In Greenwell v. Auto-Owners Ins. Co. (No. C074546, Filed 1/27/2015) (“Greenwell”), the California Court of Appeal, Third Appellate District, held a California resident could not establish specific personal jurisdiction over an insurance company, located in Michigan, which issued a policy of insurance to the California resident where the claimed loss occurred in Arkansas.
Plaintiff purchased a policy of insurance from defendant, Auto-Owners Ins. Co. (“Auto”), a Michigan corporation. The policy provided commercial property coverage for an apartment building owned by Plaintiff, located in Arkansas. The policy also provided commercial general liability coverage for plaintiff’s property ownership business, which plaintiff operated from California.
Both coverage provisions insured certain risks, losses, or damages that could have arisen in California. The dispute which arose between Plaintiff and Defendant, however, involved two fires that damaged the apartment building in Arkansas. As a result of coverage decisions that Auto made in the handling of the claim, plaintiff filed suit for breach of contract and bad faith.
Auto moved to quash Plaintiff’s service of summons for lack of personal jurisdiction. In support, Auto offered evidence indicating that aside from the policy issued to plaintiff, it had not conducted any business in California. Plaintiff opposed the motion arguing Auto had availed itself of the benefits of California by entering into a relationship, in California, with him, and by providing insurance covering myriad facets of his business liability. The trial Court granted Auto’s motion, holding plaintiff failed to meet his burden of demonstrating Auto had sufficient minimum contacts with California to justify the exercise of specific personal jurisdiction.
The Court of Appeal affirmed, acknowledging the facts were “like an essay question on a law school exam.” In reaching its holding, the Court noted that only “specific jurisdiction” was at issue. Thus, the test was whether the non-resident defendant had purposefully availed itself of forum benefits, and whether the controversy was related to or arose out of the defendant’s specific contacts with California.
The Court distinguished McGee v. International Life Ins. Co. (1957) 355 U.S. 220 (“McGee”), where the U.S. Supreme Court held an insurer was properly haled into California state court after issuing a life insurance policy to a California resident. The Court noted two distinguishing facts: (1) in Mcgee, the insurance company sent a reinsurance offer to California and thus specifically solicited business in the forum state; and (2) the McGee policy was a life insurance policy on a California resident, and the insured event—the insured’s death—provided the basis for the lawsuit.
In Greenwell, however, there was no evidence proffered which indicated Auto solicited plaintiff in California. Further, the policy at issue was a commercial property and commercial general liability policy purchased by an individual operating a building ownership business from California; the only apparent subject of which was an apartment building in Arkansas, where the insured event—the fires at the building—occurred.
While the Court reasoned Auto had availed itself of the benefits of California because portions of the policy contemplated covered losses for events taking place in California, the Court nonetheless concluded the second prong—whether there exists a substantial nexus between the defendant’s contacts and the arising controversy—had not been met by plaintiff. The Court noted Auto conducted no other business in California, did not have agents licensed to sell policies in California, did not pay California taxes, and had never commenced a legal action in California. Thus, the fires at the insured Arkansas property were not sufficient to demonstrate a substantial nexus with Auto’s California contacts, minimal as they were. Since Plaintiff was not suing Auto for any California risk that came to fruition, the trial court’s grant of Auto’s motion to quash was affirmed.
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