in Insurance Law and Cases to Watch • Lamar Homes, Inc. v. Mid-Continent Casualty Co., No. 05-0832, 2007 WL 2459193 (Tex. Aug. 31, 2007). • Entergy Gulf States, Inc. v. Summers, No. 05-0272, 2007 WL 2458027 (Tex. Aug. 31, 2007). • Samsung Electronics America, Inc. v. Federal Insurance Co., 202 S.W.3d 372 (Tex. App.—Dallas 2006, pet. filed). • Nokia, Inc. v. Zurich American Insurance Co., 202 S.W.3d 384 (Tex. App.—Dallas 2006, no pet. h.). • Excess Underwriters at Lloyd’s, London, et al. v. Frank’s Casing Crew & Rental Tools, Inc., No. 02-0730, 2005 WL 1252321 (Tex. May 27, 2005). • OneBeacon Insurance Co. v. Don’s Building Supply, Inc., 496 F.3d 361 (5th Cir. 2007).

  19. Lamar Homes, Inc. v. Mid-Continent Casualty Co., No. 05-0832, 2007 WL 2459193 (Tex. Aug. 31, 2007). • Unintended construction defects may constitute an “accident” or “occurrence” under a CGL policy, and allegations of damage to the home itself may constitute “property damage” sufficient to trigger the duty to defend. • Duty to indemnify relies on proof at trial. • Statutory penalties apply to a breach of the duty to defend.

  20. Entergy Gulf States, Inc. v. Summers, No. 05-0272, 2007 WL 2458027 (Tex. Aug. 31, 2007). • A premises owner that “undertakes to procure” work falls within the Labor Code’s definition of a general contractor and thus qualifies for the exclusive remedy defense.

  21. Samsung Electronics America, Inc. v. Federal Insurance Co., 202 S.W.3d 372 (Tex. App.—Dallas 2006, pet. filed).andNokia, Inc. v. Zurich American Insurance Co., 202 S.W.3d 384 (Tex. App.—Dallas 2006, no pet. h.). • Allegations of biological damage to human cells as a result of cell phone radio frequency radiation was “bodily injury” within the meaning of CGL policies, such that insurance companies owed duty to defend the various class actions.

  22. Excess Underwriters at Lloyd’s, London, et al. v. Frank’s Casing Crew & Rental Tools, Inc., No. 02-0730, 2005 WL 1252321 (Tex. May 27, 2005). • Court granted rehearing in this case following 2005 decision in which it held that an excess insurance carrier that disputed coverage, but then settled a claim against an insured, can seek reimbursement for the settlement costs from the insured, even though the policy did not grant it the right to be reimbursed.

  23. OneBeacon Insurance. Co. v. Don’s Building Supply, Inc.,496 F.3d 361 (5th Cir. 2007). • Issue of first impression as to what triggers an insurance company’s duty to defend a damage claim that occurred during the policy period but was discovered years after the policy ended.

  24. James L. Walker rwalker@jw.com Marc Rietvelt mrietvelt@jw.com QUESTIONS? Jackson Walker L.L.P.www.jw.com Austin  Dallas  Fort Worth  HoustonSan Angelo  San Antonio

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