Guardian Royal Exchange Assur., Ltd. v. English China Clays, P.L.C.

• Decision Date: 27 February 1991
• Docket Number: No. C-8367,C-8367
• Citation: 815 S.W.2d 223
• Parties: GUARDIAN ROYAL EXCHANGE ASSURANCE, LTD., Petitioner, v. ENGLISH CHINA CLAYS, P.L.C. et al., Respondent.
• Court: Texas Supreme Court

Page 223

815 S.W.2d 223

59 USLW 2547

GUARDIAN ROYAL EXCHANGE ASSURANCE, LTD., Petitioner, v. ENGLISH CHINA CLAYS, P.L.C. et al., Respondent.

No. C-8367.

Supreme Court of Texas.

Feb. 27, 1991.

Rehearing Overruled Sept. 11, 1991.

Gayle A. Boone, Edward S. Hubbard, Michael L. Dinnin and J. Clifford Gunter, III, Houston, for petitioner.

Elizabeth J. Lindell, Donald D. Gavlick, San Antonio, for respondent.

OPINION

HIGHTOWER, Justice.

The issue before this court is whether it is consistent with the requirements of due process of law under the United States Constitution for Texas courts to assert in personam jurisdiction over Guardian Royal Exchange Assurance, Ltd. ("Guardian Royal"), an English insurance company. Southern Clay Products, Inc. ("Southern Clay"), Gonzales Clay Corporation ("Gonzales Clay"), English China Clays Overseas Investments Ltd. ("Overseas Investments") and English China Clays, P.L.C. ("English China") ¹ sued Guardian Royal in Gonzales County, Texas. The trial court granted Guardian Royal's special appearance and dismissed the cause. The court of appeals reversed the judgment of the trial court and remanded the cause for trial. 762 S.W.2d 927. We reverse the judgment of the court of appeals and affirm the judgment of the trial court.

Guardian Royal is an English insurance company with its office and principal place of business in England. English China is an English company with American subsidiaries including Southern Clay and Gonzales Clay, which are Texas corporations. In 1980-81, Guardian Royal issued an insurance policy including several endorsements ² to English China providing coverage for third party liability occurring anywhere in the world English China and its subsidiary companies did business. These transactions occurred in England between an English insurer and an English insured. All acts concerning the negotiation, implementation and performance of the policy and endorsement (including the payment of premiums) occurred in England between Guardian Royal and English China.

Guardian Royal asserts that the coverage was extended to the American subsidiaries on the understanding that they would obtain underlying liability insurance from American insurers. Although the endorsement to the policy listed Southern Clay and Gonzales Clay as located in the "U.S.A.", there was no indication that these subsidiaries were located in Texas. ³ Furthermore, Guardian Royal did not know whether English China or its American subsidiaries did business in Texas or sent products to Texas. Subsequently Southern Clay acquired liability coverage from United States Fire Insurance Company ("U.S. Fire") and others.

In 1982, an employee of Southern Clay was killed in an on-the-job accident in Gonzales County, Texas. The deceased's family filed wrongful death lawsuits against the English China entities and others in federal and state courts in Texas. The English China entities settled the lawsuits and U.S. Fire contributed approximately $600,000 to the settlement. Asserting that the policy covered English China and its subsidiaries only for liability in excess of the coverage provided by American insurers, Guardian Royal declined to participate in or contribute to the settlement of the lawsuits. The English China entities asserted that Guardian Royal should "reimburse" U.S. Fire ⁴ for its settlement contribution on their behalf because Guardian Royal was the "primary insurer." After Guardian Royal refused to "reimburse" U.S. Fire, the English China entities sued Guardian Royal. Guardian Royal filed a special appearance pursuant to Rule 120a of the Texas Rules of Civil Procedure asserting that it did not have such minimum contacts with Texas as would allow the court to exercise personal jurisdiction without offending traditional notions of fair play and substantial justice. The trial court granted the special appearance and dismissed the cause. The court of appeals reversed the judgment of the trial court and remanded the cause for trial. 762 S.W.2d 927.

Guardian Royal argues that it is inconsistent with federal constitutional requirements of due process for Texas courts to assert in personam jurisdiction over Guardian Royal in this cause. We agree.

The Texas long-arm statute authorizes the exercise of jurisdiction over nonresidents "doing business" in Texas. TEX.CIV.PRAC. & REM.CODE ANN. § 17.042 (Vernon 1986). Although it lists particular acts which constitute "doing business," the statute also provides that the nonresident's "other acts" may satisfy the "doing business" requirement. Id. See Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990). The broad language of the long-arm statute's "doing business" requirement permits the statute to reach as far as the federal constitutional requirements of due process will allow. Schlobohm, 784 S.W.2d at 357; U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760, 762 (Tex.1977). As a result, we consider only whether it is consistent with federal constitutional requirements of due process for Texas courts to assert in personam jurisdiction over Guardian Royal. See Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 413-14, 104 S.Ct. 1868, 1871-72, 80 L.Ed.2d 404, 410-11 (1984).

Federal constitutional requirements of due process limit the power of the state to assert personal jurisdiction over a nonresident defendant such as Guardian Royal. Helicopteros, 466 U.S. at 413-14, 104 S.Ct. at 1872. The United States Supreme Court divides the due process requirements into two parts: (1) whether the nonresident defendant has purposely established "minimum contacts" with the forum state; and (2) if so, whether the exercise of jurisdiction comports with "fair play and substantial justice." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76, 105 S.Ct. 2174, 2183-84, 85 L.Ed.2d 528, 542-43 (1985). See Helicopteros, 466 U.S. at 414, 104 S.Ct. at 1872.

I.

Under the minimum contacts analysis, we must determine whether the nonresident defendant has purposefully availed itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws. Burger King, 471 U.S. at 474-75, 105 S.Ct. at 2183. This "purposeful availment" requirement ensures that a nonresident defendant will not be haled into a jurisdiction based solely upon "random," "fortuitous" or "attenuated" contacts or the "unilateral activity of another party or a third person." Burger King, 471 U.S. at 475, 105 S.Ct. at 2183; Helicopteros, 466 U.S. at 417, 104 S.Ct. at 1873; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 298, 100 S.Ct. 559, 567, 62 L.Ed.2d 490, 502 (1980). Furthermore, individuals must have fair warning that a particular activity may subject them to the jurisdiction of a foreign sovereign. Burger King, 471 U.S. at 472, 105 S.Ct. at 2182; Zac Smith & Co. v. Otis Elevator Co., 734 S.W.2d 662, 663 (Tex.1987).

The exercise of personal jurisdiction is proper when the contacts proximately result from actions of the nonresident defendant which create a substantial connection with the forum state. Burger King, 471 U.S. at 474-75, 105 S.Ct. at 2183-84. The substantial connection between the nonresident defendant and the forum state necessary for a finding of minimum contacts must come about by action or conduct of the nonresident defendant purposefully directed toward the forum state. Burger King, 471 U.S. at 472-76, 105 S.Ct. at 2182-84. However, "the constitutional touchstone remains whether the [nonresident] defendant purposefully established 'minimum contacts' in the forum State." Burger King, 471 U.S. at 474, 105 S.Ct. at 2183.

Foreseeability is also an important consideration in deciding whether the nonresident defendant has purposely established "minimum contacts" with the forum state. However, "foreseeability" is not necessarily determinative when considering whether the nonresident defendant purposefully established "minimum contacts" with the forum state. Although not an independent component of the minimum contacts analysis, the concept of "foreseeability" is implicit in the requirement that there be a "substantial connection" between the nonresident defendant and Texas arising from action or conduct of the nonresident defendant purposefully directed toward Texas. World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567; Burger King, 471 U.S. at 474, 105 S.Ct. at 2183. "Foreseeability" is especially pertinent when the nonresident defendant is an insurance company. See Rossman v. State Farm Mutual Ins. Co., 832 F.2d 282 (4th Cir.1987); Eli Lilly & Co. v. Home Ins. Co., 794 F.2d 710 (D.C.Cir.1986), cert. denied, 479 U.S. 1060, 107 S.Ct. 940, 93 L.Ed.2d 990, 991 (1987); Commonwealth of Puerto Rico v. S.S. Zoe Colocotroni, 628 F.2d 652 (1st Cir.1980), cert. denied, 450 U.S. 912, 101 S.Ct. 1350, 67 L.Ed.2d 336 (1981); American & Foreign Insurance Ass'n v. Commercial Ins. Co., 575 F.2d 980 (1st Cir.1978). These authorities upheld the assertion of personal jurisdiction over insurance companies based primarily upon "foreseeability." ⁵ Rossman, 832 F.2d at 286-87 (automobile liability); Eli Lilly, 794 F.2d at 720-21 (pharmaceutical products); Colocotroni, 628 F.2d at 668-70 (maritime "vessels" such as oil tankers); American & Foreign Insurance Ass'n, 575 F.2d at 981-82 (glass bottles). "Foreseeability" was based upon the insurer's awareness "that it was responsible to cover losses arising from a substantial subject of insurance regularly present in" the forum state, Colocotroni, 628 F.2d at 669 and American & Foreign Insurance Ass'n, 575 F.2d at 982, or the nature of the particular insurance contract and coverage, ⁶ Rossman, 832 F.2d at 286 and Eli Lilly, 794 F.2d at 720-21. Thus, when the nonresident defendant is an insurance company, the following factors, when appropriate, should be considered when determining whether the nonresident defendant has purposely established "minimum contacts" with the forum state: (a) the insurer's...