Policyholders who decide to pursue litigation against their insurers often participate in a “rush to the courthouse” to file before their insurers in the belief this provides them with an advantage.

A September 2010 ruling in litigation involving Chinese drywall in which insurers unsuccessfully moved to have the case moved to a Florida court from one in Louisiana, where policyholders had filed litigation first, illustrates one such policyholder success.

Robert Horkovich, a policyholder attorney and shareholder with Anderson Kill & Olick P.C. in New York, said the ruling in Chartis Specialty Insurance Co. and Lexington Insurance Co. vs. Robert C. Pate, WCI Communities Inc. and WCI Communities L.L.C. by the federal district court in Tampa, Fla., was significant because Louisiana does not apply the pollution exclusion outside of traditional environmental contamination, while Florida law does.

According to the ruling, Chartis Specialty and Lexington, units of New York-based Chartis Inc., had sued for declaratory relief as to their duty to defend or indemnify Mr. Pate in his capacity as the trustee of the Chinese Drywall Trust under a liability insurance policy issued by each plaintiff.

The defendant insurers moved to dismiss the “lack of subject matter jurisdiction” and to either dismiss, transfer or stay the action in deference to a previously filed action in the U.S. District Court for the Eastern District of Louisiana in New Orleans.

The “first-filed action” in this case was a lawsuit filed by the policyholders against the insurers that sought a declaratory judgment that each insurer had an obligation to indemnify the trust as to each claim arising from the sale of homes that allegedly contained defective Chinese drywall.

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The policyholders also pointed out that the New Orleans judge already had issued discovery orders and scheduled hearings on motions in the case, and charged that the insurers' attempt to have the Florida court hear the case was a “flagrant and belated attempt at forum shopping,” according to the Florida ruling.

The insurers argued the first-filed action was “only in its infancy,” among other arguments, and that the New Orleans court was an improper forum. It also charged the trustee with forum shopping.

The Florida court agreed to transfer the case to Louisiana, stating in part, “the plaintiffs failed to show a compelling circumstance warranting disregard of the first-filed rule.”

Mr. Horkovich said the Louisiana court has stayed the multidistrict litigation in the Chinese drywall cases in favor of mediation among the parties.