Forum Non Conveniens Dismissal Is Not A Judgment On The Merits
Barry Zalma
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The Fifth Circuit Court of Appeals resolved insurance issues concerning cable-damage in the Arabian Gulf by recognizing the difference between a broker and an agent, the place where – and to whom – a policy was delivered, and how to deal with the issue personal jurisdiction the court has over the parties and that a forum non conveniens dismissal is not a judgment on the merits; it is, instead a determination that the merits should be adjudicated elsewhere.
In Dynamic Industries, Incorporated; Dynamic Industries International, L.L.C.; Dynamic Industries Saudi Arabia, Limited v. Walaa Cooperative Insurance Company; Marsh & McLennan Companies, Inc., doing business as Marsh, Inc.; Marsh USA, Inc., doing business as Marsh USA Risk Services, No. 22-30033, United States Court of Appeals, Fifth Circuit (March 13, 2023) the disputes were resolved.
CLAIM OF INSUREDS
The insureds (Dynamic) assert that their insurance brokers (Marsh) failed to procure adequate insurance coverage from the insurer (Walaa), or in the alternative, that Walaa breached the insurance policy by declining coverage for an incident involving undersea cable-damage in the Arabian Gulf. The district court granted Marsh’s motion to dismiss the suit as untimely under Louisiana law. The district court also granted Walaa’s motion to dismiss the suit for forum non conveniens, reasoning that the insurance policy at issue designates Saudi Arabia as the exclusive forum.
DISCUSSION
First, as for Marsh, Louisiana law requires insureds who wish to sue their insurance broker to do so “within one year from the date that the alleged act, omission, or neglect . . . should have been discovered.” [La. Rev. Stat. § 9:5606].
Case Against Broker
Dynamic sued Marsh after Walaa denied coverage. But Dynamic received a copy of the insurance policy from Walaa almost 18 months earlier. When Dynamic received that copy, it also received constructive notice of any deficiencies that the policy contained. Dynamic’s claims against Marsh are therefore untimely.
Dynamic rejects constructive notice, arguing that the policy contains “absolutely no indication that coverage would be denied.” But the denial was Walaa’s choice, not Marsh’s. According to Dynamic, the policy either omits coverage that Marsh is liable for failing to procure or offers coverage that Walaa must honor. For purposes of asserting its in-the-alternative claims against Marsh Dynamic asked the Fifth Circuit to assume that the policy omitted coverage. Any such omission was present when Dynamic received the policy so its suit is time barred.
Choice of Jurisdiction
Dynamic argued that the Walaa policy’s choice of Saudi Arabian law is unenforceable, under Louisiana law, if the policy was “delivered” in Louisiana. Dynamic says that it received delivery in Louisiana from Walaa’s agent – a Marsh affiliate known as Marsh KSA. Walaa responded that Marsh KSA was actually Dynamic’s agent, and that delivery therefore occurred in Saudi Arabia (where Walaa delivered the policy to Marsh KSA). The Fifth Circuit agreed with Walaa since Marsh, as a broker, is an agent of the insured not the insurer.
Under Louisiana law, an insurance broker is generally deemed to be the agent of the insured rather than the insurer. A broker who is asked by the client to procure coverage wherever possible at the best price is not the agent of the insurer. Marsh KSA “approached” multiple insurers looking for a “competitive price” for Dynamic. Marsh KSA was thus Dynamic’s agent.
After conducting an independent assessment of the clause’s enforceability, the district court properly concluded that delivery occurred in Saudi Arabia to the agent of the insured.
LACK OF PERSONAL JURISDICTION
Separately, the district court concluded that it lacked personal jurisdiction over a Marsh affiliate known as Marsh & McLennan Companies, Inc. (“Marsh Inc.). Yet the district court’s judgment dismissed Dynamic’s claims against Marsh Inc. “with prejudice” – that is, on the merits. ” A federal court generally may not rule on the merits of a case without first determining that it has jurisdiction over the parties i.e., personal jurisdiction.
Because the district court lacked personal jurisdiction, it also lacked power to issue a merits judgment regarding Marsh Inc. Likewise, the district court dismissed Dynamic’s claims against Walaa “with prejudice.” That too was an error, because a forum non conveniens dismissal is not a judgment on the merits; it is, instead a determination that the merits should be adjudicated elsewhere.
The Fifth Circuit, therefore, reversed dismissal as to Walaa Cooperative Insurance Company and Marsh & McLennan Companies, Inc., and remanded with instructions for the district court to enter judgment dismissing Dynamic’s claims against Walaa Cooperative Insurance Company and Marsh &McLennan Companies, Inc. without prejudice.” In all other respects, the District Court’s decision was affirmed.
ZALMA OPINION
The parties won some arguments and lost others. The case established the fact that an insurance broker is not an agent of the insurer but is the agent of the insured who, on the insured’s behalf, transacts insurance. The District Court exceeded its authority and the Fifth Circuit set it straight affirmed part of the decision and reversed others.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected]
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Barry Zalma, Esq., CFE is available at http://www.zalma.com and [email protected]
Follow me on LinkedIn: https://lnkd.in/guWk7gfM
Go to the Insurance Claims Library – https://lnkd.in/gWVSBde.
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Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.
Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
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See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
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ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
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BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
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ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
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