Pugh v. Oklahoma Farm Bureau Mutual Insurance Co.

• Decision Date: 22 January 1958
• Docket Number: Civ. A. No. 7116.
• Citation: 159 F. Supp. 155
• Parties: Hal PUGH, Plaintiff, v. OKLAHOMA FARM BUREAU MUTUAL INSURANCE COMPANY, Inc., Defendant.
• Court: U.S. District Court — Eastern District of Louisiana

159 F. Supp. 155

Hal PUGH, Plaintiff, v. OKLAHOMA FARM BUREAU MUTUAL INSURANCE COMPANY, Inc., Defendant.

Civ. A. No. 7116.

United States District Court E. D. Louisiana, New Orleans Division.

January 22, 1958.

Baron B. Bourg, Houma, La., for plaintiff.

Seale, Kelton & Hayes, Donald V. Organ, Baton Rouge, La., for defendant.

WRIGHT, District Judge.

This case involves another attempt, via state statute, further to whittle down the once revered doctrine of Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565. Like most similar attempts, it succeeds because the considerations which gave rise to the personal jurisdiction doctrine of Pennoyer v. Neff are no longer valid. Notice, opportunity adequately to defend, and assurance of fair trial no longer depend on physical presence within the jurisdiction. Consequently, the requirement of physical presence has been replaced by such considerations as minimal contacts giving the state a legitimate interest in the proceedings plus an application of the doctrine forum non conveniens. Or, as some cases have stated it, minimal contacts plus "reasonableness," "justice," and "fair play." International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95.

The Non-Resident Motorist Statute here in suit has been part of the law of Louisiana since 1928. The validity of such statutes was first upheld on a theory of consent implied from use of the state's highways. Wuchter v. Pizzutti, 276 U.S. 13, 48 S.Ct. 259, 72 L.Ed. 446; Hess v. Pawloski, 274 U.S. 352, 47 S.Ct. 632, 71 L.Ed. 1091. Now these statutes are generally justified as a proper exercise of police power of the state.¹ The legitimate interest of the state in making her courts available for litigation arising from accidents occurring within her borders plus notice, opportunity to defend and general fairness in the proceedings are sufficient to overcome any constitutional objections based on lack of "presence" within the jurisdiction.² In short, where there is a proper accommodation between the police power of the state and the due process requirements of the Constitution, validity is assured.

In 1956 Louisiana amended her Non-Resident Motorist Statute³ by extending its application to liability insurers of non-resident motorists as well as personal representatives and heirs of such motorists. Similar extensions in other states as to personal representatives and heirs have, with one exception,⁴ been held valid.⁵ In suit here is a constitutional attack on the extension of the Louisiana statute to insurers. The defendant is an insurance company domiciled in Oklahoma. It has never formally qualified to, nor does it, transact business in Louisiana. The policy in suit was issued to a resident of Oklahoma covering the car which later was involved in an accident in Louisiana. Plaintiff, a resident of Texas and a passenger in that car, brought this action for damages resulting from injuries received in the accident, against the insurer in a Louisiana state court from whence it was removed here. Service on the insurer was effected through the Secretary of State of Louisiana pursuant to the 1956 amendment to the Louisiana Non-Resident Motorist Statute. There is no question of actual notice of the proceedings. In fact, counsel employed by the insurer have filed this motion to quash the service and dismiss the complaint. Moreover, had this action been brought here against the assured, rather than his insurer, these same counsel would have represented the assured, since the policy, like most liability policies, provides that the insurer will defend any action covered by the policy brought against the assured.

This complaint was filed directly against the insurer, rather than the assured, under LSA-R.S. 22:655⁶ which permits a direct action for damages against a liability insurer based on torts committed within the state. This statute has been upheld against constitutional attack even where the policy in suit contains a "no action" clause,⁷ as this one does, and was issued in a state where such clause was enforceable. Mr. Justice Black in Watson v. Employers Liability Assurance Corp., 348 U.S. 66, 72, 75 S.Ct. 166, 170, 99 L.Ed. 74, gives the rationale of the decision: "Louisiana's direct action statute is not a mere intermeddling in affairs beyond her boundaries which are no concern of hers. Persons injured or killed in Louisiana are most likely to be Louisiana residents, and even if not, Louisiana may have to care for them. Serious injuries may require treatment in Louisiana homes or hospitals by Louisiana doctors. The injured may be destitute. They may be compelled to call upon friends, relatives, or the public for help. Louisiana has manifested its natural interest in the injured by providing remedies for recovery of damages. It has a similar interest in policies of insurance which are designed to assure ultimate payment of such damages. Moreover, Louisiana courts in most instances provide the most convenient forum for trial of these cases."

Since the state has validly created this right of direct action under LSA-R.S. 22:655 against the insurer for damages resulting from accidents within its borders, may it provide a forum, through substituted service under LSA-R.S. 13:3574, for the exercise of that right against an insurer whose only contact with the state is its presence on the risk at the time of the accident? Certainly the contact is minimal. In fact, it is singular. But the test as to sufficiency of contact with the state is neither mechanical nor quantitative. International Shoe Co. v. State of Washington, supra, 326 U.S. at page 319, 66 S.Ct. 154. The commission of a single act or the existence of a single circumstance may be sufficient to render the company liable to suit within the state. Where, as here, the litigation arises directly from the contact with the state, considerations concerning the continuous presence of the company within the state may be irrelevant. Young v. Masci, 289 U.S. 253, 53 S.Ct. 599, 77 L.Ed. 1158; Hess v. Pawloski, supra; Kane v. State of New Jersey, 242 U.S. 160, 37 S.Ct. 30, 61 L.Ed. 222. Cf. Old Wayne Mutual Life Ass'n of Indianapolis, Ind. v. McDonough, 204 U.S. 8, 27 S.Ct. 236, 51 L.Ed. 345. It is the nature and the quality of the contact, and the interest of state therein, which is determinative. McGee v. International Life Insurance Company, 78 S.Ct. 199. Since the accident within the state is sufficient contact to justify maintenance of the suit for damages against the nonresident motorist,⁸ it would seem that the same accident should justify maintenance of suit against his nonresident liability insurer who, after all, is the real party in interest. See Lumbermen's Mutual Casualty Co. v. Elbert, 348 U.S. 48, 75 S.Ct. 151, 99 L.Ed. 59.

Under International Shoe Co. v. State of Washington, supra, and its progeny, minimal contact plus reasonableness and fair play satisfy due process. The reasonableness of subjecting the nonresident insurer to the direct action statute of Louisiana has already been spelled out in Watson v. Employers Liability Assurance Corp., supra. The rationale there supports the service of process under the statute here. With reference to fair play, there is no suggestion that the insurer, served here pursuant to the statute in suit, will be treated less fairly than any other insurer otherwise served and required to defend under the direct action statute. If the defendant insurer harbored any doubt in the matter, it should have excluded Louisiana from the coverage of its policy. Having agreed to cover Louisiana risks, it cannot deny Louisiana courts the right to determine its liability on claims arising from accidents occurring in this state. McGee v. International Life Insurance Company, supra. The interest of the state in the safety of her highways, the care and hospitalization of persons injured thereon, the availability within the state of witnesses to the accident, the fact that Louisiana law will determine the liability for damages arising from the accident, the provision in the statute for actual notice to the non-resident insurer by registered mail, all combine to make certain that the maintenance of the suit within the state does not...