Wallace Stegner once wrote, “California is like the rest of America, only more so.” His observation fits many things about California, including its insurance disputes. California has developed strong rules protecting policyholders because insurance is not a mere commodity. It is a promise of protection bought before disaster strikes and needed most when the policyholder is vulnerable.
The recent California appellate opinion in BayWa R.E. Wind v. RSG Underwriting Managers 1 is another warning flare for policyholders, brokers, risk managers, and insurance regulators. The case involved a California wind project damaged after record-setting rain. The project was in California. The damage was in California. The witnesses and repairs were largely tied to California. The insureds wanted their California lawsuit to go forward. Yet, the Court of Appeal affirmed a stay because the insurance policy required disputes to be litigated in New York.
The court focused on policy language stating that disputes “shall be subject to the exclusive jurisdiction” of New York courts. BayWa argued that other policy provisions, including a Service of Suit Clause, created ambiguity or at least allowed the dispute to proceed in California. The court disagreed. It held that the New York forum-selection language was mandatory and that enforcing it was not unreasonable.
The opinion is doctrinally predictable. I just wrote about a similar result from Florida in “A Florida Yacht Insurance Dispute Sails to London Arbitration Before a Judge I Know Well.” It is also a flashing neon sign that the surplus lines industry needs to be reeled in.
Surplus lines insurers have tremendous freedom. This freedom is supposed to allow markets to insure unusual, difficult, or large risks that admitted carriers may not want to write. It is not supposed to become a license to insert procedural land mines that make it more expensive, more difficult, and more dangerous for policyholders to enforce the very coverage they purchased.
Forum-selection and choice-of-law clauses are not harmless boilerplate. They are claim weapons. They change the leverage of the dispute before the loss ever happens. A California policyholder with a California property loss should not discover after disaster strikes that the courthouse has been moved across the country by a clause buried in a surplus lines policy. The clause is an obvious remedy-shrinking by the surplus lines industry.
The BayWa court reasoned that even if California has strong public policies favoring insurance bad-faith remedies and the efficient proximate cause doctrine, that does not necessarily mean California has a strong policy against enforcing a contract requiring litigation elsewhere. While that may be the current state of California insurance law, it exposes the problem. If an insurer can avoid California’s policyholder protections simply by drafting a New York forum clause into a California risk policy, then the protections are not as strong as many policyholders assume.
This is also a broker and agent issue. Agents and brokers selling surplus lines policies should be warning their clients in writing about these clauses before the policy is purchased and not after the loss. The warning should take place before the premium is paid.
A forum-selection clause can add hundreds of thousands of dollars in litigation costs. It can require new counsel in a distant jurisdiction. It can deprive the policyholder of familiar local law. It can affect bad-faith remedies, causation rules, appraisal rights, jury rights, discovery practice, and settlement leverage. It can turn a claim dispute into a war of attrition where the insurer’s first advantage is the courthouse itself.
If an agent or broker sells a policy containing a foreign or distant forum-selection clause and fails to warn the policyholder of its practical consequence, that agent or broker should expect to be sued for negligence. The policyholder is relying on the insurance professional to procure meaningful coverage, not merely a stack of paper with traps in the back pages. A policy that covers the loss but makes enforcement economically irrational is not the protection most policyholders think they are buying.
The surplus lines industry will respond that sophisticated insureds can negotiate. Sometimes that is true, but it is often a fiction. Many policyholders are told the market is tight, the terms are standard, and coverage will not be available without accepting the insurer’s form. Insurance forms are often take-it-or-leave-it contracting dressed up in commercial clothing.
The National Association of Insurance Commissioners should take up this topic. The NAIC has a Surplus Lines Task Force for a reason. It should study and address the use of forum-selection, arbitration, and choice-of-law clauses that require policyholders to litigate property insurance disputes in states or countries with no meaningful connection to the insured property or the loss.
The rule should be simple. If the property is in California and the loss occurs in California, the policyholder should be able to litigate in California under California law unless the policyholder knowingly and specifically agrees otherwise after the loss. The same principle should apply in Florida, Texas, Louisiana, Colorado, and every other state where policyholders buy insurance to protect real property in that state.
Insurance regulators should also treat this as an unfair claim practice issue. It is fundamentally unfair to sell protection for property in one state while forcing the policyholder to enforce that protection in another jurisdiction chosen because it gives the insurer a tactical advantage. The courthouse should not be a hidden deductible.
Policyholders and risk managers should now ask three questions before buying surplus lines coverage. Where do I have to sue? What law applies? What rights am I giving up if the insurer disputes the claim?
If the answer is New York, London, Bermuda, or any place with no real connection to the property, the policyholder should demand a change. If the insurer refuses, the broker should document the warning, and the policyholder should consider the true price of the policy. The cheapest premium may become the most expensive insurance purchase ever made once a claim turns into litigation.
BayWa is not just a forum-selection case. It is a lesson in how insurance companies can win leverage before the loss, before the first adjuster arrives, and before the first denial letter is written.
Insurance is supposed to provide peace of mind. It should not require a California policyholder to chase justice across the country because a surplus lines insurer inserted a courthouse trap into the policy.
Thought For The Day
“California is like the rest of America, only more so.”
—Wallace Stegner
1 BayWa R.E. Wind v. RSG Underwriting Managers, No. B337522, 2026 WL 183023 (Cal. App. Jan. 23, 2026). See, Baywa Initial Brief, RSG Underwriting Answer Brief, and Baywa Reply Brief.