Source: https://supreme.justia.com/cases/federal/us/355/220/
Timestamp: 2019-04-25 22:20:05+00:00

Document:
Justia › US Law › US Case Law › US Supreme Court › Volume 355 › McGee v. International Life Ins. Co.
To satisfy due process, a contract suit must be based on a contract that has a substantial connection with the forum for it to have personal jurisdiction over a non-resident defendant.
After Lowell Franklin bought a life insurance policy from an insurer, it was reinsured by International Life Insurance Co. The reinsurer mailed a reinsurance certificate to Franklin, who lived in California, and offered to insure him. Accepting this offer, Franklin mailed all payments for his premiums from his residence in California to International's office in Texas. Once Franklin died, the beneficiary of his policy, McGee, informed International of his death. International refused to pay the proceeds of the policy, and McGee successfully sued it in California.
There were substantial connections between California and the subject matter of the lawsuit, since both the policy holder and the beneficiary lived in California, the contract was sent there, and the premiums were payable there. As the forum state, California has a strong interest in providing remedies for residents when their insurers fail to properly pay out claims. They should not be required to litigate their claims in a distant state.
The court found that soliciting the policy in California, even though only a single occurrence, was a sufficient contact to find that California jurisdiction was foreseeable. It might have reached a different outcome if the insured party had bought the policy in Texas and moved to California.
Petitioner's son, a resident of California, bought a life insurance policy from an Arizona corporation, naming petitioner as beneficiary. Later, respondent, a Texas corporation, agreed to assume the insurance obligations of the Arizona corporation, and mailed a reinsurance certificate to petitioner's son in California, offering to insure him in accordance with his policy. He accepted this offer, and paid premiums by mail from his California home to respondent's office in Texas. Neither corporation has ever had any office or agent in California or done any other business in that State. Petitioner sent proofs of her son's death to respondent, but it refused to pay the claim. Under a California statute subjecting foreign corporations to suit in California on insurance contracts with residents of California, even though such corporations cannot be served with process within the State, petitioner sued respondent and obtained judgment in a California court, process being served only by registered mail to respondent's principal place of business in Texas.
1. The Due Process Clause of the Fourteenth Amendment did not preclude the California court from entering a judgment binding on respondent, since the suit was based on a contract which had a substantial connection with California. Pp. 355 U. S. 223-224.
2. Respondent's insurance contract was not unconstitutionally impaired by the fact that the California statute here involved did not become effective until after respondent had assumed the obligation of the insurance policy. P. 355 U. S. 224.
288 S.W.2d 579, reversed and remanded.
Opinion of the Court by MR. JUSTICE BLACK, announced by MR. JUSTICE DOUGLAS.
Unable to collect the judgment in California petitioner went to Texas, where she filed suit on the judgment in a Texas court. But the Texas courts refused to enforce her judgment, holding it was void under the Fourteenth Amendment because service of process outside California could not give the courts of that State jurisdiction over respondent. 288 S.W.2d 579. Since the case raised important questions not only to California, but to other States which have similar laws, we granted certiorari. 352 U.S. 924. It is not controverted that, if the California court properly exercised jurisdiction over respondent, the Texas courts erred in refusing to give its judgment full faith and credit. 28 U.S.C. § 1738.
time until his death in 1950, paid premiums by mail from his California home to respondent's Texas office. Petitioner, Franklin's mother, was the beneficiary under the policy. She sent proofs of his death to the respondent, but it refused to pay, claiming that he had committed suicide. It appears that neither Empire Mutual nor respondent has ever had any office or agent in California. And, so far as the record before us shows, respondent has never solicited or done any insurance business in California apart from the policy involved here.
"due process requires only that, in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'"
Id., at 326 U. S. 316.
touch two or more States, and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time, modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity.
Turning to this case, we think it apparent that the Due Process Clause did not preclude the California court from entering a judgment binding on respondent. It is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with that State. Cf. Hess v. Pawloski, 274 U. S. 352; Henry L. Doherty & Co. v. Goodman, 294 U. S. 623; Pennoyer v. Neff, 95 U. S. 714. [Footnote 2] The contract was delivered in California, the premiums were mailed from there, and the insured was a resident of that State when he died. It cannot be denied that California has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims. These residents would be at a severe disadvantage if they were forced to follow the insurance company to a distant State in order to hold it legally accountable. When claims were small or moderate, individual claimants frequently could not afford the cost of bringing an action in a foreign forum -- thus in effect making the company judgment-proof. Often the crucial witnesses -- as here, on the company's defense of suicide -- will be found in the insured's locality.
Of course, there may be inconvenience to the insurer if it is held amenable to suit in California, where it had this contract, but certainly nothing which amounts to a denial of due process. Cf. Travelers Health Assn. v. Virginia ex rel. State Corporation Comm'n. 339 U. S. 643. There is no contention that respondent did not have adequate notice of the suit, or sufficient time to prepare its defenses and appear.
The California statute became law in 1949, after respondent had entered into the agreement with Franklin to assume Empire Mutual's obligation to him. Respondent contends that application of the statute to this existing contract improperly impairs the obligation of the contract. We believe that contention is devoid of merit. The statute was remedial in the purest sense of that term, and neither enlarged nor impaired respondent's substantive rights or obligations under the contract. It did nothing more than to provide petitioner with a California forum to enforce whatever substantive rights she might have against respondent. At the same time, respondent was given a reasonable time to appear and defend on the merits after being notified of the suit. Under such circumstances, it had no vested right not to be sued in California. Cf. Bernheimer v. Converse, 206 U. S. 516; National Surety Co. v. Architectural Decorating Co., 226 U. S. 276; Funkhouser v. J. B. Preston Co., Inc., 290 U. S. 163.
The judgment is reversed, and the cause is remanded to the Court of Civil Appeals of the State of Texas, First Supreme Judicial District, for further proceedings not inconsistent with this opinion.
Cal.Insurance Code, West's Anno. §§ 1610-1620.
And see Ace Grain Co. v. American Eagle Fire Ins. Co., 95 F.Supp. 784; Storey v. United Ins. Co., 64 F.Supp. 896; S. Howes Co., Inc. v. W.P. Milling Co., 277 P.2d 655; Compania de Astral, S.A. v. Boston Metals Co., 205 Md. 237, 107 A.2d 357, 108 A.2d 372, 49 A.L.R.2d 646, certiorari denied, 348 U.S. 943; Zacharakis v. Bunker Hill Mut. Ins. Co., 281 App.Div. 487, 120 N.Y.S.2d 418; Smyth v. Twin State Improvement Co., 116 Vt. 569, 80 A.2d 664.

References: v. 
 § 1738
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.