Schutt v. Commercial Travelers Mutual Accident Ass'n

• Decision Date: 17 January 1956
• Docket Number: No. 147,Docket 23371.,147
• Citation: 229 F.2d 158
• Parties: J. C. SCHUTT, Administrator of the Estate of John P. Bell, deceased, Jane Bell, Frances Bell Ebling, and Margaret Bell Douglas, residents of Davidson County, Tennessee, Plaintiffs-Appellants, v. The COMMERCIAL TRAVELERS MUTUAL ACCIDENT ASSOCIATION OF AMERICA, a corporation organized under the laws of the State of New York, with its home office in Utica, New York, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

229 F.2d 158 (1956)

J. C. SCHUTT, Administrator of the Estate of John P. Bell, deceased, Jane Bell, Frances Bell Ebling, and Margaret Bell Douglas, residents of Davidson County, Tennessee, Plaintiffs-Appellants, v. The COMMERCIAL TRAVELERS MUTUAL ACCIDENT ASSOCIATION OF AMERICA, a corporation organized under the laws of the State of New York, with its home office in Utica, New York, Defendant-Appellee.

No. 147, Docket 23371.

United States Court of Appeals Second Circuit.

Argued December 20, 1955.

Decided January 17, 1956.

Kernan & Kernan, Utica, N. Y. (Willis D. Morgan and Bruce C. McLean, Utica, N. Y., of counsel), for plaintiffs-appellants.

Hubbard, Felt & Fuller, Utica, N. Y., for defendant-appellee.

Before CLARK, Chief Judge, and MEDINA and WATERMAN, Circuit Judges.

MEDINA, Circuit Judge.

Plaintiffs are the beneficiaries named in an accident policy of insurance and the legal representative of the assured, John P. Bell, who lost his life in a fire which destroyed his home in Davidson County, Tennessee, on October 8, 1950. They appeal from a judgment dismissing their second cause of action, based upon a Tennessee state court judgment, which the court below held not entitled to full faith and credit for lack of jurisdiction.

Where a defendant plainly receives adequate notice and is afforded a reasonable opportunity to defend, the requirement of physical presence in the state has been whittled down until it is now frankly recognized that state statutes which provide for substituted service against non-residents and foreign corporations will support judgments in personam, which are entitled to full faith and credit, providing their exist "certain minimum contacts" within the territory of the forum, and these must be of such a character "that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95.

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 policy-holders, or "members," spurred on by offers of prizes and aided by advertisements and application blanks 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.¹

We are concerned here with a statute of the Tennessee Code, Sections 6459.48, 6459.49, 6459.51 and 6459.53, Chapter 119 of the Public Acts of Tennessee of 1947, hereinafter discussed.

The defendant, a New York membership corporation, had no property, office or employees in Tennessee. The policy was issued to the deceased in 1942, when he resided in Winchester, Kentucky. According to the terms of the contract, it is agreed that it "is for all purposes deemed to be executed, issued and delivered within * * * the State of New York." Prior to 1947 the decedent moved to Tennessee, where he was domiciled at the time of his death. The activities of defendant in Tennessee were: the usual solicitation of new business by "members," with prizes, advertising matter and application blanks; notices of assessments or premiums due, sent regularly through the mails to decedent and to other policy-holders and received by him and by others at their Tennessee homes; acceptance of remittances for assessments or premiums mailed in Tennessee; and the mailing of proofs of loss in Tennessee and the presence of an investigator of defendant on the premises after the fire.

Service of process in the Tennessee state case was made on the Commissioner of Insurance, who forwarded the papers promptly to defendant in Utica, New York. But defendant took the position that it had never transacted any business in Tennessee, had no representatives there and had never designated the Commissioner of Insurance to accept service in its behalf. A decree pro confesso followed in due course, and it included, in accordance with Tennessee law,² "additional costs and expenses in the sum of $2500.00 arising directly out of defendant's refusal in bad faith to pay its obligation under said policy."

The court below, citing Parmalee v. Iowa State Traveling Men's Association, 5 Cir., 206 F.2d 518, 519, 44 A.L.R. 2d 410 and Parmalee v. Commercial Travelers, 5 Cir., 206 F.2d 523, held that it was not necessary to consider the constitutional questions of due process and full faith and credit, as it construed the Tennessee statute as having no application "to a certificate of insurance delivered outside the State, and prior to the passage of the statute."

Did the court below construe the statute correctly? We think not. The two Parmalee cases are not in point as the Florida statute there involved, F.S.A. § 625.29, showed on its face that it was only applicable to "policies of insurance issued or delivered" in the State of Florida. Naturally, had the Tennessee statute with which we are now concerned stated that the procedure set forth should be available only where the policy had been issued or delivered in the State of Tennessee, substituted service would not have been available in an action to recover on a policy delivered in Kentucky.

Nor is there anything in the text of Chapter 119 of the Laws of 1947 to indicate that the benefits to be derived from its provisions with respect to substituted service are reserved for those to whom policies were delivered in...