Bish v. EMPLOYERS'LIABILITY ASSUR. CORP.

• Decision Date: 28 January 1952
• Docket Number: Civ. A. No. 3310.
• Citation: 102 F. Supp. 343
• Parties: BISH et ux. v. EMPLOYERS' LIABILITY ASSUR. CORP., Limited.
• Court: U.S. District Court — Western District of Louisiana

102 F. Supp. 343

BISH et ux. v.EMPLOYERS' LIABILITY ASSUR. CORP., Limited.

Civ. A. No. 3310.

United States District Court W. D. Louisiana, Shreveport Division.

January 28, 1952.

Lunn, Irion, Switzer, Trichel & Johnson, and Richard H. Switzer, all of Shreveport, La., for plaintiffs.

Cook, Clark & Egan and Benjamin C. King, all of Shreveport, La., for defendant.

DAWKINS, District Judge.

Plaintiffs, Mrs. Marie Bish and her husband, James N. Bish, residents of the City of Shreveport, citizens of Louisiana, sued in tort the defendant, a foreign corporation and citizen of New York, for the respective sums of $50,000 and $539.31, for alleged injuries of the wife and medical expenses caused by the use of a "Toni Home Permanent" Set upon her hair.They alleged that the set was sold to them by Broadmoor Drug Company as a retailer for the Toni Company, a division of the Gillette Safety Razor Company of Chicago, Illinois, whose insurer against liability was the defendant in this case.The husband's claim, as head of the community, is for medical, hospital and nursing bills incurred because of the injuries to the wife.

In an amended complaint, Mrs. Bish has raised her demand to $195,000, charging that the injuries had subsequently caused the development of certain diseases which have increased her pain, suffering and disfigurement and permanently disabled her.

It is obvious that the claim of the husband is far below the minimum jurisdictional amount of this court, a circumstance of which it must take notice ex proprio motu.It therefore must be dismissed for want of jurisdiction, since the amount cannot be combined with that of the wife for such purposes.

The nature of the motion to dismiss now to be considered is such that no recital of details of either the injuries or the character of the alleged negligence is necessary.The grounds in substance are as follows:

1.The policy sued on was executed in Massachusetts, delivered in Illinois, and provided that: a) "all of its terms should be fully complied with," and b) that the obligation of the insurer to pay "shall be finally determined either by judgment against the insured after final trial or by written agreement with the insured, the claimant and the insurance company";

2.That no one should have "any right to join the company as a co-defendant in any action against the insured to determine the insured's liability";

3.That said stipulations were entirely lawful and valid under the laws of Massachusetts, where the policy was issued, and in Illinois, where it was delivered; and

4.Finally, Acts 541 and 542 of the Louisiana Legislature of 1950 LSA-R.S. 22:655, 22:983, subd. E, in their application to this case, are invalid, because the result would:

"(a) impair the obligations of defendant's contract with the Toni Company.

"(b) deny to defendant its right to have the Courts of Louisiana and the Federal Court sitting in Louisiana give full faith and credit to the public acts affecting, and judicial proceedings of the State of Massachusetts.

"(c) deprive defendant of its property and rights without due process of law;

"(d) deny to defendant equal protection of the law."

In the case of Bayard v. Traders & General Ins. Co., D.C., 1951, 99 F.Supp. 343, the writer had occasion to consider the applicability of these two statutes under a policy issued and delivered in the State of Texas, wherein the "no action" stipulation was valid, and a similar motion to dismiss was sustained.However, counsel for plaintiff here, in a very able and exhaustive brief, seek to distinguish that case on the ground that it arose at a time when the Louisiana law expressly confined its application to policies written or delivered within its borders.On the other hand, counsel for defendant just as strongly contends that those circumstances could make no difference because the Bayard case has not to this day been tried on its merits so as to bring it within the ruling of Belanger v. Great American Indemnity Co., 5 Cir., 1951, 188 F.2d 196, which had been finally tried and decided in the trial court before the law was changed.The statutes now include all contracts of insurance, whether made within or without the state, and require insurance companies to file written consent to be sued in a direct action as a condition precedent to doing business in Louisiana.

Therefore, we are now confronted squarely with the issue of the validity of Acts 541 and 542 of 1950, insofar as they attempt to give a direct action against an insurer under a policy written and delivered outside the state, as well as the requirement that foreign corporations file written consent to be so sued directly.The defendant, it is admitted, filed such consent, as the price of doing business in the state.

At the outset, it is proper to say that in the Bayard casethe court gave no consideration to the fact that the accident happened before the change in the state law, and the Court of Appeals for this Circuit sustained the ruling of the trial court in the Belanger case expressly upon the ground that it had been finally tried and decided below at a time when that law confined its operation to policies issued or delivered within the state, that court expressly pretermitting the issues here.

After careful consideration of the arguments and authorities cited by plaintiff, the writer is still of the view that if these statutes are to be held valid at all, their operation must be confined to Louisiana contracts.Any other conclusion would give them an extraterritoral effect not permissible.In the first place, business such as that conducted by the defendant throughout the nation involves interstate commerce, as was held in U. S. v. Southeastern Underwriters Association, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440.Because of that decision, Congress passed what is known as the McCarran Act, 59 Stats. 33,15 U.S.C.A. §§ 1011-1015, the pertinent provisions of which are as follows:

"Sec. 1.The Congress hereby declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States.

"Sec. 2.(a) The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.

"(b) No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance * *."

The South-Eastern case had upheld the conviction of certain persons and corporations under the Sherman Anti-Trust Law, 15 U.S.C.A. §§ 1-7,15 note, which was followed by the McCarran Act; and in 1946the Supreme Court was called upon to interpret its effects in Prudential Insurance Co. v. Benjamin, 328 U.S. 408, 60 S.Ct. 1142, 1155, 90 L.Ed. 1342, on the power of the State of South Carolina to tax a foreign insurance company.That state had for years imposed a tax of 3% upon the gross revenues arising in the state of foreign insurance companies, which in the South-Eastern case had been declared to be engaged in interstate commerce.The Prudential, therefore, attacked it as discriminatory and unconstitutional.The Court, after pointing out that Prudential had paid the tax for many years without dire results, concluded that the exaction was not unreasonable, and said:

"Obviously Congress' purpose was broadly to give support to the existing and future state systems for regulating and taxing the business of insurance.This was done in two ways.One was by removing obstructions which might be thought to flow from its own power, whether dormant or exercised, except as otherwise expressly provided in the Act itself or in future legislation.The other was by declaring expressly and affirmatively that continued state regulation and taxation of this business is in the public interest and that the business and all who engage in it `shall be subject to' the laws of the several states in these respects.

"Moreover, in taking this action Congress must have had full knowledge of the nation-wide existence of state systems of regulation and taxation; of the fact that they differ greatly in the scope and character of the regulations imposed and of the taxes exacted; and of the further fact that many, if not all, include features which, to some extent, have not been applied generally to other interstate business.Congress could not have been unacquainted with these facts and its purpose was evidently to throw the whole weight of its power behind the state systems, notwithstanding these variations.

"It would serve no useful purpose now to inquire whether or how far this effort was necessary, in view of the explicit reservations made in the majority opinion in the South-Eastern case.Nor is it necessary to conclude that Congress, by enacting the McCarran Act, sought to validate every existing state regulation or tax.For in all that mass of legislation must have lain some provisions which may have been subject to serious question on the score of other constitutional limitations in addition to commerce clause objections arising in the dormancy of Congress' power.And we agree with Prudential that there can be no inference that Congress intended to circumvent constitutional limitations upon its own power."

The contract in the present case, as stated earlier, was made in the State of Massachusetts and delivered in the State of Illinois, in both of which the "no action" clause requiring that any claim against the insured be liquidated before suit could be maintained against the insurer for indemnification, was valid.Therefore, since the insurance business, when conducted across...