Capitol Indem. Corp. v. Certain Lloyds Underwriters

• Decision Date: 02 April 1980
• Docket Number: No. 78-C-302.,78-C-302.
• Parties: CAPITOL INDEMNITY CORPORATION, a Wisconsin Corporation, Plaintiff, v. CERTAIN LLOYDS UNDERWRITERS AND/OR LONDON COMPANIES, an unauthorized foreign insurance company, more specifically identified as follows: Spicer-Syndicate No. 898; Mountain-Syndicate No. 855; Groom-Syndicate No. 455—Marine; Merrett-Syndicate No. 418; Moller-Syndicate No. 275; Brooks-Syndicate No. 880; Dugdale-Syndicate No. 89; Hindes-Syndicate No. 266; Alder-Syndicate No. 950; General Aircraft Insurance Co., Ltd., a foreign insurance corporation, and United Reinsurance Consultants, Inc., a New Jersey Corporation, Defendants.
• Court: U.S. District Court — Western District of Wisconsin

487 F. Supp. 1115

CAPITOL INDEMNITY CORPORATION, a Wisconsin Corporation, Plaintiff, v. CERTAIN LLOYDS UNDERWRITERS AND/OR LONDON COMPANIES, an unauthorized foreign insurance company, more specifically identified as follows: Spicer-Syndicate No. 898; Mountain-Syndicate No. 855; Groom-Syndicate No. 455—Marine; Merrett-Syndicate No. 418; Moller-Syndicate No. 275; Brooks-Syndicate No. 880; Dugdale-Syndicate No. 89; Hindes-Syndicate No. 266; Alder-Syndicate No. 950; General Aircraft Insurance Co., Ltd., a foreign insurance corporation, and United Reinsurance Consultants, Inc., a New Jersey Corporation, Defendants.

No. 78-C-302.

United States District Court, W. D. Wisconsin.

April 2, 1980.

Bruce Gillman, Tomlinson, Gillman & Travers, Madison, Wis., for plaintiff.

John A. Hansen, Stafford, Rosenbaum, Rieser & Hansen, Madison, Wis., Brendan J. Connoly, Mendes & Mount, New York City, for defendants Certain Lloyds Underwriters & General Aircraft.

Daniel W. Hildebrand, Roy L. Prange, Jr., Ross & Stevens, S. C., Madison, Wis., for defendant United Reinsurance.

MEMORANDUM AND ORDER

WARREN, District Judge.

There are currently two types of motions pending in this civil case. All of the defendants have moved to dismiss for lack of in personom jurisdiction and for failure to state a claim upon which relief can be granted. Subject matter jurisdiction exists pursuant to 28 U.S.C. § 1332.

Plaintiff seeks in this action to recover amounts paid by it under a policy of insurance issued by plaintiff as reinsurer to defendant Lloyds Underwriters and defendant General Aircraft Insurance Co. as reinsureds. Defendant United Reinsurance Consultants, Inc. (United) acted as a broker. The insurance policies at issue are known in the industry as Total Loss Only Reinsurance Treaties. This reinsurance is underwritten primarily to satisfy reinsurance requirements of marine underwriters, insuring direct hull and machinery risks on vessels, who are liable under their primary policies to pay the face amount of the policy in the event the insured vessel becomes a constructive total loss. Such a loss occurs when the estimated cost of recovering the vessel and repairing the damage caused by an insured exceeds the insured value. Plaintiff issued reinsurance to cover a portion of the eight treaties in suit.

The basis of plaintiff's complaint is that it got "conned" into reinsuring the hulls of certain vessels under the mistaken belief that the underlying insurers had actually insured the hulls and were merely passing off the risk to the various reinsurers. Plaintiff alleges that there was no underlying risk and that the defendants were merely "gambling" that a certain number of airplanes would be lost thereupon obligating plaintiff under the policy. Under several theories, plaintiff claims that it is entitled to recover the amounts paid to defendant reinsureds under the policies. It also seeks relief from defendant United as broker.

Depending upon the defendants' status and purported contacts with Wisconsin, plaintiff relies upon one or the other of the following subsections of the Wisconsin longarm statute to confer in personam jurisdiction over defendants, Wis.Stats. §§ 801.05(1)(d) or 801.05(4). Rather than discussing the question of personal jurisdiction over each defendant separately, the Court will instead discuss the statutes relied upon by plaintiff and relate it to the appropriate defendant where necessary.

In resolving the issue of personal jurisdiction, the procedure utilized by the Wisconsin Supreme Court appears most expeditious since in a diversity case, this Court must apply the law of the place where it is sitting to obtain jurisdiction over defendants' persons. See Lakeside Bridge & Steel Co. v. Mountain Construction Co., 597 F.2d 596 (7th Cir. 1977); 4 Wright & Miller, Federal Practice & Procedure, § 1068 (1969). The first step involves determining whether the state statute relied upon itself permits an exercise of jurisdiction over the person of defendants. If the state longarm statute does in fact extend to confer jurisdiction, the Court must determine whether the exercise of personal jurisdiction comports with constitutional due process. Zerbel v. Federman & Co., 48 Wis.2d 54, 179 N.W.2d 872 (1970). This was also the procedure utilized by the court in Lakeside Bridge & Steel, supra. The reach of the Wisconsin long-arm statute is, of course, a question of law.

I. WIS.STAT. § 801.05(1)(d)

Under the Wisconsin long-arm statute, a defendant is subject to personal jurisdiction if he "Is engaged in substantial and not isolated activities within this state, whether such activities are wholly interstate, intrastate, or otherwise." Wis.Stat. § 801.05(1)(d). According to revision notes following section 801.05, subsection (1)(d) was drawn to correspond with the "doing business" basis for jurisdiction recognized by the Supreme Court in Perkins v. Benquet Consolidated Mining Corp., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952). See Foster, Revision Notes to Wis.Stat. § 801.05 at 55-56 (1959). See also Traveler's Insurance Co. v. McArthur, 25 Wis.2d 197, 130 N.W.2d 852 (1964).

In order to base personal jurisdiction on section 801.05(1)(d), a court must find more than just contacts between the defendant and the forum. Rather, the activity of defendant must have been both "continuous and systematic." Towne Realty Inc. v. Bishop Enterprises, Inc., 432 F.Supp. 691, 694 (E.D.Wis.1977); Traveler's Insurance Co. v. McArthur, 25 Wis.2d at 203, 130 N.W.2d 852. In the pleadings, defendant Syndicates underwriting at Lloyd's, London (Lloyd's Syndicates) and defendants General and United are each alleged to have conducted "continuous and systematic" business within Wisconsin. The question for this Court is whether the above named defendants' activities are sufficient to confer jurisdiction under Wis.Stat. § 801.05(1)(d), because if they have such contacts, these are clearly sufficient to comport with the requirements of due process discussed in Perkins v. Benguet Consolidated Mining Corp., supra.

Notwithstanding the allegations of plaintiff's complaint to the contrary, the factual record available indicates that the only contacts between General and Wisconsin are those incidental to the insurance contract at issue in this litigation. (Oliver affidavit submitted in support of General's motion to dismiss). Once personal jurisdiction is so challenged, plaintiff bears the burden of showing that the statute relied upon confers jurisdiction. O'Hare International Bank v. Hampton, 437 F.2d 1173 (7th Cir. 1971); 5 Wright & Miller, § 1351 at n.33. With respect to defendant General, plaintiff has completely failed to meet its burden of proving the contacts necessary for General under Wis.Stat. § 801.05(1)(d) and, therefore, this Court must find that jurisdiction over General under this statute is absent.

Defendant United likewise has the same limited contact with Wisconsin. As indicated in the affidavit of Mr. Frederick F. Stiff, III, Manager of defendant United, defendant United's contact with Wisconsin relates solely to the transaction at issue. This unrefuted affidavit establishes that United's contacts are insufficient to subject it to personal jurisdiction in this forum under Wis.Stat. § 801.05(1)(d).

Applying section 801.05(1)(d) to defendant Lloyd's Syndicates presents the Court with a much more difficult problem than presented by General's motion. In order to resolve the motion, the nature of the Lloyd's insurance organization must be briefly reviewed.

The insurance seller commonly known as Lloyd's of London, England is not a corporation or business in the same sense as our insurance companies. Lloyd's does not sell insurance and it does not underwrite. Instead, it is a market place wherein certain underwriters meet to conduct their own insurance business. On a common policy of insurance, the insurer is not Lloyd's of London, but instead, it or they are listed as an underwriter or underwriters at Lloyd's, London. (See, e. g., exhibit C-1 attached to the James Carew affidavit of Aug. 27, 1979). One example of a renewal policy furnished by plaintiff shows the insurer as "underwriters at Lloyd's, London" and although the underwriters are not named, it explains that the names and portions of the risk underwritten by them will be supplied if requested. (Exhibit C-2 attached to Carew affidavit). Under the practice used at Lloyd's, "The individual . . . underwriters operate through an underwriting agent, each agent representing, in most cases, a number of underwriters, thus forming various groups known as Snydicates." (See Bests Insurance Reports—Property— Casualty for 1979 at 491B attached to the July 31, 1979 affidavit of Bruce Gillman).

It is important to note that Lloyd's of London had a listing in the May, 1979, Milwaukee, Wisconsin telephone directory under that name. (Exhibit D attached to Gillman affidavit of July 31, 1979). The listing is in an advertisement format and states: "Insurance's effected at Lloyd's, London." A local broker is listed in the same advertisement.

In order to confer jurisdiction under 801.05(1)(d), plaintiff directs attention to the fact that some of the members of the association known as Lloyd's of London do substantial business in Wisconsin. This point is not denied by defendant syndicates. It is also not disputed by the parties that the individual syndicates being sued in this litigation do not have substantial contacts with Wisconsin. The issue presented by the defendant syndicates' motion to dismiss is whether the substantial contacts of Lloyd's of London through several of its member syndicates is sufficient to confer this Court with jurisdiction over the defendant syndicates who individually have insubstantial contacts with Wisconsin.

Apparently, in order to do business in Wisconsin, the association has pooled assets and set up a trust fund in order to qualify as a seller of surplus lines of...