Wingard v. Lansforsakringar AB et al

Filing 103

MEMORANDUM OPINION AND ORDER directing as follows: (1) LF Kronoberg's 84 motion for reconsideration of the court's Order 68 denying LF Kronoberg's motion to dismiss for improper venue is GRANTED, but the Order is reaffirmed for the reasons set out in this opinion; and (2) Plaintiff's 71 motion for partial summary judgment is GRANTED, and summary judgment is entered in favor of Plaintiff on his breach-of-contract action against LF Kronoberg, as further set out in order. Signed by Chief Judge William Keith Watkins on 9/30/13. (Attachments: # 1 civil appeals checklist)(djy, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
WALTER WINGARD,
administrator of the estate of
Beverlyn Wingard (deceased), as
assignee of Texo AB and
Texo, Inc.,1

)
)
)
)
)
)
Plaintiff,
)
)
v.
)
)
LÄNSFÖRSÄKRINGAR AB,
)
LÄNSFÖRSÄKRINGAR ALLIANCE )
AB, and LF KRONOBERG,
)
)
Defendants.
)

CASE No. 2:11-CV-45-WKW
[WO]

MEMORANDUM OPINION AND ORDER
This diversity action involves a coverage dispute arising out of an international
insurance contract. The dispute began when LF Kronoberg, an independent mutual
insurance company domiciled in Sweden, invoked the punitive damages exclusion
in the insurance contract to deny indemnity to its insureds, Texo, Inc., and Texo AB,
for any part of a $5.25 million punitive damages judgment entered in an Alabama

1

Plaintiff has captioned his pleadings as Walter Wingard, as the administrator of the
estate of Beverlyn Wingard, deceased. However, in the body of the complaint’s three iterations,
it is clear that Plaintiff is bringing this action in his representative capacity as administrator of the
estate of Beverlyn Wingard and as the assignee of Texo, Inc., and Texo AB’s causes of action
under the insurance contract at issue. Because “the complaint itself, not the caption, controls the
identification of the parties,” Welch v. Laney, 57 F.3d 1004, 1010 (11th Cir. 1995), the court has
amended the caption.

state court under the Alabama Wrongful Death Act in favor of Plaintiff Walter
Wingard as administrator of Beverlyn Wingard’s estate. The insureds assigned their
causes of action, under the insurance contract for payment of the judgment, to
Plaintiff, who then brought this lawsuit against LF Kronoberg and other related
Swedish entities alleging, among other claims, breach of the insurance contract.
Before the court is Plaintiff’s motion for partial summary judgment on the
breach-of-contract claim. (Doc. # 71.) Plaintiff contends that under Alabama’s laws
and public policy, an insurer cannot exclude coverage for punitive damages in cases
brought under the Alabama Wrongful Death Act, an Act that restricts recovery solely
to punitive damages. Consequently, Plaintiff contends that under Alabama law, the
punitive damages exclusion is void as against public policy, that LF Kronoberg must
provide indemnity for the Alabama judgment, and that its failure to do so constitutes
a breach of the insurance contract.
LF Kronoberg opposes the summary judgment motion on two grounds. (Doc.
# 84.) First, LF Kronoberg argues that neither this court nor the forum’s laws have
any place in this litigation because the insurance policy’s forum-selection and choiceof-law clauses dictate the application of Swedish law in Swedish courts. This
argument, in effect, seeks reconsideration of the court’s prior Order (Doc. # 68)
denying LF Kronoberg’s motion to dismiss for improper venue based upon the forum2

selection clause. Given the focus of LF Kronoberg’s arguments, the court construes
LF Kronoberg’s summary judgment response as containing a motion for
reconsideration of the prior Order. Second, assuming the unenforceability of the
forum-selection and choice-of-law clauses, LF Kronoberg argues that there was not
a proper assignment between Texo and Plaintiff of Texo’s contractual rights under
the policy, and, thus, Plaintiff cannot bring a cause of action against LF Kronoberg
for breach of the insurance contract.
Based upon careful consideration of the arguments of counsel, the relevant law,
and the record as a whole, the court finds that the motion for reconsideration is due
to be granted. Upon reconsideration, however, the court rejects LF Kronoberg’s
additional arguments and finds that both the forum-selection clause and the choice-oflaw clauses are unenforceable. The court further finds that Plaintiff’s motion for
partial summary judgment on the breach-of-contract claims is due to be granted.
I. JURISDICTION AND VENUE
The court exercises subject matter jurisdiction pursuant to 28 U.S.C.
§ 1332(a)(2). Plaintiff, as a bona fide assignee, is a citizen of Alabama, and
Defendants are incorporated under the laws of and headquartered in Sweden. The
amount in controversy exceeds $75,000. The court has personal jurisdiction over

3

Defendants, and venue is proper in this district as laid out in the court’s prior
memorandum opinion (Doc. # 68).
II. BACKGROUND
The material facts out of which this litigation arises are not in dispute. To aid
in a better understanding of the underpinnings of this lawsuit, the court initially will
provide some background as to the nature of the insurance policy, the underlying state
court action, the coverage dispute, and the assignment, followed by a summary of the
proceedings in this lawsuit.
A.

The Insurance Policy
This lawsuit involves a coverage dispute under a general liability policy

entered into between two companies domiciled in Sweden: LF Kronoberg and Texo
AB. LF Kronoberg is the insurer. Texo AB is the named insured, and Texo, Inc., a
domestic corporation, is an additional insured under the policy.2 The policy insures
Texo’s risks arising from its activities in the United States pursuant to a worldwide
territory-of-coverage clause, and the pivotal term of the policy at issue is the
exclusion for coverage for a punitive damages award.

2

The court refers to Texo AB and Texo, Inc., collectively as “Texo” or the “Texo
entities,” and to the general liability policy as either the “policy” or the “insurance contract.”
4

Plaintiff Wingard is not a party to the insurance contract. His involvement in
this lawsuit is through an assignment from Texo of its rights and causes of action
under the insurance contract for payment of indemnity on a judgment for punitive
damages entered against Texo in an Alabama state court under the Alabama Wrongful
Death Act. Pursuant to that assignment, Plaintiff stands in the shoes of Texo. There
is more on the assignment later, but first some discussion of the circumstances of the
underlying action is helpful.
B.

The Underlying Action Filed in State Court Under the Alabama Wrongful

Death Act
The coverage dispute began when Texo found itself on the receiving end of a
lawsuit filed in an Alabama state court for the wrongful death of Beverlyn Wingard.
Ms. Wingard, an Alabama resident, died in an industrial accident while at work in
Montgomery, Alabama.

She was operating a machine called a warper.

Unfortunately, the warper did not have proper safety guards, and tragically, as a
result, Ms. Wingard was crushed to death when her body was pulled into the
unguarded rotating parts of the machine.
Plaintiff, the assignee in this litigation, also is Ms. Wingard’s brother and the
administrator of Ms. Wingard’s estate. In his capacity as the administrator of Ms.
Wingard’s estate, Plaintiff sued Texo AB and Texo, Inc., which had repaired and
5

altered the warper. He brought suit in the Circuit Court of Montgomery County,
Alabama, under the Alabama Wrongful Death Act. Plaintiff won a $5.25 million
judgment, all in punitive damages, as punitive damages are the only permissible
damages under the Alabama Wrongful Death Act. See Ala. Code § 6-5-410 (creating
private right of action for wrongful death); Trott v. Brinks, Inc., 972 So. 2d 81, 84
(Ala. 2007) (holding that, in a wrongful-death action, “the only recoverable damages
are punitive damages intended to punish the tortfeasor for its actions”). “Alabama
has historically treated actions resulting in death differently from actions causing
lesser injury. The ‘enormity of the wrong’ justifies the difference in treatment.”
Campbell v. Williams, 638 So. 2d 804, 810 (Ala. 1994). To precisely set the line of
scrimmage in this contest, it is a violation of Alabama’s public policy to exclude
punitive damages in an insurance policy covering wrongful deaths occurring in
Alabama.
C.

The Coverage Dispute and the Assignment
LF Kronoberg provided a defense to Texo in the underlying state-court

litigation but denied Texo’s indemnity claim for payment up to the policy limits of
the $5.25 million judgment based upon the policy’s punitive damages exclusion.
Texo assigned to Plaintiff its contractual rights under the policy for payment of the
judgment. Although the assignment appears to have been oral (as Plaintiff has not
6

submitted a written contract for the assignment or argued that one exists), counsel for
Texo and counsel for Plaintiff in this lawsuit memorialized the existence of the
assignment in a written stipulation. The stipulation provides that “Texo AB and
Texo, Inc. assigned to Plaintiff, Walter Wingard, the insurance policy with LF
Kronoberg. The assignment arose out of a judgment entered against Texo AB and
Texo, Inc. [in the underlying state-court action].”3 (Doc. # 86-4 (Stipulation).)
The first sentence of the stipulation suggests an assignment of the policy itself,
while the second sentence implies an assignment of any rights Texo may have under
the policy for indemnity of the judgment. See generally 17 Williston on Contracts
§ 49:126 (4th ed.) (distinguishing in the context of casualty insurance policies
between assignments of a policy itself before a loss has occurred (which is an
assignment of the contractual relationship) and the assignment of the policyholder’s
rights under the policy after a loss has occurred and regarding that loss (which is an
assignment of the policyholder’s causes of action)). Notwithstanding the wording of
the stipulation, the context of this lawsuit – including the pleadings, the briefing on
motions, and the contentions in the proposed pretrial order – elucidates that the
3

Counsel for Texo and counsel for Plaintiff prepared the stipulation pursuant to counsel
for LF Kronoberg’s request for a “stipulation as to the terms of the agreement relating to
allowing Plaintiff to assert claims against LF Kronoberg . . . .” (Doc. # 80 (Supplemental Report
of Parties’ Planning Meeting).) LF Kronoberg represented that if Texo and Plaintiff submitted
the stipulation, then LF Kronoberg would “accept it as establishing the terms of the agreement
without further discovery on that issue.” (Doc. # 80.)
7

assignment pertains to the latter. (See, e.g., 2d Am. Compl. ¶ 5 (“Texo, Inc. and Texo
AB have assigned their right of action against Defendants to Walter Wingard in
accordance with § 8-5-20, Code of Alabama, 1975.”).) Because both parties assume
that the assignment pertains to an assignment of Texo’s rights under the policy (in
particular, Texo’s rights to causes of action against LF Kronoberg), the court will do
the same.
D.

This Lawsuit
Plaintiff brings the instant action as Texo’s assignee.4 Defendants, all of which

are deemed citizens of Sweden, are LF Kronoberg, Länsförsäkringar AB, and
Länsförsäkringar Alliance. Länsförsäkringar AB is in default (see Doc. # 65), and
Plaintiff has not perfected service on Länsförsäkringar Alliance. Only LF Kronoberg
has defended this action.
Plaintiff alleges claims for breach of the insurance contract and negligent
failure to settle and also seeks to enjoin related litigation in Sweden. LF Kronoberg
promptly moved to dismiss for lack of personal jurisdiction and for improper venue,
but the court denied that motion in a prior Order. (Doc. # 68.) The court concluded

4

In these related proceedings, Plaintiff has worn two litigation hats. The first hat is that
of the administrator of the estate of Ms. Wingard, his sister. Wearing that hat, Plaintiff instituted
the underlying action in state court. In this litigation, Plaintiff wears a second hat – the hat of the
assignee of Texo’s rights under the LF Kronoberg policy. This action pertains solely to
Plaintiff’s second hat.
8

that LF Kronoberg had sufficient contacts to support the exercise of specific
jurisdiction and that doing so would not violate traditional notions of fair play and
substantial justice. The court also found that the policy’s forum-selection clause was
unenforceable and, thus, rejected LF Kronoberg’s argument that venue was improper
in the United States District Court for the Middle District of Alabama.
Plaintiff now moves for partial summary judgment on the breach-of-contract
claim, arguing that “there is no genuine issue of material fact as to whether LFK’s
insurance policy covers the judgment entered against [Texo].” (Doc. # 72, at 1.)
Plaintiff contends, and LF Kronoberg has not disputed, that LF Kronoberg refused
to pay the judgment against Texo based solely on the punitive damages exclusion in
the policy, but Plaintiff argues that, “[u]nder Alabama law and public policy, an
insurance policy cannot exclude coverage for punitive damages in a wrongful death
case.” (Doc. # 72, at 5.) Because the policy’s punitive damages exclusion at issue
is void under Alabama law, Plaintiff contends that the insurance policy
“unequivocally provided coverage against Ms. Wingard’s injuries” and that LF
Kronoberg breached the insurance contract when it failed to pay the underlying
judgment. (Doc. # 72, at 6.)
Responding to the motion for partial summary judgment, LF Kronoberg
continues to insist that, based upon the forum-selection and choice-of-law clauses,
9

the parties must litigate this case in the courts of Sweden in accordance with the laws
of Sweden. And it contends that under Swedish law, a Swedish court would uphold
the punitive damages exclusion in the policy to deny indemnity coverage for the
underlying Alabama judgment. (See Doc. # 85, in which LF Kronoberg asserts that
“[i]n Sweden, a party to a civil action cannot receive an award of punitive damages
for any injury or cause of action”). Alternatively, LF Kronoberg contends that the
assignment of Texo’s claims to Plaintiff is improper based on the absence of an
endorsement to assert a claim for breach of contract. LF Kronoberg contends,
therefore, that Plaintiff is not a proper party to bring a breach-of-contract action
against LF Kronoberg and that Plaintiff’s partial summary judgment motion is due to
be denied. LF Kronoberg did not file a summary judgment motion on this or any
other issue.
III. STANDARDS OF REVIEW
A.

Reconsideration
The court has broad discretion to reconsider an interlocutory order. See Toole

v. Baxter Healthcare Corp., 235 F.3d 1307, 1315 (11th Cir. 2000); see also United
States v. Acosta, 669 F.2d 292, 293 (5th Cir. Unit B 1982)5 (“[T]he district court has

5

Decisions of Unit B of the former Fifth Circuit are binding precedent in this circuit.
Stein v. Reynolds Sec., Inc., 667 F.2d 33, 34 (11th Cir. 1982).
10

broad power to reconsider the correctness of its interlocutory rulings.”). It may
reconsider an interlocutory ruling “for any reason it deems sufficient.” Canaday v.
Household Retail Servs., Inc., 119 F. Supp. 2d 1258, 1260 (M.D. Ala. 2000), aff’d
sub nom. Perry v. Household Retail, 268 F.3d 1067 (11th Cir. 2001).
B.

Summary Judgment
To succeed on summary judgment, the movant must demonstrate “that there is

no genuine dispute as to any material fact and the movant is entitled to judgment as
a matter of law.” Fed. R. Civ. P. 56(a). The court must view the evidence and the
inferences from that evidence in the light most favorable to the nonmovant.
Jean-Baptiste v. Gutierrez, 627 F.3d 816, 820 (11th Cir. 2010).
The party moving for summary judgment “always bears the initial
responsibility of informing the district court of the basis for its motion.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). This responsibility includes identifying
the portions of the record illustrating the absence of a genuine dispute of material
fact. Id. A genuine dispute of material fact exists when the nonmoving party
produces evidence allowing a reasonable factfinder to return a verdict in its favor.
Waddell v. Valley Forge Dental Assocs., 276 F.3d 1275, 1279 (11th Cir. 2001). If the
movant meets its evidentiary burden, the burden shifts to the nonmoving party to

11

establish – with evidence beyond the pleadings – that a genuine dispute material to
each of its claims for relief exists. Id. at 324.
IV. DISCUSSION
The court divides its discussion into two parts. Part A reconsiders the ruling
that the forum-selection clause is unenforceable. Part B addresses Plaintiff’s motion
for partial summary judgment on the breach-of-contract claim, which incorporates
discussion on the validity of the assignment.
A.

Reconsideration of the Court’s Order Denying LF Kronoberg’s Motion to

Dismiss for Improper Venue
LF Kronoberg moves for reconsideration of the court’s prior Order (Doc. # 68)
denying its motion to dismiss for improper venue on grounds that the policy’s forumselection clause is unenforceable. Upon reconsideration, the court reaffirms that
Order that the forum-selection clause is unenforceable. The court also expressly finds
what it previously implicitly found – that the choice-of-law clause also is
unenforceable.
The broad issue is whether the forum-selection and choice-of-law clauses
mandating the courts of Sweden and application of Swedish law for resolution of any
dispute arising out of the insurance contract are enforceable. At the motion-todismiss stage, Plaintiff did not directly challenge the choice-of-law provision as
12

requiring denial of LF Kronoberg’s motion, and this court did not directly invalidate
that clause. But LF Kronoberg’s assumption that the court found both the forumselection choice-of-law clauses unenforceable is reasonable. (See Doc. # 84, at 5, in
which LF Kronoberg argues that “[t]his Court has ruled that the choice clauses in the
insurance contract are unenforceable.”) Namely, applying M/S Bremen v. Zapata OffShore Co., 407 U.S. 1 (1972), the court implied that, as represented in the briefing,
a Swedish court applying Swedish law likely would honor the policy’s punitive
damages exclusion and permit LF Kronoberg to rely on it to deny indemnity coverage
for the Alabama judgment for punitive damages under the Alabama Wrongful Death
Act. (Doc. # 68, at 22– 24.) In essence, the court found that operating together, the
choice clauses denied Plaintiff a remedy (because punitive damages constitute the
only remedy under the Alabama Wrongful Death Act) and violated Alabama’s strong
public policy prohibiting the exclusion of coverage for punitive damages in a case
under the Alabama Wrongful Death Act. Admittedly, the court’s finding impliedly
found the choice-of-law clause unenforceable.6

6

The finding that the forum-selection clause is unenforceable may well have been
different had the choice-of-law clause, for example, dictated application of Alabama law. In that
hypothetical, Plaintiff would have had greater difficulty arguing that the forum-selection clause
would deprive Plaintiff of a remedy and violate Alabama’s public policy because a Swedish court
would have been bound to apply Alabama law.
13

LF Kronoberg contends that the court got it wrong. It says that both choice
clauses – the forum selection clause and the choice of law clause – are enforceable
based upon the four-factored framework originating in Bremen. And Plaintiff argues
that the court correctly applied Bremen. The court agrees with Plaintiff and takes this
opportunity on reconsideration not only to reexamine its prior findings (both explicit
and implicit), but also to address a conflict-of-laws issue not addressed by either
party.
1.

Conflict of Laws

As a preliminary matter, the court turns to a matter that the parties have sidestepped. That matter is Erie. “Under the Erie doctrine, federal courts sitting in
diversity apply state substantive law and federal procedural law.” Gasperini v. Ctr.
for Humanities, Inc., 518 U.S. 415, 427 (1996) (citing Erie R. Co. v. Tompkins, 304
U.S. 64 (1938)). The Erie question boils down to whether the forum-selection clause
and the choice-of-law clause are governed by the same law. The court addresses,
first, the law governing forum-selection clauses and, second, the law governing
choice-of-law clauses.
a.

The Law Governing Forum-Selection Clauses

There is not a clear consensus among the circuits as to whether forum-selection
clauses are substantive or procedural for purposes of Erie. See Albemarle Corp. v.
14

AstraZeneca UK Ltd., 628 F.3d 643, 648–50 (4th Cir. 2010) (collecting cases);
Lambert v. Cesar, 983 F.2d 1110 (1st Cir. 1993) (collecting cases). Thankfully under
Eleventh Circuit precedent, this court need not enter the murky Erie waters when it
comes to deciding whether federal or state law governs the enforcement of the forumselection clause.
In Rucker v. Oasis Legal Finances, LLC, 632 F.3d 1231 (11th Cir. 2011), also
a diversity action, the Eleventh Circuit pronounced, “We decide whether state versus
federal law governs a particular issue, such as the enforceability of a forum selection
clause, in federal diversity cases by applying the Erie doctrine.” Id. at 1235; see also
Kostelac v. Allianz Global Corporate & Specialty AG, 517 F. App’x 670, 673 (11th
Cir. 2013) (In a diversity case, the court must “look to the Erie doctrine to determine
whether state or federal law governs the enforcement of the forum-selection clause.”).
But “[i]f no conflict exists [between federal and state law with respect to the validity
of forum-selection clauses], then the analysis need proceed no further, for the court
can apply state and federal law harmoniously to the issue.” Rucker, 632 F.3d at 1235
(citation and internal quotation marks omitted). Fortunately, “there is no conflict
between Alabama and federal law regarding the validity of forum selection clauses.”
Id. at 1236. Rucker and Kostelac applied Bremen to decide the validity of the forumselection clause, and this court did the same in its earlier Order. The analysis of the
15

forum-selection clause on reconsideration, therefore, will remain informed by
Bremen.
In Bremen, the Supreme Court of the United States altered the American
courts’ course in admiralty cases involving international agreements from a
presumptive disapproval of forum-selection clauses to a presumptive approval of such
clauses. In Bremen, a Texas corporation contracted with a German corporation to
tow an offshore drilling rig from Louisiana to the Adriatic Sea near Ravenna, Italy.
See id. at 1. During the rig’s tow, and many nautical miles from the final destination,
a storm arose in the Gulf of Mexico that caused substantial damage to the offshore
rig. The damage caused by the storm disrupted the rig’s voyage and required an
emergency stop in Tampa, Florida, the closest port of refuge. The Texas corporation
brought suit in admiralty in a federal district court in Tampa against the German
corporation for breach of contract and negligence, notwithstanding the towing
contract’s forum-selection clause mandating that the parties litigate contractual
disputes in the English courts. See id. at 3.
The German corporation moved to dismiss the action, invoking the forumselection clause. See id. at 4. The district court and the court of appeals found the
clauses unenforceable, relying on the then-traditional view of the American courts
that “agreements in advance of controversy whose object is to oust the jurisdiction
16

of the courts are contrary to public policy and will not be enforced.” Id. at 6 (citation
and internal quotation marks omitted).
But the Supreme Court disagreed with the lower courts’ charted course: “[I]n
light of present-day commercial realties and expanding international trade[,] we
conclude that the forum clause should control absent a strong showing that it should
be set aside.” Id. at 15. The Supreme Court held that for federal district courts sitting
in admiralty, forum-selection clauses are “prima facie valid.” Id. at 10. To
demonstrate a clause’s invalidity, the clause’s opponent must “show that enforcement
would be unreasonable and unjust, or that the clause [is] invalid for such reasons as
fraud or overreaching.” Id. at 15. The Court also observed that a contractual forumselection clause is unenforceable “if enforcement would contravene a strong public
policy of the forum in which suit is brought, whether declared by statute or by judicial
decision.” Id. Bremen thus marked a clear, navigable Erie course when it comes to
what law governs the enforceability of a forum-selection clause in an admiralty case
involving an international contract.
b.

The Law Governing Contractual Choice-of-Law Clauses

Bremen did not involve a dispute about the enforceability of a contractual
choice-of-law clause, nor was subject matter jurisdiction based on diversity.
Following Bremen’s sea change, however, the Eleventh Circuit has extended
17

Bremen’s rationale to non-admiralty cases (including diversity cases) involving both
forum-selection and choice-of-law clauses, at least in cases involving international
agreements. Lipcon v. Underwriters at Lloyd’s, London, 148 F.3d 1285 (11th Cir.
1998), is one such case.
In Lipcon, an action brought under federal securities laws, the Eleventh Circuit
employed a dual analysis of “choice clauses” in an international agreement that
required resolution of disputes under English law in English courts. Lipcon described
Bremen as establishing a “framework for evaluating choice provisions in international
agreements.” Id. at 1291. Lipcon recognized that the international contract at issue
in Bremen did not contain a choice-of-law clause, but it observed that Bremen had
noted the clear interplay between the two: “‘[I]t is the general rule in English courts
that the parties are assumed, absent contrary indications, to have designated the forum
with the view that it should apply its own law . . . . It is therefore reasonable to
conclude that the forum choice clause was also an effort to obtain certainty as to the
applicable substantive law.’” Id. at 1292 (quoting Bremen, 401 U.S. at 15 n.15).
Because the choice clauses in Lipcon were part of an agreement that was “truly
international,” id. at 1293 n.14, Lipcon reviewed the international choice clauses
pursuant to “the Bremen test.” Id. at 1292, 1295–96; see also id. at 1295 (“[F]orum-

18

selection and choice of law clauses ‘are presumptively valid where the underlying
transaction is fundamentally international.’”).
Although Lipcon enforced the choice clauses before it, the Eleventh Circuit
recognized that there are exceptions to their enforceability. It held that “choice
clauses” are not enforceable under Bremen’s teachings if “(1) their formation was
induced by fraud or overreaching; (2) the plaintiff effectively would be deprived of
its day in court because of the inconvenience or unfairness of the chosen forum;
(3) the fundamental unfairness of the chosen law would deprive the plaintiff of a
remedy; or (4) enforcement of such provisions would contravene a strong public
policy.”7 Id. at 1296. Lipcon set a buoy for application of Bremen to “choice
clauses” in international contracts, but jurisdiction was anchored to the presence of
a federal question.
Recently, however, in a diversity case involving “an international dispute
between foreign entities” of the Bahamas and the Cayman Islands, the Eleventh
Circuit held that Lipcon provided the framework for the analysis. Xena Invs., Ltd. v.
Magnum Fund Mgmt. Ltd., ___ F.3d ___, 2013 WL 4081393, at *5 (11th Cir. 2013).
In Xena, the Eleventh Circuit held that the district court correctly enforced the
“forum-selection clause . . . requiring all disputes be resolved under English law in

7

The court refers to these exceptions and the “Bremen/Lipcon factors.”
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English courts.” Id. (emphasis added). The Xena court cited approvingly the district
court’s reliance on Lipcon for the principle that under Bremen, both forum-selection
clauses and choice-of-law clauses in international agreements are enforceable unless
one of the four Bremen/Lipcon factors applies. See id. (citing Lipcon, 148 F.3d
at 1296); see also Estate of Myhra v. Royal Caribbean Cruises, Ltd., 695 F.3d 1233,
1235–36 & n.1, 1240 (11th Cir. 2012) (analyzing under Bremen the enforceability of
a forum-selection clause requiring litigation in the courts of England and Wales and
encompassing a choice-of-law clause dictating application of English law where
federal jurisdiction was based both on diversity of citizenship and the presence of a
federal question).
The court finds that application of the Bremen test as framed by Lipcon to
determine the validity of the choice clauses is appropriate in this case as well for at
least three reasons. First, the court finds and the parties do not dispute that “the
underlying transaction is fundamentally international in character.” Lipcon, 148 F.3d
at 1295. The insurance policy was executed between two Swedish corporations (LF
Kronoberg and Texo AB) to insure both a Swedish corporation (Texo AB) and a
United States corporation (Texo, Inc.). The policy insured Texo AB and Texo, Inc.’s
activities occurring anywhere in the world (pursuant to a worldwide territory-ofcoverage). That coverage necessarily extended to Alabama, and it was Texo AB’s
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and Texo, Inc.’s activities in Alabama that caused an Alabama citizen’s tragic death.
The international character of the agreement aligns this case with the facts in Bremen,
Lipcon, and Xena.
Second, Lipcon firmly embeds consideration of a choice-of-law clause (the
“chosen law”) into the Bremen analysis of whether the forum-selection clause is
enforceable. Namely, when a court considers whether “the fundamental unfairness
of the chosen law would deprive the plaintiff of a remedy,” Lipcon, 148 F.3d at 1296,
the parties’ choice clauses become inextricably intertwined. And when the parties’
chosen law, in fact, strips the plaintiff of any remedy whatsoever, the two choice
clauses necessarily must sink together. Cf. Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19 (1985) (“[I]n the event the
choice-of-forum and choice-of-law clauses operated in tandem as a prospective
waiver of a party’s right to pursue statutory remedies for antitrust violations, we
would have little hesitation in condemning the agreement as against public policy.”).
Third, both Plaintiff and LF Kronoberg propose Bremen/Lipcon as providing
the applicable legal standard for both choice clauses, albeit with disagreement as to
the result obtained. Significantly, the parties have not argued that the choice-of-law
clause requires application of Alabama’s conflict of laws or that, in any event,
Alabama’s conflict of laws would yield a contrary result. But those potential
21

arguments are Erie water under the bridge: The parties have waived any argument
that Alabama’s conflict of laws governs the analysis of the contractual choice-of-law
clause for failure to raise that issue at any time during these proceedings. Cf. Pulte
Home Corp. v. Osmose Wood Preserving, Inc., 60 F.3d 734, 739 n.15 (11th Cir.
1985) (appellant waived choice-of-law issue when it had acquiesced in the trial
court’s choice-of-law decisions throughout the trial court proceedings and objected
for the first time on appeal).
Bremen and Lipcon will guide, therefore, the analysis of whether the choice
clauses are enforceable. But assuming that the parties had not waived reliance on
Alabama’s conflict-of-laws analysis as to the contractual choice-of-law clause, the
court will apply Alabama’s conflict of laws to the contractual choice-of law clause.
For the reasons to follow, the result is the same under either analysis – the choice
clauses are unenforceable.
2.

Application of Bremen and Lipcon

During the course of this litigation, Plaintiff has challenged the validity of the
choice clauses under the second, third, and fourth Bremen/Lipcon factors. (Doc. # 69,
at 16–18; Doc. # 86, at 6–7.) For the reasons that follow, the court finds that the
forum-selection and the choice-of-law clauses are unenforceable based upon the
Bremen/Lipcon’s third and fourth factors, but not the second factor.
22

The second factor requires a showing that “the plaintiff effectively would be
deprived of its day in court because of the inconvenience or unfairness of the chosen
forum” Lipcon, 148 F.3d at 1296. Plaintiff argues that requiring him to litigate his
claim against LF Kronoberg in Sweden would deprive him of his day in court because
he “cannot afford to litigate his claim in a foreign country.” (Doc. # 59, at 17; see
also Doc. # 86, at 5 n.1.) That argument is misplaced. The second Lipcon factor
focuses on the convenience and fairness of the forum to Texo, not to Plaintiff.
Plaintiff as the assignee of Texo’s rights cannot “shift the Bremen inquiry to [himself]
in relation to the insurance contract.” Kostelac, 517 F. App’x at 676. For that reason,
the Kostelac court rejected a similar argument made by the assignees to an insurance
contract: “Whatever burden the assignees might bear in bringing the case in Germany
is immaterial to our analysis of their position as [the contracting party’s] assignees.”
Id. In Kostelac, the assignees failed to demonstrate that the original contracting party
faced any “unforeseeable burdens” by litigating in Germany. See id. Similarly,
Plaintiff has not pointed to any unforeseeable burdens that would render it
inconvenient or unfair for Texo to litigate in Sweden; thus, the second factor does not
adversely affect the choice clauses’ enforceability.
The third Bremen/Lipcon factor analyzes whether “the fundamental unfairness
of the chosen law would deprive the plaintiff of a remedy.” Lipcon, 148 F.3d at 1292.
23

The Eleventh Circuit “will not invalidate choice clauses . . . simply because the
remedies available in the contractually chosen forum are less favorable than those
available in the courts of the United States.” Id. at 1297. “Instead, [the Eleventh
Circuit] will declare unenforceable choice clauses only when the remedies available
in the chosen forum are so inadequate that enforcement would be fundamentally
unfair.” Id. In Lipcon, for example, the court held that choice clauses were
enforceable because, even though English law was “less favorable” to the American
plaintiffs than U.S. securities laws, English law provided “adequate remedies” that
permitted “polic[ies] underlying United States securities law [to] be vindicated.” Id.
at 1297–99.
The parties submit that a Swedish court applying Swedish law would likely
honor the policy’s punitive damages exclusion in the insurance policy. (See, e.g., LF
Kronoberg’s Notice of Foreign Law ¶ 9 (Doc. # 85) (“In Sweden, a party to a civil
action cannot receive an award of punitive damages for any injury or cause of action,”
and, thus, “contracts with provisions disallowing for coverage of punitive damages
are upheld in Sweden.”).) This being the sole reason LF Kronoberg denied indemnity
coverage, as represented by the parties in their briefing, application of Swedish law
would permit LF Kronoberg to rely on the policy’s punitive damages exclusion to
deny coverage for the judgment entered against Texo under the Alabama Wrongful
24

Death Act. Under Swedish law then, there can never be a remedy for an insured
whose insurance policy contains a punitive damages exclusion when the insured
seeks indemnity under the policy for a judgment under the Alabama Wrongful Death
Act. That is because under Alabama’s unique wrongful death statute, “the only
recoverable damages are punitive damages intended to punish the tortfeasor for its
actions.” Trott, 972 So. 2d at 84; see also Hill v. Campbell, 804 So. 2d 1107, 1115
(Ala. Civ. App. 2001) (“We note that Alabama’s Wrongful Death Act is unique in the
nation in that it has been interpreted to allow only punitive damages on a
wrongful-death claim.”).
This is not a case in which the remedies under Swedish law are merely “less
favorable” to Plaintiff’s chance of recovery than in Alabama, or where Plaintiff must
forfeit some claims in the chosen forum that he would have had in the absence of the
choice-of-law clause. See Lipcon, 148 F.3d at 1297–99. Rather, this is a case where
the remedy under Swedish law is, literally, no remedy at all. Hence, the forumselection clause and the choice of law provision effectively work together to “deprive
Plaintiff of a remedy.”
LF Kronoberg does not dispute that Plaintiff, as Texo’s assignee, has no
remedy under the insurance contract if Swedish law applies. But LF Kronoberg
nonetheless argues that Plaintiff “is not without a remedy” if the court enforces the
25

choice clauses because Plaintiff can enforce its $5.25 million judgment against Texo
“by having the judgment domesticated in Alabama.” (Doc. # 84, at 5.) That may or
may not be true.8 But even assuming the truth of LF Kronoberg’s argument, it
confuses Plaintiff’s role in this litigation. In suing LF Kronoberg, Plaintiff wears his
second hat (see supra note 4) and stands in the shoes of Texo pursuant to the
assignment. To follow Texo’s argument to its necessary conclusion, Plaintiff, as
assignee of Texo’s rights, would in effect be taking legal action for the enforcement
of the judgment against itself, and that is nonsensical. The point is that Texo’s
remedies under the insurance contract are the focus here, not Plaintiff’s remedies in
relation to the judgment Plaintiff obtained against Texo in the underlying action in
his capacity as the administrator of Ms. Wingard’s estate.

That is why LF

Kronoberg’s argument is misguided.
Under the fourth Bremen/Lipcon factor, the court considers whether
“enforcement would contravene a strong public policy of the forum in which suit is
brought, whether declared by statute or by judicial decision.” Bremen, 407 U.S. at 15.
Here, Plaintiff focuses on the forum of Alabama, and its judicial decision
pronouncing a strong public policy precluding an insurance company whose coverage

8

Plaintiff reminds the court that, wearing his first litigation hat, he agreed with Texo not
to execute the judgment against Texo in exchange for an assignment of any rights Texo had
under the policy with LF Kronoberg.
26

territory includes Alabama from excluding coverage for punitive damages in cases
alleging wrongful death under Alabama law.9 Because of the oddity of the Alabama
Wrongful Death Act, “[a] standard liability policy that excluded coverage for punitive
damages in a wrongful-death case would contravene Alabama law.” Hill, 804 So. at
1109; see also Alabama Attorney Gen. Op. 2 (Feb. 1, 1978) (“[A]ny administrative
ruling which allowed insurance companies to exclude coverage for punitive damages
under standard liability policies would be in direct contravention of wrongful death
case law on the subject, and would therefore be void as against public policy of [the
State of Alabama] as well.”). The court focused on this same public policy in its prior

9

The Eleventh Circuit and other courts have considered a broad range of public policy
arguments in the Bremen analysis, and LF Kronoberg provides no authority, and the court found
none, that precludes reliance on the forum’s state law for the public policy analysis. See, e.g.,
Estate of Myra, 695 F.3d at 1241 (concluding that the forum-selection clause was “subject to
judicial scrutiny to determine whether it violates the public policy embodied in” a federal
maritime statute); Rucker, 632 F.3d at 1237 (acknowledging the plaintiffs’ state public policy
argument, but holding that enforcement of the forum-selection clause had no impact on whether
the purchase agreements violated Alabama public policy against enforcing contracts based upon
illegal gambling consideration because the choice-of-law clause required application of Alabama
law); Seung v. Regent Seven Seas Cruises, Inc., 393 F. App’x 647, 649 (11th Cir. 2010) (“[T]o
the extent Seung contends that enforcing the clause contravenes United States public policy in
favor of reimbursing Medicare for Seung’s prior medical expenses, we are unpersuaded, since
Seung has not suggested that Paris is not a legally competent forum for her claim”); Lipcon, 148
F.3d at 1285 (considering whether the choice clauses’ requirements for litigation in England’s
courts under English law would contravene the public policies expressed in the anti-waiver
provisions of the United States’ securities laws); IDACORP, Inc. v. Am. Fiber Sys. Inc., No.
11cv654-EJL, 2012 WL 4139925, at *2 (D. Idaho 2012) (“Federal law expressly contemplates
considering state policies in determining the enforceability of forum-selection clauses.); but see
Albemarle, 628 F.3d at 651 (rejecting the argument that the forum-selection clause would violate
South Carolina’s strong public policy disfavoring such clauses; “it can hardly be a strong public
policy to countermand the very policy that the Supreme Court adopted in The Bremen.”).
27

Order. Based on the foregoing authority, the court found in its prior Order that
“Alabama has a strong public policy interest in preventing insurance companies from
enforcing a policy’s punitive damages exclusion for claims brought under the
Alabama Wrongful Death Act.” (Doc. # 68, at 22.) The court reaffirms that finding
here. The court also incorporates by reference its holding in the next subsection that
Alabama has a “fundamental public policy” that prohibits insurance companies from
excluding coverage for punitive damages awards under the Alabama Wrongful Death
Act. Although that holding is made under Alabama’s conflict-of-laws analysis, for
purposes of this case, the court discerns no meaningful distinction between a
“fundamental public policy” and a “strong public policy” as used in Bremen.10
In sum, the choice clauses work together not only to deprive Plaintiff of a
remedy under the insurance contract, but also to violate the strong public policy of
the forum state. Accordingly, the court finds on reconsideration that both the forumselection clause and the choice-of-law clause are unenforceable.
3.

Application of Alabama’s Conflict of Laws

In the alternative, assuming in a diversity case that Bremen and Lipcon do not
supply the proper test for evaluating a choice-of-law clause in an international

10

It is unnecessary to decide whether a context exists in which a public policy could be
fundamental, but not strong, or vice versa.
28

agreement, the application of Alabama’s conflict-of-laws analysis commands the
same result.
Alabama courts analyze whether a party’s contractual choice-of-law clause is
enforceable by reference to the Second Restatement of Conflicts §§ 187-88. See
generally Cherry, Bekaert & Holland v. Brown, 582 So. 2d 502, 506–07 (Ala. 1991)
(explaining that Alabama analyzes whether a contractual choice-of-law clause is
enforceable by reference to the Second Restatement of Conflict of Laws, §§ 187–88).
Under the Restatement Second, the choice-of-law clause is valid and the chosen law
applies “if the particular issue is one which the parties could have resolved by explicit
provision in their agreement directed to that issue.” Restatement (Second) of Conflict
of Laws § 187(1). Here, the “particular issue” is the punitive damages exclusion as
it operates in Alabama’s legal climate. This provision of the Restatement does not
shed light on whether the parties could have resolved this issue by agreement.
Indeed, the peculiarity of the Alabama Wrongful Death Act’s allowance of only
punitive damages would surely not have occurred in the cool climate of Sweden. It
is difficult to imagine an invitation from LF Kronoberg to Texo during contract
negotiations for the two to meet at the finest restaurant in Stockholm to discuss the
policy’s exclusions in light of the law of damages in Alabama that excludes a punitive
damages recovery.

29

Even if the parties could not have resolved the particular issue by agreement,
the chosen law applies unless (a) it “has no substantial relationship to the parties or
the transaction and there is no other reasonable basis for the parties’ choice” or (b) its
“application . . . would be contrary to a fundamental policy of a state which has a
materially greater interest than the chosen [forum’s law] in the determination of the
particular issue and which . . . would be the state of the applicable law in the absence
of an effective choice of law by the parties.” Restatement (Second) of Conflict of
Laws § 187(2)(a) & (b). Here, the contracting parties chose Swedish law to govern,
and Sweden has a substantial relationship to the parties and the transaction because
the parties to the contract are two Swedish companies executing an insurance contract
in Sweden. Thus, the law of the chosen jurisdiction – Sweden – applies unless the
exception articulated in § 187(2)(b) applies.
Under § 187(2)(b), the law of the jurisdiction with a materially greater interest
than the chosen forum trumps the chosen law if the chosen law is contrary to a
fundamental public policy of that jurisdiction and that jurisdiction’s law would
govern in the absence of a choice-of-law provision. Thus, to apply the Restatement,
it is essential to determine whose contract law would apply in the absence of the
choice-of-law clause, which is the appropriate starting point for the analysis.

30

a. Whether Alabama’s Law Applies in the Absence of an Effective
Choice-of-Law Clause
Under Alabama’s rule of lex loci contractus, in the absence of a choice-of-law
provision, the law of a contract is the law of the jurisdiction where the parties entered
the contract. That would be Sweden. There is an exception, however, to this general
rule: The law of the jurisdiction where the parties formed the contract applies unless
that law “is contrary to the forum state’s fundamental public policy.” Stovall v.
Universal Constr. Co., 893 So. 2d 1090, 1102 (Ala. 2004); see also Cherokee Ins. Co.
v. Sanches, 975 So. 2d 287, 292 (Ala. 2007) (quoting Stovall). Therefore, the law of
Sweden will apply unless application of its law is contrary to Alabama’s fundamental
public policy. However, if application of Sweden’s law is contrary to Alabama’s
fundamental public policy, Alabama law will apply in the absence of a choice-of-law
clause. See Cherry, 582 So. 2d at 506–07.11

11

This inquiry loops back on the § 187(2)(b) exception, but is not identical to it. If Sweden’s
law is contrary to Alabama’s fundamental public policy such that lex loci contractus does not control,
Alabama is the relevant comparator under § 187(2)(b).

31

i.

Whether Alabama Has a Fundamental Public Policy

Prohibiting Insurance Companies from Excluding Coverage
for Punitive Damages Awards Under the Alabama Wrongful
Death Act
“[I]n order for a policy to be considered fundamental it must be ‘a substantial
one’ and ‘may be embodied in a statute which makes one or more kinds of contracts
illegal or which is designed to protect a person against the oppressive use of superior
bargaining power.’” Cherry, 582 So. 2d at 507. There are two levels of public
policies in Alabama – those fundamental enough to take precedence over that of other
jurisdictions, and those recognized by Alabama law but which will not, on their own,
take precedence over other jurisdictions’ policies. Cherokee Insurance Co. v.
Sanches illustrates the differences between an ordinary Alabama public policy and
an Alabama fundamental public policy in the context of an uninsured motorist
insurance policy. See 975 So. 2d 287, 294 (Ala. 2007) (“[W]e do not discern any
legislative intent that the public policies encompassed in our UM [uninsured motorist]
statute were intended to take precedence over those of sister states.”).
Alabama has a public policy that prohibits insurance companies from excluding
coverage for punitive damages awards under the Alabama Wrongful Death Act. The
question is whether this policy is a fundamental one. The parties have not cited and

32

this court has not found any binding authority expressly ruling whether Alabama’s
public policy interest in prohibiting punitive damages exclusions in insurance
contracts in an Alabama wrongful death case is a “fundamental public policy” that
should void a contractual choice-of-law provision. But the court has little difficulty
concluding that existing Alabama law provides “sufficient and significant guidance
on how the Alabama Supreme Court would rule if presented with this issue.” First
Fin. Bank v. CS Assets, LLC, 434 F. App’x 897, 898 (11th Cir. 2011).
That law begins with the Act itself. There is only one cause of action in
Alabama for death – the Alabama Wrongful Death Act. See Ala. Power Co. v. White,
377 So. 2d 930, 933 (Ala. 1979). And there is only one type of damages available for
that sole cause of action – punitive damages. See Atkins v. Lee, 603 So. 2d 937, 943
(Ala. 1992) (Damages under the Alabama Wrongful Death Act “are entirely punitive,
imposed for the preservation of human life and as a deterrent to others to prevent
similar wrongs.”). “An insurance company can limit coverage through exclusions,
so long as those exclusions do not violate a statute or public policy.” Hill, 804 So.
2d at 1109; see also Perdue v. Green, ___ So. 3d ___, 2012 WL 887492, at *8 (Ala.
2012) (“[I]t has long been the law of this State that every contract adverse to the
enactments of the legislature, is illegal and void.” (citation and internal quotation
marks omitted)). “A standard liability policy that excluded coverage for punitive

33

damages in a wrongful-death case would contravene Alabama law,” Hill, 804 So. 2d
at 1109, and, thus, would violate the public policy of Alabama. See Alabama
Attorney Gen. Op. 2 (Feb. 1, 1978) (“[A]ny administrative ruling which allowed
insurance companies to exclude coverage for punitive damages under standard
liability policies would be in direct contravention of wrongful death case law on the
subject, and would therefore be void as against public policy of [the State of
Alabama] as well.”).
The Alabama Supreme Court liberally has construed an insurance policy in
favor of providing coverage for punitive damages under Alabama’s unique wrongful
death law. In American Fidelity & Casualty Co. v Werfel, 162 So. 103, 106 (Ala.
1935), although not decided on public policy grounds, the Alabama Supreme Court
held that where an automobile insurance policy provided coverage for accidental
injury and death, the insurer was obligated to pay a punitive damages award entered
against its insured in a wrongful death case under a precursor to the Alabama
Wrongful Death Act that similarly limited recovery to punitive damages. See id. at
106; see also Hill, 804 So. 2d at 1110 (citing Werfel).
Against the foregoing legal backdrop, an insurance company that provides
coverage for its insured’s activities in Alabama that result in the loss of human life
based upon the insured’s “wrongful act, omission, or negligence,” Ala. Code

34

§ 6-5-410, but denies coverage for punitive damages awards, in effect provides no
coverage at all. An insurance policy, as just described, is in derogation of the
Alabama Wrongful Death Act and openly and directly contravenes Alabama’s public
policy. While Alabama’s public policy against punitive damages exclusions in
insurance policies where the insured’s liability arises under the Alabama Wrongful
Death Act is not itself embodied in a statute, that public policy flows directly from
the Act. And even if not in a holding, the highest court of the state pronounced the
public policy, and the state’s attorney has confirmed it. See Hill, 804 So. 2d at 1009;
see also Alabama Attorney Gen. Op. 2 (Feb. 1, 1978). Because punitive damages are
the only remedy the legislature has chosen for civil homicide and because Alabama
courts have stressed the need to punish wrongful behavior that results in death, one
could hardly imagine a more fundamental public policy than one that forbids an
insurer’s reliance on a punitive damages exclusion when the Alabama Wrongful
Death Act is implicated. Based on the foregoing authority, there is a sufficient and
substantial basis in Alabama law to conclude that Alabama’s public policy that
prohibits insurance companies from excluding coverage for punitive damages awards
under the Alabama Wrongful Death Act is a substantial policy and a fundamental one.

35

ii.

Whether Application of Swedish Law Would Be

Contrary to Alabama’s Fundamental Public Policy
The parties agree that Swedish law does not share Alabama’s same
fundamental public policy against insurance policy exclusions for punitive damages
awarded under the Alabama Wrongful Death Act. A Swedish court applying Swedish
law, according to the parties’ submissions, would uphold the punitive damages
exclusion, even where the insurance policy provided coverage for the insured’s
activities in Alabama and the insured was found liable under the Alabama Wrongful
Death Act, an Act under which only punitive damages are available. Accordingly,
Swedish law on punitive damages exclusions is contrary to Alabama’s fundamental
public policy.
iii.

Summary

The preceding analysis resolves the issue of which state’s law would apply in
the absence of an effective contractual choice-of-law clause. The law of Alabama
would apply because Swedish law is contrary to the forum state’s fundamental public
policy.

36

b.

Whether Alabama Has a Materially Greater Interest than

Sweden in the Outcome of this Case
Section 187(2)(b) also asks whether application of the chosen law (Swedish
law) would be contrary to a fundamental policy of a jurisdiction that has a materially
greater interest than the chosen forum (Sweden) in the determination of the particular
issue. Because the court has found that Sweden’s law is contrary to Alabama’s
fundamental public policy such that lex loci contractus does not control, Alabama is
the relevant comparator in the analysis, and the only issue left for determination under
§ 187(2)(b) is whether Alabama has a materially greater interest than Sweden in the
outcome of this case.
Although the original contracting parties are Swedish entities, the insurance
policy extended coverage to its insureds for their activities in Alabama. LF
Kronoberg now is attempting to enforce a punitive damages exclusion to preclude its
Swedish insured (Texo AB) and its domestic insured (Texo, Inc.) from coverage for
those activities in Alabama. Moreover, those activities caused the death of an
Alabama resident in an Alabama factory, and the Texo entities’ liability arises from
a judgment under the Alabama Wrongful Death Act entered by an Alabama court.
Alabama has a strong interest in litigation involving a foreign entity’s activities that
affect its residents and factories and in preventing a foreign insurance policy’s

37

subversion of the unique remedial scheme under the Alabama Wrongful Death Act.
For these reasons, Alabama has a materially greater interest than Sweden in deciding
this case.
B.

Plaintiff’s Motion for Partial Summary Judgment on the Breach-of-

Contract Claim
With the choice clauses unenforceable and Alabama decidedly supplying the
governing substantive law, resolution of Plaintiff’s motion for partial summary
judgment is markedly simplified. Plaintiff contends that under Alabama law an
insurance policy’s exclusion for coverage of a punitive damages award under the
Alabama Wrongful Death Act is void against public policy. As discussed elsewhere
in this opinion, Plaintiff is correct. “A standard liability policy that exclude[s]
coverage for punitive damages in a wrongful-death case . . . contravene[s] Alabama
law.” Hill, 804 So. 2d at 1109; see also Perdue, 2012 WL 887492, at *8 (“[I]t has
long been the law of this State that every contract adverse to the enactments of the
legislature, is illegal and void.” (citation and internal quotation marks omitted)).
Plaintiff contends that because LF Kronoberg can no longer rely on the punitive
damages exclusion to deny indemnity coverage for the judgment in the underlying
action (its sole reason for denying coverage), there can be no dispute that the
insurance policy provides indemnity coverage for the judgment and that LF

38

Kronoberg’s “failure to pay the judgment” breached the insurance contract between
LF Kronoberg and Texo. (Doc. # 72, at 6.) The court agrees.
The elements of a breach-of-contract claim under Alabama law are: (1) “the
existence of a valid contract binding the parties in the action, (2) [the plaintiff’s] own
performance under the contract, (3) the defendant’s nonperformance, and
(4) damages.” Poole v. Prince, 61 So. 3d 258, 273 (Ala. 2010) (citation and internal
quotation marks omitted). Elements two, three, and four are not in dispute. Texo
paid its premiums under the insurance policy; the insurance contract (sans the
punitive damages exclusion) provided coverage for the judgment entered against
Texo in the underlying state court action; LF Kronoberg failed to pay the judgment
up to the policy limits; and that failure damaged Texo. Element one is the only
element in dispute, which brings the discussion to the assignment issue.
LF Kronoberg contends that even if the court deems the choice clauses
unenforceable, Plaintiff is not entitled to summary judgment on his breach-of-contract
claim. It contends that Texo’s assignment to Plaintiff of Texo’s contractual rights
under the insurance contract does not satisfy the requirements of § 8-5-20 of the
Alabama Code because the assignment was oral and there is no endorsement “on the
face of the contract.” (Doc. # 84, at 2.) And without a proper assignment, LF
Kronoberg contends that Plaintiff cannot show “the existence of a valid contract

39

binding” it and Plaintiff.12 (Doc. # 84, at 2); Poole, 61 So. 3d at 273. Plaintiff, also
relying on § 8-5-20 as the statutory source for the assignment, counters that the
assignment need not be in writing and that he can show that Texo assigned its
“contractual rights to Plaintiff.” (Doc. # 86, at 2.)
The parties’ arguments demonstrate that one cannot get the right answer by
asking the wrong question. Section 8-5-20 provides:
All bonds, writings, and contracts for the payment of money, or other
thing, or the performance of any act or duty, are assignable by
endorsement so as to authorize an action thereon by each successive
endorsee.
But the assignment was not an assignment for a bond, a writing, a contract for the
payment of money or other thing, or the performance of an act or duty. Rather, as the
parties maintain, the assignment was an assignment of Texo’s rights under a contract,
namely, Texo’s rights to any causes of action against LF Kronoberg relating to
coverage for the underlying state-court judgment, not the assignment of the contract
itself.

12

The validity of the assignment is a different issue, of course, from the enforceability of
the choice clauses, but the finding that the choice clauses are unenforceable permits the court to
reach the assignment issue. The assignment issue brings up its own conflict of laws issues that,
again, neither party has briefed. Under Alabama conflict-of-laws rules, the assignment is a
separate contract distinct from the insurance contract, and the law of the place where the parties
made the assignment controls. Fourth Nat’l Bank v. Woolfolk, 125 So. 217, 218 (Ala. 1929). In
their briefing, the parties do not indicate where the assignment was made; however, the parties
have relied on Alabama law, and the court will do the same without further analysis on conflict
of laws.
40

LF Kronoberg has not demonstrated that an endorsement is required for the
assignment of rights under an insurance policy. Indeed, how does one endorse an
assignment of such right? There is no writing to endorse. The parties have failed to
identify and argue this distinction between the assignment of a policy and the
assignment of the policyholder’s rights under the policy after a loss has occurred and
regarding that loss (which is an assignment of the policyholder’s causes of action).
See generally Williston on Contracts § 49:126 (4th ed.). It is logical to assume that
Texo would have remained insured under the policy after the assignment, and it is
equally probable that Mr. Wingard did not become the “insured.”
But even if § 8-5-20 governs, LF Kronoberg still has not shown that an
endorsement is the sole method for effectuating an assignment, as Lightsey v. Orgill
Brothers & Co., 454 So. 2d 1002 (Ala. Civ. App. 1984), illustrates. In Lightsey, the
Alabama Court of Civil Appeals rejected an interpretation of § 8-5-20 that an
endorsement provides the sole method for assigning a guaranty.

There, the

guarantors argued that an assignment of a guaranty was improper because the original
creditor who made the assignment did not endorse the guaranty. See id. at 1004. But
the court observed that statutes and case law had modified the common law
prohibiting an assignment of a guaranty so as to “permit an action to be maintained
by the assignee of a chose in action or by the real party in interest.” Id. (emphasis

41

omitted). The Lightsey court explained further that in Henley v. Bush, 33 Ala. 636
(1959), the Alabama Supreme Court
held the predecessor statute of section 8-5-20, Code 1975, dealing with
assignments and endorsements of contracts for the payment of money,
change[d] the common law to authorize the action to be brought in the
name of the real party in interest in suits on contracts for the payment of
money, whether they are assigned, endorsed, in writing, or simply
transferred by delivery.
Id. Based on Henley, the Alabama Court of Civil Appeals held that the assignee was
the real party in interest because it had acquired the assets and liabilities of the
original guarantee. Therefore, the assignee could sue on the guaranty, even though
the guaranty was not endorsed. See id. at 1005 (holding that “an endorsement was not
required for the assignment of the guaranty”). Thus, to the extent that the assignment
by Texo to Plaintiff of its causes of action under the insurance contract is akin to a
“contract for the payment of money” under § 8-5-20, the principles in Lightsey and
Henley warrant the conclusion that an endorsement is not the exclusive method for
the assignment at issue here.
Absent any binding authority establishing the contrary, the assignment from
Texo to Plaintiff could be “written, parol, or otherwise.” DeVenney v. Hill, 918 So.
2d 106, 113 (Ala. 2005) (quoting Baker v. Eufaula Concrete Co., 557 So. 2d 1228,
1230 (Ala. 1990)). A valid assignment occurs “(1) if the assignor intended to transfer
a present interest in the subject matter of the contract, and (2) if the assignor and the
42

assignee mutually assented to the assignment.” Id. LF Kronoberg makes no
argument that Texo did not intend to transfer its present rights under the insurance
contract for indemnification of the underlying Alabama judgment or that mutual
assent between the assignor (Texo) and assignee (Plaintiff) was lacking. In short, LF
Kronoberg has not presented a legal or factual basis for denying Plaintiff’s motion for
partial summary judgment on the breach-of-contract claim.
Urging a different result, however, LF Kronoberg relies upon Phillips v.
Sellers, 42 Ala. 658 (Ala. 1868), but that case is distinguishable. Phillips addressed
an assignment of a failed contract for the delivery of two bales of cotton, not an
assignment of a cause of action arising out of a contract. Phillips did not hold, as LF
Kronoberg contends, that an assignment of a cause of action under a contract can only
be by endorsement.
V. CONCLUSION
The choice clauses in the international insurance contract are unenforceable
based upon the principles first pronounced in M/S Bremen v. Zapata Off-Shore Co.,
407 U.S. 1 (1972), and interpreted in Lipcon v. Underwriters at Lloyd’s, London, 148
F.3d 1285 (11th Cir. 1998). Because the choice clauses are unenforceable, Alabama
law applies to this action. Alabama law voids the punitive damages exclusion in the
insurance contract as void as against public policy, which means that LF Kronoberg

43

cannot rely on the exclusion to deny indemnity coverage for the punitive damages
award judgment entered by an Alabama state court under the Alabama Wrongful
Death Act. LF Kronoberg breached the insurance contract by failing to provide
indemnity.
Lastly, LF Kronoberg has not shown an invalid assignment so as to raise a
genuine dispute as to whether Plaintiff can establish a breach-of-contract claim
against LF Kronoberg pursuant to an assignment from Texo of its causes of action
under the insurance contract. Accordingly, it is ORDERED as follows:
(1)

LF Kronoberg’s motion for reconsideration (Doc. # 84) of the court’s

Order denying LF Kronoberg’s motion to dismiss for improper venue (Doc. # 68) is
GRANTED, but the Order is reaffirmed for the reasons set out in this opinion; and
(2)

Plaintiff’s motion for partial summary judgment (Doc. # 71) is

GRANTED, and summary judgment is entered in favor of Plaintiff on his breach-ofcontract action against LF Kronoberg.
DONE this 30th day of September, 2013.
/s/ W. Keith Watkins
CHIEF UNITED STATES DISTRICT JUDGE

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