Dauphin Deposit Trust Co. v. Commercial Travelers Mut. Acc. Ass'n of America

• Decision Date: 20 February 1957
• Parties: DAUPHIN DEPOSIT TRUST COMPANY, Executor of the Estate of Charles William Hardt, deceased, Plaintiff, v. The COMMERCIAL TRAVELERS MUTUAL ACCIDENT ASSOCIATION OF AMERICA, Defendant.
• Court: New York Supreme Court

Page 566

165 N.Y.S.2d 566

8 Misc.2d 210

DAUPHIN DEPOSIT TRUST COMPANY, Executor of the Estate of Charles William Hardt, deceased, Plaintiff, v. The COMMERCIAL TRAVELERS MUTUAL ACCIDENT ASSOCIATION OF AMERICA, Defendant.

Supreme Court, Oneida County.

Feb. 20, 1957.

Anthony J. Fernicola, Utica, for plaintiff.

Hubbard, Felt & Fuller, Utica, for defendant.

HUDSON, Justice.

This is a motion by defendant for summary judgment dismissing the complaint on the ground that the Pennsylvania judgment upon which the case of action is based, is void and is not entitled to full faith and credit under Article IV, Section 1 of the Constitution of the United States for the reason that the Court of Common Pleas of Dauphin County in the Commonwealth of Pennsylvania, which granted it, had no jurisdiction over the defendant.

The case of action alleged in the complaint is based upon a default judgment obtained by the plaintiff against the defendant November 15, 1950, in the Court of Common Pleas, of Dauphin County, Pennsylvania, a court of competent jurisdiction. The jdugment was for $2,200 and was entered by confession. The defendant did not appear.

The judgment was obtained upon a policy of accident insurance written by defendant May 24, 1921 upon the life of Charles W. Hardt, plaintiff's intestate, who died February 4, 1949. The plaintiff was appointed executor of decedent's estate February 24, 1949. Decedent had been a resident of Pennsylvania since the issuance of the policy by defendant in 1921.

The defendant is a domestic membership association organized in 1883. It is authorized to grant personal accident and health insurance protection to its members. Its home office is located in the city of Utica, New York and it has no office, agency, agent, bank account, real property or tangible or intangible personal property in any state other than the states of New York and Virginia. In addition it has no employee, solicitor, investigator, adjuster, or any other representative located in the state of Pennsylvania. It has not applied for or obtained a license to do business in Pennsylvania. It has never voluntarily designated any individual within nor officer or official of the State of Pennsylvania as its agent upon whom the service of process might at any time be made.

The defendant asserts by affidavit the following procedure followed by it in the transaction of its business:

'if a resident of a foreign state desires to become a member of the defendant Association he obtains an application for membership, completes it and then mails it to the defendant Association addressed to its Home office in Utica, New York. There the application is received and is acted upon by the defendant's Board of Directors. If the application is favorably considered, the applicant is thereupon elected in Utica, New York, as a member of the defendant Association where an insurance contract in the nature of a certificate of membership providing for certain accident and/or health insurance benefits executed by defendant and issued to the new member is then mailed to him through the United States Post Office in Utica, New York, addressed to him at the address that he has instructed the Association to use. Notices of assessments to cover the cost of his insurance protection are mailed to the member from the Home office from time to time and the member mails remittances in payment thereof from his state of domicile to the Home office of the Association in Utica, New York.'

Under the terms of the policy of insurance in question, the plaintiff must give notice of death to the defendant, upon which the defendant shall within 15 days furnish the necessary forms for the filing of proof of loss by the beneficiary. The proof of loss must be filed within 90 days after the date of death. The defendant then has 60 days within which to pay the loss during which 60 day period no action can be instituted on the policy. Any action on the policy must be instituted within two years from the expiration of the 90 day period for the filing of proof of loss.

The plaintiff filed the necessary proof of loss within 90 days and commenced action thereon in Pennsylvania September 14, 1949 by serving the complaint in assumpsit upon the Commissioner of Insurance of the State of Pennsylvania. It was claimed by the plaintiff that the Commissioner was the duly constituted attorney of the defendant to accept service of process by reason of the 'Unauthorized Insurer's Process Act' adopted by the Pennsylvania Legislature and signed by the Governor May 20, 1949 being Public Law 1491, 40 P.S. § 1005.1 et seq. The law did not become effective until September 1, 1949.

It does not appear from the moving papers when the plaintiff filed proof of loss or when the defendant acted thereon and consequently for the purposes of this motion it cannot be said that some action was not taken by the defendant under the policy in question between September 1, 1949, the effective date of the statute, and September 14, 1949, the date upon which service of process was effected.

The portions of the Pennsylvania 'Unauthorized Insurer's Process Act' relating to the designation of the Insurance Commissioner to receive process read as follows:

'Section 2. Service of Process upon Unauthorized Insurer----

'(a) Any of the following acts in this State effected by mail or otherwise by an unauthorized insurer of another state or foreign government: (1) the issuance of delivery of contracts of insurance to residents of this State or to corporations authorized to do business therein; (2) the solicitation of applications for such contracts; (3) the collection of premiums membership fees, assessments, or other considerations, for such contracts; or (4) any other transaction of insurance business, is equivalent to and shall constitute an appointment by such insurer of the Insurance Commissioner and his successor or successors in office to be its true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding instituted by or on behalf of an insured or beneficiary arising out of any such contract of insurance, and any such act shall be signification of its agreement that such service of process is of the same legal force and validity as personal service of process in this State upon such insurer.'

The statute is substantially identical in form to similar statutes adopted by many states to provide a means of obtaining jurisdiction over those foreign insurance companies which maintain an office and own property only in the state of their incorporation but who do business almost if not entirely by mail, upon a national basis and who generally contend in the courts that they do business exclusively in the state of their incorporation and are not amenable to the laws or courts of any other state.

In New York an almost identical statute is provided as Section 59-a of the Insurance Law.

The intention of the Legislature in passing these statutes is set forth in Section 1005.1, Volume 40 of Purdon's Pennsylvania Statutes Annotated in almost identical language to that contained in section 59-a, subdivision 1 of the Insurance Law, Volume 27 of McKinney's Consolidated Laws of New York. The Pennsylvania statute in this particular reads as follows:

'The purpose of this act is to subject certain insurers to the jurisdiction of courts of this State in suits by or on behalf of insureds or beneficiaries under insurance contracts. The legislature declares that it is a subject of concern that many residents of this State hold policies of insurance issued or delivered in this State by insurers not authorized to do business in this State, thus presenting to such residents the often insuperable obstacle of resorting to distant forums for the purpose of asserting legal rights under such policies. In furtherance of such State interest the Legislature herein provides a method of substituted service of process upon such insurers and declares that in so doing it exercises its power to protect its residents and to define for the purpose of this statute what constitutes doing business in this State, and also exercises powers and privileges available to the State by virtue of Public Law 15, 79th Congress of the United States, Chapter 20, first Sess. S. 340 as amended, which declares that the business of insurance and every person engaged therein shall be subject to the laws of the several states. 1949, May 20, P.L. 1491, § 1.'

The nature of the problem which this legislation is designed to correct is fully described and discussed by Judge Medina in Schutt v. Commercial Travelers Mutual Accident Ass'n, 2 Cir., 229 F.2d 158, at page 159:

'The background is the mushroom growth of the mail order insurance business. Typically such companies maintain an office and own property only in the state where they are incorporated, but they insure risks in many states, sometimes on a nation-wide basis. They have no agents or solicitors. New business is secured through the efforts of old policyholders, or 'members', spurred on by offers of prizes and aided by advertisements and application banks furnished by the company. The amounts of money involved are small, full coverage of $5,000 or $10,000, the various sums of accident, hospital and health coverage running from a few dollars up to a few thousand. Some of these details appear in the exhibits attached to the affidavits in this case. In any event, such has been the success of these companies and so clear is the hardship of requiring the assured or his beneficiaries to hire a lawyer to prosecute such small claims in a state far from the residence of the policy-holder, where the necessary witnesses are generally to be found, that several states have enacted legislation to protect their residents against the expense, inconvenience, and injustice which are found to exist where such claims are required to be prosecuted in far distant forums.'

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