International Ins. Co. v. McDermott Inc., 91-3398

• Decision Date: 09 March 1992
• Docket Number: No. 91-3398,91-3398
• Parties: , 60 USLW 2612 INTERNATIONAL INSURANCE COMPANY, an Illinois Corporation, et al., Plaintiffs-Appellants, v. McDERMOTT INCORPORATED, a Delaware Corporation, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 93

956 F.2d 93

1992 A.M.C. 2594, 60 USLW 2612

INTERNATIONAL INSURANCE COMPANY, an Illinois Corporation, et

al., Plaintiffs-Appellants, v. McDERMOTT INCORPORATED, a Delaware Corporation, et al.,

Defendants-Appellees.

No. 91-3398.

United States Court of Appeals, Fifth Circuit.

March 9, 1992.

Francis P. Accardo, Gus A. Fritchie, III, Montgomery, Barnett, Brown, Reed, Hammond & Mintz, New Orleans, La., and Laurence M. McHeffey, McElroy, Deutsch & Mulvaney, Morristown, N.J., for plaintiffs-appellants.

Rockne L. Moseley and Arden Jay Lea, Lea, Plavnicky & Moseley, New Orleans, La., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before POLITZ, Chief Judge, and KING and JOHNSON, Circuit Judges.

JOHNSON, Circuit Judge:

The Court's prior opinion in this case, of Feb. 19, 1992, is withdrawn in its entirety, and the following substituted in its place.

Today this Court once again turns its attention to issues of interpretation of contracts of insurance. In particular, we are asked to resolve, for the second time in the last several months, a question regarding a clause common in insurance policies, commonly known as a "Service of Suit" clause.

I. Facts and Procedural History

Between 1981 and 1986 the International Insurance Company and U.S. Fire Insurance Company issued ten policies of umbrella and excess liability insurance to McDermott, Inc. In 1989 and 1990, McDermott and International engaged in discussions regarding whether and to what extent these policies provide coverage for some 20,000 asbestosis actions pending against McDermott and its subsidiary, Babcock & Wilcox, Inc. The gravamen of the asbestosis actions is an allegation that certain boilers manufactured by Babcock & Wilcox contained or incorporated asbestos insulation materials which allegedly caused asbestosis.

On January 3, 1991, McDermott made a formal demand on International for payment of amounts McDermott contended were due under the ten policies. McDermott told International that if it did not pay within thirty days, McDermott would "institute proceedings." The thirty day deadline came and went. International did not pay. McDermott did not institute proceedings. On February 28, 1991, International and U.S. Fire filed their own complaint, seeking a declaratory judgment as to their rights and liabilities with respect to all ten policies of insurance. They filed their complaint in the United States District Court for the Eastern District of Louisiana, the district in which McDermott and Babcock & Wilcox maintain their corporate headquarters. McDermott concedes that if the action may be maintained in the federal court, then jurisdiction and venue are proper in the Eastern District of Louisiana.

On March 15, 1991, about two weeks after International and U.S. Fire had filed their complaint in the federal district court, McDermott filed an action in state court in Jefferson County, Texas. In the state court action McDermott seeks to recover amounts McDermott claims under two of the ten policies, covering about 100 of the 20,000 outstanding asbestosis actions. Three days after it filed its action in Texas state court, McDermott moved to dismiss the federal action.

In its motion to dismiss the federal action, McDermott relies on a "Service of Suit" clause contained in each of the ten policies of insurance. That clause provides:

It is agreed that in the event of the failure of Underwriters hereon to pay any amount claimed to be due hereunder, Underwriters hereon, at the request of the Assured, will submit to the jurisdiction of any court of competent jurisdiction within the United States and will comply with all requirements necessary to give such court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such court.

The federal district court concluded that this clause was a "forum selection clause," and that because McDermott, the insured, had chosen the Texas state court as its forum, the federal action had to be dismissed. International and U.S. Fire appeal.

II. Discussion

Just last term, in City of Rose City v. Nutmeg Ins. Co., 931 F.2d 13 (5th Cir.1991), this Court held that a "Service of Suit" clause substantially identical to the one at issue in this case gave the insured the right to choose the forum in which to try its claims against the insurer, and prohibited the insurer from removing an insured's state court action to federal court. 931 F.2d at 15. The question presented by the instant case is whether that same clause allows an insured to block, by a subsequent filing in state court, the insurer's otherwise valid federal action for declaratory judgment.

In Nutmeg an assignee of the insured filed an action against the insurer in Texas state court. The insurer removed the action to federal court. The assignee attempted to have the case remanded to the state court, but the federal court refused, and instead granted summary judgment to the insurer. The assignee appealed to this Court. We reversed the decision of ...