On appeal from Superior Court of New Jersey, Law Division, Burlington County.
Approved for Publication January 6, 1997.
Before Judges Kleiner and Coburn. The opinion of the court was delivered by Coburn, J.
The opinion of the court was delivered by: Coburn
The opinion of the court was delivered by
COBURN, J.S.C. (temporarily assigned).
This is a declaratory judgment action. Plaintiff, a New Jersey Corporation, sues on a liability insurance policy relating solely to property located within this State. The insurance policy contains a forum-selection clause establishing a foreign state, where the insurance company is located, as the only place where litigation may be commenced. The question is whether we should decline jurisdiction. If not, the next question is whether we should accept the policy's choice-of-law provision which requires that the insured's rights be governed by the law of the foreign state.
Plaintiff Param Petroleum Corp. (Param), a small, "one-man" New Jersey Corporation, owns and operates a gasoline service station in Burlington, New Jersey. Defendant Commerce and Industry Insurance Company (Commerce) is a New York corporation. One of its areas of specialty is insurance for pollution liability.
Commerce issued Param an "Underground Storage Tank Third-Party Liability and Corrective Action Policy" for the period April 7, 1994 to April 7, 1995. The policy was issued to cover pollution liability stemming from the underground gasoline storage tanks on plaintiff's gasoline station in New Jersey. The pertinent portion of the policy provides:
In the event that the Insured and the Company dispute the meaning, interpretation or operation of any term, condition, definition or provision of this Policy resulting in litigation, arbitration or other form of dispute resolution, the Insured and the Company agree that the law of the State of New York shall apply and that all litigation, arbitration or other form of dispute resolution shall take place in the State of New York.
In October 1994, the New Jersey Department of Environmental Protection advised Param that gasoline and gasoline derivatives from its underground storage tanks had been discovered in a nearby municipal sewage treatment plant. Param's attempts to obtain the benefits of its insurance policy with Commerce were unsuccessful. Consequently, Param filed a declaratory judgment action in Burlington County, the location of the insured gasoline station. Commerce moved to dismiss the action without prejudice based upon the forum-selection clause. The trial court granted the motion on that ground. Consequently, it did not reach the choice-of-law question. Plaintiff Param appeals. We reverse.
In Kubis & Perszyk Assoc., Inc. v. Sun Microsystems, Inc., 146 N.J. 176, 680 A.2d 618 (1996), the Court discussed at length the historical development and present status of the law governing forum-selection clauses. Id. at 186-92. The Court adopted the modern view that such clauses will be given effect unless unfair, unreasonable, or contrary to public policy. Id. at 192. However, it then went on to hold, as have a number of states ( Id. at 191) that forum-selection clauses would not be recognized when contained in agreements subject to local franchise acts. With respect to the New Jersey Franchise Practices Act, N.J.S.A. 56:10-1 to -15. The Court said:
We hold that such clauses are presumptively invalid because they fundamentally conflict with the basic legislative objectives of protecting franchisees from the superior bargaining power of franchisors and providing swift and effective judicial relief against franchisors that violate the Act.
The Court emphasized, in particular, the unfairness in permitting franchisees to be forced by the generally stronger franchisors to bear the burdens of litigating in distant forums, a circumstance which the Court believed would result in the abandonment of meritorious claims by the generally more marginally financed franchisees. Id. at 194, 196. Finally, the Court said:
Nor does our holding in any respect undermine the interests served by enforcing contracts freely negotiated by responsible parties with comparable bargaining power. We simply acknowledge that the vast majority of franchise contracts do not fit within that category.
The principles of Kubis govern here. Indeed, given the nature and purposes of insurance, the argument for the presumptive rejection of forum-selection clauses is even stronger in relation to insurance policies than it is for ...