Opinion ID: 594788
Heading Depth: 4
Heading Rank: 1

Heading: Basis for Out of State Service.

Text: 21 (2) SUFFICIENT CONTACTS. A person has sufficient contacts with the state when that person, acting directly or by agent, is or may be legally responsible as a consequence of that person's: 22 (G) Contracting to insure any person, property, or risk located within this state at the time of contracting. 2 23 Olivier maintains that his claim is a covered claim within the meaning of the Louisiana and South Carolina statutes governing the respective state insurance guaranty associations. Midland insured Merritt, a resident of South Carolina and a beneficiary of the SCIGA; Olivier was a resident of Louisiana and a beneficiary of the LIGA at the time of the insured event. See La.Rev.Stat.Ann. § 22:1379(3)(a), 3 S.C.Code Ann. § 38-31-20(6). 4 24 Furthermore, Olivier argues that since his claim is a covered claim, according to the respective statutes, LIGA and SCIGA are deemed insurers to the extent of Midland's obligations. See La.Rev.Stat.Ann. §§ 22:1382 A(1) and (2), 5 S.C.Code Ann. §§ 38-31-60(a) and (b). 6 We agree with Olivier's position. 25 Olivier contends that Midland is subject to personal jurisdiction in Alabama because it provided insurance coverage for Merritt for accidents that occurred while operating its vessels in Alabama waters. By guaranteeing payment of Midland's policies that provided insurance for claimants who are state residents or insureds who are state residents, Olivier contends LIGA and SCIGA should reasonably have foreseen that they would be subject to suit in other jurisdictions. Olivier claims that the statutes, which place LIGA and SCIGA in the position of an insolvent insurer, impose affirmative, extraterritorial obligations upon them. Because Midland is subject to personal jurisdiction in Alabama, both LIGA and SCIGA are subject to personal jurisdiction in Alabama. Olivier argues that LIGA's and SCIGA's statutory obligations establish minimum contacts with Alabama sufficient to justify the district court's exercise of personal jurisdiction over them. 26 As mere creations of their respective state statutes, LIGA and SCIGA claim they have not purposefully directed any activity toward the State of Alabama. Neither LIGA nor SCIGA maintains any offices or agents in Alabama. The associations contend that Midland's contacts with Alabama are not at issue since personal jurisdiction is not being sought after Midland, but after LIGA and SCIGA. LIGA and SCIGA claim that they will be denied due process if they are subject to legal liability in Alabama on account of the unilateral activity of a third party--Midland. We interpose that it is our view that Midland's activity was not unilateral. Midland was a member of SCIGA. The record is silent as to whether Midland was a member of LIGA, but we assume it was since LIGA did not raise this as a defense. A member of the association, acting within the framework of the Interstate compact who becomes insolvent, automatically makes the association the alter ego of that failed member. 27 In addition, LIGA and SCIGA argue that although it might have been foreseeable that the associations could become involved in litigation in Alabama, such foreseeability alone is insufficient to confer personal jurisdiction. LIGA and SCIGA maintain that foreseeability is only one factor to be considered in an analysis of a defendant's minimum contacts with a forum. 28 LIGA and SCIGA note that neither of the state insurance guaranty acts specifically authorizes suit against an insurance guaranty association outside the state which created the association. The associations argue that this conspicuous absence indicates that it was not the intent of the state legislatures to permit LIGA and SCIGA to be subject to suit in other jurisdictions. 7 29 In support of their arguments, LIGA and SCIGA rely upon the reasoning of the district court in Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n., 715 F.Supp. 94, 97 (S.D.N.Y.1989), aff'd on other grounds, 896 F.2d 674 (2d Cir.1990). We are not persuaded by the court's reasoning in Rhulen. Indeed, we believe the district court decision concerning personal jurisdiction over AIGA and other state insurance guaranty associations is entitled to no weight since the Second Circuit held that the district court lacked subject matter jurisdiction; this holding precluded any consideration of the existence of personal jurisdiction over the defendants. Rhulen, 896 F.2d at 675-676. 30 For the reasons outlined below, we believe Olivier has the superior argument. In the seminal case, International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, the Supreme Court of the United States held that the due process clause of the Fourteenth Amendment requires that a defendant be subject to the personal jurisdiction of the court. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980). Thus, we recognize that even if the forum state is the most convenient location for litigation, the due process clause may act to divest a state's courts of the power to render a valid judgment if a defendant does not have the requisite minimum contacts with the forum. World-Wide Volkswagen, 444 U.S. at 294, 100 S.Ct. at 566; Hanson v. Denckla, 357 U.S. 235, 251, 254, 78 S.Ct. 1228, 1238, 1240, 2 L.Ed.2d 1283 (1958). 31 The Supreme Court has opined that the due process clause of the Fourteenth Amendment requires that defendants have fair warning that particular activities may subject them to the jurisdiction of foreign sovereigns. Burger King, 471 U.S. at 472, 105 S.Ct. at 2182. One of the considerations important in assessing whether or not a defendant has fair warning is the foreseeability of suit within the jurisdiction. The foreseeability that is critical in an analysis of minimum contacts is whether the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there. World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567. In attempting to define when a defendant should reasonably anticipate being haled into court, the Supreme Court has stated: ... there must be some act by which the defendant purposefully availed itself of conducting activities within the forum state. Hanson, 357 U.S. at 253, 78 S.Ct. at 1239-1240. This requirement exists to ensure that a defendant will not be subject to legal liability in a jurisdiction solely as a result of random, fortuitous, or attenuated contacts. Burger King, 471 U.S. at 475, 105 S.Ct. at 2183. 32 In the instant case, LIGA and SCIGA are subject to legal liability in Alabama neither on account of random contacts nor on account of the unilateral activity of Midland Insurance. In forming the state insurance guaranty associations to avoid federal legislation creating a national guaranty fund, the insurance industry had to anticipate that the guaranty associations would be haled into the same courts where their insolvent members would have been subject to the reach of due process. Thus, SCIGA and LIGA consented to service of process in Alabama in this case. 33 LIGA and SCIGA guaranteed payment of covered claims. See La.Rev.Stat.Ann. § 22:1379(3)(a), S.C.Code Ann. § 38-31-20(6). The claimant, Olivier, was a Louisiana resident and he has a colorable claim. The insured, Merritt, was a South Carolina corporation and it has a colorable claim. Not only did LIGA and SCIGA guarantee payment of covered claims, but they also assumed all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent. See La.Rev.Stat.Ann. § 22:1382 A(2), S.C.Code Ann. § 38-31-60(b). By the language of the statutes that govern LIGA and SCIGA, we conclude that these associations had fair warning that they could be subject to suit for covered claims in jurisdictions outside of their respective states. 34 Midland insured Merritt's operations in Alabama. Since the Supreme Court's decision in McGee v. International Life Ins. Co., 355 U.S. 220, 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957), it has been the law that a company with insurance obligations in a state in which it has no other business has submitted to the jurisdiction of the state's courts. LIGA and SCIGA, by standing in Midland's shoes, also have consented to jurisdiction in the state's courts. 35 Our decision in this case is bolstered by a South Carolina Supreme Court opinion which was issued after our initial opinion was filed. In Bell v. Senn Trucking Co. of Newberry, 418 S.E.2d 310 (S.C.1992), the court stated the following: 36 The Georgia Pool first asserts that it is not amenable to suit in South Carolina under the South Carolina long-arm statute, S.C.Code Ann. § 36-2-803 (1976). We disagree. South Carolina's long-arm statute provides that a court may exercise personal jurisdiction over a person who contracts to insure any person, property or risk located in South Carolina at the time of contracting. S.C.Code Ann. § 36-2-803(1)(f) (1976). Anglo-American is subject to in personam jurisdiction in South Carolina because it contracted with Senn of Georgia to insure a risk in South Carolina. The Georgia legislature requires the Georgia Pool to assume the obligations of an insolvent insurer in regard to covered claims for a specified period following the date an insurer is determined to be insolvent. Ga.Code Ann. § 33-36-9 (1990). The Georgia Pool is deemed to be the insurer for such period with respect [to] and to the extent of the claims with all the rights, duties, and obligations of the insolvent insurer.... Id. Moreover, as a condition of doing business in Georgia, an insurer is deemed to have appointed the Georgia Pool as its agent with respect to the investigation, adjustment, compromise, and settlement of covered claims in the event the insurer becomes insolvent. Id. § 33-36-13. 37 Based on the plain language of the Georgia Code, once Anglo-American became insolvent, the Georgia Pool became subject to the jurisdiction of the courts of this State as Anglo-American's alter-ego and agent. We find that the trial judge did not err in holding that the Georgia Pool is subject to in personam jurisdiction in South Carolina. 38 418 S.E.2d at 311-12. 39 We conclude that the associations' obligations to defend suits in other jurisdictions would not be unduly burdensome. Indeed, both LIGA and SCIGA may alleviate the cost of litigation in other jurisdictions by adjusting their insurance assessments. Or if the expenses are too great, they have the option of altering their obligations and coverage for claims. Cf. World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567.