King v. Am. Family Mut. Ins. Co.

• Decision Date: 31 January 2011
• Docket Number: No. 08–35988.,08–35988.
• Parties: Timothy R. KING, Plaintiff–Appellant,v.AMERICAN FAMILY MUTUAL INSURANCE COMPANY; American Standard Insurance Company of Wisconsin, Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

632 F.3d 570

11 Cal. Daily Op. Serv. 1407

2011 Daily Journal D.A.R. 1782

Timothy R. KING, Plaintiff–Appellant,

v.AMERICAN FAMILY MUTUAL INSURANCE COMPANY; American Standard Insurance Company of Wisconsin, Defendants–Appellees.

No. 08–35988.

United States Court of Appeals, Ninth Circuit.

Submitted * June 7, 2010.Filed Jan. 31, 2011.

Guy W. Rogers, Jon A. Wilson, Brown Law Firm, Billings, MT, for the plaintiff-appellant.Lynn M. Grant, Cashmore & Grant, Billings, MT, for the defendants-appellees.Appeal from the United States District Court for the District of Montana, Carolyn S. Ostby, Magistrate Judge, Presiding. D.C. No. 1:08–cv–00014–CSO.Before: CYNTHIA HOLCOMB HALL, FERDINAND F. FERNANDEZ, and M. MARGARET McKEOWN, Circuit Judges.Opinion by Judge McKEOWN; Dissent by Judge FERNANDEZ.

OPINION

McKEOWN, Circuit Judge:

Imagine this scenario:

An out-of-state insurance company is contemplating doing business in Montana. Preliminary to any authorization to sell policies or the transaction of any business, state law requires the company to appoint the Commissioner of Insurance for service of process, which it did. Although the company began the licensure application process, the company cannot yet sell policies in Montana and has not completed the regulatory process to do so. The company has no contacts or contracts, no sales agents or producers, no employees, and no offices in Montana, nor has it filed insurance rates and other forms necessary to do business, solicited any business, advertised, sold any policies, collected any premiums, or transacted any business in Montana. The company is, in short, 99.99% “Montana free.” Although it has done nothing more than dip its toe in the water to test the idea and preserve its option of doing business in Montana at some undetermined point in the future, the company now faces the prospect of being subject to general jurisdiction.

We hold that this toe—the mere appointment of an agent for service of process—does not subject the company to general personal jurisdiction in Montana. Numerous Supreme Court opinions and Montana law counsel that such testing of the waters does not constitute a generalized consent to be sued in Montana. Nor is the appointment of an agent for service of process sufficient to confer either general or specific personal jurisdiction over the company under our controlling standards. The constitutional standard of “minimum contacts” has practical meaning in the context of personal jurisdiction. Mere appointment of an agent for service of process cannot serve as a talismanic coupon to bypass this principle. We therefore affirm the district court's dismissal of this suit for lack of personal jurisdiction.

Background

In 2007, Timothy King and his wife, Gwynne King,¹ were involved in a motorcycle accident in Montana. The Kings are Colorado residents who own four vehicles, all of which are garaged in Colorado and are insured under policies that were issued in Colorado by either American Family Mutual Insurance Company or American Standard Insurance Company of Wisconsin (collectively, “the Companies”). None of the insured vehicles were involved in the accident that gave rise to this dispute.² The Companies do not sell insurance policies in Montana, although the Kings' policies do provide coverage for accidents occurring anywhere within the United States.

The Companies are organized under Wisconsin state law, and their principal places of business are in Wisconsin. In 2000, the Companies began exploring the possibility of becoming authorized to issue insurance policies in Montana. As an initial step, the Companies applied for certificates of authority to transact business in the state.

In applying for the certificates, and under the governing Montana statute, the Companies executed a form appointing the Montana Commissioner of Insurance as their registered agent for service of process in Montana. See Mont.Code Ann. § 33–1–601 (2010). This appointment is “irrevocable, binds the insurer and any successor in interest or to the assets or liabilities of the insurer, and remains in effect as long as there is in force in Montana any contract made by the insurer or obligations arising from a contract.” Id.

The state issued certificates of authority to the Companies in July 2001. However, neither company has completed the process of obtaining authorization to sell insurance and transact business in Montana. Before the Companies may issue insurance policies in Montana, the Companies must also, for example, submit their rate schedules to the Insurance Commissioner, see Mont.Code Ann. § 33–16–203, submit and obtain approval of all insurance forms that will be used in Montana, see id. § 33–1–501(1)(a), and submit a list of sales agents and producers, see id. §§ 33–17–231, 33–17–236. As of June 2008, the Companies had not taken any of these steps. They had, however, paid annual fees from 2002 through 2008 in order to preserve their Montana business names and the progress made on their applications to do business in the state.

In accordance with Montana law, the Companies have not conducted any business in the state of Montana. They have no offices in Montana, no employees, agents, or officers in Montana, and have never solicited business in Montana. Between 2001 and 2007, the Companies did not issue or sell any insurance policies in Montana and did not collect any premiums in the state. Had the Companies done so, because they were not authorized to sell insurance in Montana, they would have been subject to penalties and other remedies. See Mont.Code Ann. §§ 33–1–317, 33–1–318, 33–2–118, and 33–2–119.

Analysis

I. Montana Statutes and Case Law Govern the Question of Whether the Companies Have Consented to Personal Jurisdiction

We review de novo the district court's ruling that it lacked personal jurisdiction over the Companies. Love v. Associated Newspapers, Ltd., 611 F.3d 601, 608 (9th Cir.2010). Our analysis of whether the Companies' appointment of an agent for service of process is a sufficient hook for the exercise of personal jurisdiction begins with a line of venerable Supreme Court cases.

The Court first considered the issue in Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93, 37 S.Ct. 344, 61 L.Ed. 610 (1917). In Pennsylvania Fire, the defendant insurer executed a power of attorney that made service on the superintendent of the insurance department of Missouri equivalent to personal service. 243 U.S. at 94, 37 S.Ct. 344. The Supreme Court held that the insurer's appointment of a resident agent for service of process constitutionally subjected the insurer to suit in Missouri for cases growing out of the insurer's activities both in Missouri and elsewhere. See id. at 95, 37 S.Ct. 344. The linchpin that made this holding possible, however, was the Supreme Court of Missouri's interpretation of the governing state statute.

The Missouri statute at issue in Pennsylvania Fire

requir[ed] all [insurers doing business in Missouri] to appoint the insurance commissioner of [Missouri] as their agent to accept service of process ... and to acknowledge receipt of the same when ‘issued by any court of record, justice of the peace or other inferior court, and upon whom such process may be served for and in behalf of such company in all proceedings that may be instituted against such company in any court of this state.’

Gold Issue Mining & Milling Co. v. Pa. Fire Ins. Co. of Phila., 267 Mo. 524, 184 S.W. 999, 1004–05 (1916) (quoting Mo.Rev.Stat. § 7042 (1909)). ³ Previous versions of the Missouri statute had “limit[ed] the process of the [Missouri] courts ... to causes of action arising out of contracts ... made in [Missouri].” Id. at 1005. The Missouri Supreme Court held that, by contrast with those earlier versions, the more expansive language of the current version of § 7042 “clearly authorized the superintendent of insurance to acknowledge the receipt and service of process for any such company in any and all transitory causes of action that might be brought by any one against it in the [Missouri] courts.” Id. (emphasis added). The state supreme court went on explain at length that, so construed, § 7042 was constitutional. See id. at 1005–21.

On appeal, the Supreme Court noted that the insurer had “appoint[ed] an agent in language that rationally might be held to” subject it to personal jurisdiction for any and all suits, and noted that “[t]he language has been held to go to that length” by the state supreme court. Pennsylvania Fire, 243 U.S. at 95, 37 S.Ct. 344. The Court then affirmed the constitutionality of the statute as construed by the Missouri Supreme Court, concluding that when an insurer executes a document consenting to jurisdiction, the insurer “takes the risk of the interpretation that may be put upon [the document] by the courts.” Id. at 96, 37 S.Ct. 344. Pennsylvania Fire, in other words, holds that the appointment of an agent for service of process will subject a foreign insurer to general personal jurisdiction in the forum if the governing state statute so provides.

Later Supreme Court cases reinforce this rule. Just three years later, in Chipman, Ltd. v. Thomas B. Jeffrey Co., 251 U.S. 373, 40 S.Ct. 172, 64 L.Ed. 314 (1920), the Court applied a similar analysis, albeit without citation to Pennsylvania Fire. The Court in Chipman held that a New York statute requiring foreign corporations to designate an in-state person for service of process only extended personal jurisdiction over the corporation to cases involving business the corporation conducted in New York. Chipman, 251 U.S. at 379, 40 S.Ct. 172. The Court rested its decision on the New York courts' interpretation of the statute, quoting a state court decision holding that “ ‘[u]nless a foreign corporation is engaged in business within the state, it is not brought within the state by the presence of its agents.’ ” Id. (quoting Tauza v....