In Greenwell v. Auto-Owners Ins. Co. (No. C074546, filed 1/27/15), a California appeals court held that the use of a mailing address to send policies and renewals into California did not support jurisdiction for a California resident’s bad faith lawsuit against a Michigan insurer over property coverage for a fire loss to a building in Arkansas.
In Greenwell, the insured was a California resident engaged in real estate investment. He purchased an apartment building in Little Rock, Arkansas. Using the services of an insurance broker in Little Rock, he purchased a package of general liability and commercial property insurance for the building from Auto-Owners Insurance Company, a Michigan insurer not licensed in California. The policy listed the insured’s business address in California, the policy was mailed there, and renewed three times via the insured’s California address.
After two back-to-back fires damaged the apartment building, a dispute arose when Auto-Owners changed position from treating the claim as two separate losses, contending that only one single limit applied. The insured subsequently claimed that he was damaged as a result because he had entered into repair contracts in excess of a single limit, defaulted and had to sell the apartment building at a loss.
The insured sued Auto-Owners in California Superior Court, alleging breach of contract and bad faith. However, Auto-Owners moved to quash the service of summons, contending that the California state court lacked jurisdiction over the insurance company, since it did no business in the state except for mailing the one policy and its renewals to the insured.
The court agreed, applying the classic tests for personal jurisdiction: “If the nonresident defendant does not have substantial and systematic contacts in the forum sufficient to establish general jurisdiction, he or she still may be subject to the specific jurisdiction of the forum, if the defendant has purposefully availed himself or herself of forum benefits, and the controversy is related to or arises out of a defendant’s contacts with the forum.”
The Greenwell Court found insufficient contacts, distinguishing McGee v. International Life Ins. Co. (1957) 355 U.S. 220, a life insurance case where an out-of-state insurer had solicited the business of the California resident and the risk — the insured’s death — was located in the state.
Significantly, the Greenwell court held that merely sending renewal policies into California did not constitute “solicitation” under the holding of McGee. However, the court did not discuss whether a renewal technically involves an offer, and its conclusion was based solely on the insured’s failure to cite any evidence other than the mere mailing of the policies to the insured’s California address.
In any event, the element of a substantial nexus was also absent. While acknowledging that the liability component of the policies could have covered the insured for risks occurring in California, and could have obligated the insurer to defend the insured in California, the Greenwell court found there was an insufficient nexus between the insurance and California, saying that “most important” was the fact that the losses at issue had occurred in Arkansas, involving property coverage for a building located there, which had been procured through an Arkansas insurance broker.
As a result there were insufficient contacts, Auto-Owners was not subject to being sued in a California Superior Court, and the service of summons was quashed.
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