Mayo v. Zurich General Accident & Liability Ins. Co.

• Decision Date: 16 August 1952
• Docket Number: Civ. No. 3638.
• Citation: 106 F. Supp. 579
• Court: U.S. District Court — Western District of Louisiana
• Parties: MAYO v. ZURICH GENERAL ACCIDENT & LIABILITY INS. CO.

106 F. Supp. 579

MAYO v. ZURICH GENERAL ACCIDENT & LIABILITY INS. CO.

Civ. No. 3638.

United States District Court W. D. Louisiana, Lake Charles Division.

August 16, 1952.

Joseph E. Bass, Jr., Bass & Brame, Lake Charles, La., for plaintiff.

R. W. Farrar, Jr., King, Anderson & Swift, Lake Charles, La., for defendant.

DAWKINS, Chief Judge.

Plaintiff, a citizen of Texas, sued defendant, a corporation under the laws of Switzerland, alone in damages for injuries alleged to have been caused by the negligence of Williams Brothers-Davis Company (called Williams), its insured, also a citizen of the State of Texas. It was alleged that a pickup truck belonging to Williams struck the rear of plaintiff's automobile, causing the injuries. The demand was for $25,000.

Defendant moved to dismiss the complaint (I) on the ground that it failed to state a claim for relief because (a) the policy was a Texas contract issued and delivered in that state; (b) that both defendant and its insurer were nonresidents of the State of Louisiana; and (3) that the policy contract contained a "no action" clause reading as follows:

"No action shall lie against the company, unless as a condition precedent thereto, the insured shall have fully complied with all of the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined, either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company.

"Any person or organization or legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy. Nothing contained in this policy shall give any person or organization any right to join the company as a co-defendant in any action against the insured to determine the insured's liability.

"Bankruptcy or insolvency of the insured or of the insured's estate shall not relieve the company of any of its obligations hereunder."; and

(d) that the direct action laws of the State of Louisiana "have no application", and in the alternative, that their provisions cannot be applied here for the reason that the same are violative of the federal Constitution.

(II). Further, that for the reason stated, in Paragraph (I), this court is without jurisdiction rationae personnae et materiae.

(III). In the alternative, defendant moved for summary judgment based upon the several grounds above and upon affidavits and documents attached thereto. Attached were the following:

"D-1" Affidavit of J. M. Chance that he is Assistant Secretary of Williams, the insured, whose home office is in the City of Houston, Texas, and that the photostatic copy of the policy attached was "the only policy in effect December 6, 1951" covering liability under the contract involved in the accident; and that it was "requested by and delivered to Williams" in Houston. A copy of the policy is attached to the said affidavit.

"D-3 and 4" are affidavits of two Texas lawyers that the "no action" clause is valid and enforcible in that state.

"D-6" Affidavit of the "Deputy U. S. Manager" of the defendant that the latter's "home office" is in the City of Chicago, Illinois; that the policy sued upon, "AC 6197100", was written in the City of Chicago but "did not become effective until countersigned by" its agency in San Antonio, Texas, and was delivered to the insured at Houston.

Plaintiff's Evidence.

Thereafter, plaintiff filed interrogatories addressed to defendant which were answered in due course and from which it appears that defendant has in its possession a true copy of the policy in suit, and that the photostatic copy filed with the motion for summary judgment includes the "entire policy", but that defendant "did not file copies of schedules pertaining to location of vehicles and other attachments which we did not deem concerned in our motion to dismiss and motion for summary judgment"; that the "portions of the policy not included * * * contained a reference to the places where the vehicle covered by said policy is to be used"; that the original policy herein is still in possession of Williams, the insured; and the witness attached to his answer "photostatic copy of the schedules, attachments and documents" to the policy in suit.

The policy was dated at Houston, Texas, and covered a period of one year from April 24, 1951-1952. It also contained the provisions quoted above as "no action" clauses.

Plaintiff also offered in evidence on the motion for summary judgment, the following:

"P-1" Certificate from the Louisiana Secretary of State issued to the defendant to do an insurance business, including "liability" insurance, dated April 25, 1952, which contains a statement that "this company was first authorized in this State on April 21, 1924";

"P-2" Consent to be sued in a direct action, as provided by the laws of Louisiana "whether the policy of insurance sued upon was written or delivered in the State of Louisiana or not, and whether or not such policy contains a provision forbidding such direct action, provided the accident occurred within the State of Louisiana", dated March 2, 1951.

This case presents a clear illustration of what litigants will do under these extraordinary statutes of the State of Louisiana, the inspiration for whose passage is left to the imagination, although some light may be had from the recent activities of a group of members of the Bar which sought to take away from the State Courts of Appeal the power to pass upon the facts in civil jury cases. Both the plaintiff and the insured Williams, as above indicated, are citizens of the State of Texas, and the complaint could have been brought against the latter in the State Court at Houston, but plaintiff chose to bring it here where he could ignore the real alleged tort-feasor and expose this foreign insurance company alone to the consideration of a jury of inexperienced laymen, with all the effects mentioned in Bish v. Employers' Liability Assur. Corp., D.C., 102 F.Supp. 343, and Bayard v. Traders & General Ins. Co., D. C., 99 F.Supp. 343. No doubt the real reason was that he would have had to sue that fellow-citizen alone without being permitted to let the jury know there was any liability insurance, a requirement clearly intended to protect the insurer from the prejudice which the Texas law assumes would be experienced in litigation of this kind.

As pointed out by this court in Bish and Bayard, supra, no difference can be seen between the enforced surrender of the constitutional right of freedom of contract in other states, and a requirement, as a condition to doing business in a given state, such foreign corporation should surrender the right of removal to the federal courts. As a matter of fact, Statutes Nos. 541 and 542 of 1950, LSA-R.S. 22:655, 22:983, subd. E, as bills originally introduced by six members of the State Legislature, provided that the accident must occur "within the State of Louisiana or the injured person or his or her heirs should be residents of the State". (Emphasis by the writer).

The effect of such laws is to deprive the insurer of its property, the benefits of the contract valid in the state where made without due process of law contrary to the Fourteenth Amendment to the federal Constitution.

Insofar as the state statute here requires an insurance company to file a written consent to be sued in a direct action, with respect to contracts made outside of Louisiana, it constitutes an attempt to give that law effect, not merely within its own borders, but extending extra-territorially into all other states of the union, as well as foreign countries, even though the rights of the contracting parties may have been validly fixed under the laws of the other states or countries. In other words, it undertakes, by legislative fiat, to delete from the contracts the requirement for liquidating the claim as between the injured person and the one who caused his injuries, who are the real parties to the controversy contemplated in the diversity provisions of the federal constitution and statute. By this course, the lawmaker, in effect, says to the insurer, while you may protect yourselves fully in other states, you must surrender that right as a condition to doing business in Louisiana, no matter where your contract was made. It is not believed that this can be done any more effectively than exacting the surrender of the right to resort to the federal courts.

In Harrison v. St. Louis & San Francisco R. R. Co., 232 U.S. 318, 34 S.Ct. 333, 337, 58 L.Ed. 621, the State of Oklahoma, under its statutes, sought to revoke the license of the railroad company to do business in that state because it had applied, as the defendant, to remove an action from the state to the federal court. That statute was quite vicious and imposed both civil and criminal penalties. It provided that any one who had qualified to do business in the State should, for all purposes, be held "to be domiciled in" Oklahoma, and if they "declared in writing before any court" of the State a different domicile, their license should be "immediately revoked", and they should pay a fine of $1,000 to $5,000 a day for doing business thereafter.

Harrison filed suit against the railroad company in the state court and the latter timely applied to remove it to the federal court; whereupon the machinery of the statute was promptly set in motion for a revocation of its license. The railroad followed with a proceeding in equity to enjoin its enforcement on the ground that the statute was invalid under the federal constitution. In affirming the judgment of the District Court sustaining that contention, Chief Justice White, as the organ of the Supreme Court, analyzed the prior jurisprudence, and among other things, said:

"Those cases involved state legislation as to a subject over which there was complete state

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