In a COVID-19 insurance coverage lawsuit that Hilton Worldwide Holdings, Inc. filed against several insurers in Nevada state court, two recent rulings in favor of Hilton highlight the importance of strategic decisions early in a case.
After Hilton filed suit in Nevada, the insurers moved to dismiss the lawsuit under the doctrine of forum non conveniens, arguing that the insurance dispute should be resolved in a Virginia state court, since Hilton’s headquarters is located in Virginia. Contemporaneous to filing the forum motion, several insurers also filed a declaratory judgment action against Hilton in Virginia state court. The insurers argued that Hilton was entitled to less deference on its choice of forum because it is a non-Nevada plaintiff, Virginia is an adequate (and indeed proper) forum to adjudicate the insurance dispute because “that is the state where Hilton is headquartered and where the underwriting meetings and premium payment for some of the Policies occurred,” and private and public factors weigh in favor of dismissal of the action so that the insurance dispute would proceed in Virginia state court.
To decide the forum motion, the Nevada state court employed a three-part test that addressed the following: (1) the level of deference owed to Hilton’s choice of forum, (2) whether an adequate alternative forum exists and (3) if an alternative forum exists, whether public and private interest factors weigh in favor of dismissal where several insurers filed a separate action.
On the first prong, the Nevada state court found that Hilton is entitled to “great deference” on its choice of forum despite being an out-of-state plaintiff not headquartered or incorporated in Nevada. The court noted Hilton’s “bona fide connections to Nevada for purposes of the choice of forum analysis,” specifically referencing Hilton’s “long-standing and significant presence in [Nevada’s] hospitality and tourism industries” and management or operation of properties within Nevada with significant claimed losses at issue.
On the second prong, with apparent agreement among the parties, the court found that Virginia is an adequate alternative forum for the insurance dispute.
On the third prong, the court found that the insurers did not meet their burden of demonstrating “exceptional circumstances” such that private and public factors “weigh strongly in favor of” the alternative Virginia forum. The relevant public factors included “(1) the local interest in the case, (2) the [Nevada state] court’s familiarity with applicable law, (3) the burdens on local courts and jurors, (4) court congestion, and (5) the costs of resolving a dispute unrelated to [Hilton’s] chosen forum.” The relevant private factors included “(1) the location of the insurers, (2) access to proof, (3) availability of compulsory process for unwilling witnesses, (4) cost of obtaining testimony from willing witnesses, and (5) the enforceability of a judgment.”
Employing the three-part test outlined above, the Nevada state court denied the forum motion and allowed the case to proceed in Hilton’s chosen forum—Nevada state court.
In a separate motion, filed on the same date as the forum motion, the insurers moved to dismiss the lawsuit, which seeks insurance coverage for business income losses sustained by Hilton as a consequence of COVID-19, for failure to state a claim. The Nevada state court denied this motion too, finding that Hilton had alleged facts sufficient to state claims against the insurers and that the insurers’ arguments raised interpretive and other factual issues that could not be resolved at the motion to dismiss stage.
The court did not address choice-of-law for purposes of its rulings, stating that it is not a factor at this juncture of the case, but choice-of-law decisions can be important in a case. Critically, in the case of both rulings, the Nevada state court applied Nevada law despite recognizing that the outcome may have been different under a different state’s law (such as Virginia law). The court deferred those issues for another day, and instead applied the law of Hilton’s chosen forum.
Strategic decisions made early in a case, including in which forum to file, can influence case-dispositive issues such as the law applied by the court. There must be a legitimate basis for selecting a forum, as there was in the Hilton case, and experienced coverage counsel can assist with these strategic decisions.