In 9285-6111 Québec inc. c. Dream Yacht Charter[1], the Superior Court recently gave full application to a choice of forum clause contained in the insurance contract identifying the court of competent jurisdiction for hearing disputes arising from the contract.
A catamaran owned by 9285-6111 Québec inc. (‘9285″) and operated by Dream Yacht Charter (“DYC”) was damaged in an accident. 9285 instituted proceedings against DYC, claiming the costs of repairs to the vessel as well as loss of profits. In turn, DYC brought suit against its insurer, ION Insurance Group, S.A. (“ION”) seeking to be defended and indemnified. In the proceedings, DYC also involved the claims administrator of ION, Keane Speciality Insurance LLC (“Keane”), and the broker that delivered the insurance policy, Flagship Marine Underwriters (“Flagship”).
ION, Keane and Flagship claimed, notably, that the Superior Court of Québec did not have jurisdiction to rule on the action in warranty or the Wellington motion due to the choice of forum clauses contained in the insurance policy and the certificate of insurance.
The choice of forum clause
A choice of forum clause determines contractually, in advance, which authority will have jurisdiction to hear disputes. Such a clause is routinely included in commercial contracts. Thus the parties can stipulate that any disputes arising from the contract will be decided by the courts of another province or country, or by arbitration.
In this case, the Superior Court has confirmed that it is permissible and valid to include a choice of forum clause in an insurance contract, rendering the parties, and accordingly the insured, subject to an exclusive competent jurisdiction.
The effect of a choice of forum clause in an insurance contract
Article 3150 of the Civil Code of Québec (C.C.Q.) states that the courts of Québec have jurisdiction to decide disputes based on a contract of insurance where:
- the holder, the insured or the beneficiary of the contract is domiciled or resident in Québec
- the contract relates to an insurable interest located in Québec, or
- the loss took place in Québec.
However, the Superior Court holds that Article 3150 C.C.Q. does not explicitly set aside the principle of autonomy of will, unlike other articles which, meanwhile, ascribe sole jurisdiction to the Québec authorities[2]. This is a general rule which may be waived, if that is clearly specified in the contract.
In this case, the Superior Court found that autonomy of will of the parties should prevail.
Choice of forum clause: key drafting points
According to the Court, a well drafted choice of forum clause [translation] “will have the effect of setting aside the jurisdiction the Québec courts might have under Article 3150” C.C.Q. It is essential, however, that it be well drafted. The Court reminds us that the clause must:
- be imperative in nature;
- ascribe exclusive competence to an identified jurisdiction; and
- identify the subject matter of the disputes covered by the choice of forum clause.
In the case at hand, the relevant clauses are worded as follows:
Insurance policy issued by ION |
Certificate of insurance issued by Flagship |
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“If your policy is underwritten by ION Insurance Company Inc. then your policy shall be governed and construed in accordance with the law of the United States of America and the courts of the United States of America shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with your policy or its subject matter or formation (including non-contractual disputes or claims) unless specifically agreed to the contrary.” |
“Your policy shall be governed by and construed in accordance with the law of the United States of America and the courts of the United States of America shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with [sic].” |
Comments of the Court |
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[translation] “The use of the word “shall” ascribes an imperative nature to this clause. Furthermore, the wording “shall have exclusive jurisdiction” clearly indicates that the parties have granted exclusive jurisdiction to the American courts. Moreover, the type of dispute concerned is described clearly and precisely (“any dispute or claim arising out of or in connection with your policy or its subject matter or formation”. The clause is therefore fully enforceable.[3]“ |
[translation] “This clause is patently incomplete. It does not identify the subject matter of the disputes that must be referred to the American courts. […] it may not be invoked […], for it does not exclude the jurisdiction of the Québec authorities in a sufficiently clear and precise manner.[4]“ |
Scope of the choice of forum clause
In principle, a contract only produces its effects between the contracting parties. The choice of forum clause should only concern disputes between the insured and the insurer. However, in this case, in view of the particular circumstances, the Court recognized that this clause applies not only in favour of ION, which stipulated it in its contract, but also in favour of Keane and Flagship.
Indeed, the reproaches are based exclusively on the insurance policy and are only aimed at obtaining the benefit of the insurance coverage. The proceedings make no mention of any personal and distinct fault that might have been committed by Keane or Flagship in the obtaining of the insurance coverage or in the processing of the claim.
Conclusion
The Court therefore applied the clause contained in the contract, stipulating that any dispute related to the insurance policy must necessarily be referred to the courts of the United States of America, which have exclusive jurisdiction to hear it. Accordingly, the call in warranty and the Wellington motion were dismissed, the Court declaring that it had no jurisdiction to decide their outcome.
For a choice of forum clause included in a contract of insurance to apply, it is important that the wording be detailed and precise. The potential consequences on the management of disputes between the parties and the attendant costs are significant, notably for the insured. A clause that is drafted too broadly may ultimately be ineffective. Conversely, a clear and precise clause may lead to a situation similar to the one here, where the principal claim will pursue its course in Québec and the debate concerning insurance coverage, the duty to defend and the obligation to indemnify will be heard in the United States of America.
[1] 9285-6111 Québec inc. c. Dream Yacht Charter, 2026 QCCS 1356
[2] In this regard, see Articles 3149 and 3151 C.C.Q.
[3] Id. para. 11-12.
[4] Id. para. 13-14.