Court Opinion

ID: 8976763
Source: CourtListenerOpinion
Date Created: 2022-11-27 11:06:03.831195+00
Date Added: 2024-06-11T17:10:35.347199
License: Public Domain

ON PETITION FOR REHEARING AND SUGGESTION FOR REHEARING EN BANC
Before BROWN, REAVLEY, and HIGGINBOTHAM, Circuit Judges.
PER CURIAM:
W.R. Grace has petitioned this panel for rehearing, contending that it was error to hold that New York law should govern the disposition of this case, and that Texas law should apply. Grace argues that a clause in the insurance contracts at issue and a Texas statute both require the application of Texas law. These arguments are now raised for the first time. We are not persuaded that the arguments have sufficient merit to now consider them.
Grace points us to Texas Ins. Code Ann. art. 21.42 (1981), which provides:
Texas Laws Govern Policies
Any contract of insurance payable to any citizen or inhabitant of this State by any insurance company or corporation doing business within this State shall be held to be a contract made and entered into under and by virtue of the laws of this State relating to insurance, and governed thereby, notwithstanding such policy or contract of insurance may provide that the contract was executed and the premiums and policy (in case it becomes a demand) should be payable without this State, or at the home office of the company or corporation issuing the same.
We are not persuaded that the language of the statute mandates the application of Texas law in this case where the contracts of insurance are not payable to Texas citizens or inhabitants, but to W.R. Grace. American Home Assurance Co. v. Safway Steel Products Co., 743 S.W.2d 693 (Tex.App.-Austin 1987), held that when an insurer paid the claim of a Texas resident but reserved the right to contest coverage with its insurer, art. 21.42 required the application of Texas law. Id. at 699. We do not believe that the Texas Supreme Court would expand the interpretation of art. 21.-42 beyond that broad reading to require the application of Texas law in this case where there has been no payment by the insurer to the Texas resident. That application of art. 21.42 would raise serious questions of constitutionality under the Commerce Clause as well as the due process clause of the fourteenth amendment. Such laws are constitutional only to the extent that they are not given an extraterritorial effect. Aetna Life Ins. Co. v. Dunken, 266 U.S. 389, 45 S.Ct. 129, 69 L.Ed. 342 (1924), and may not be used to regulate business outside of the state in which they are enacted.
The petition for panel rehearing is denied and no active members of the court having requested a poll the petition for rehearing en banc is denied. Judge Brown would grant rehearing.