The court was presented with a breach of contract and bad faith claim stemming from the insurer’s alleged underpayment of the carrier’s underinsured motorist claim. The insurer, which is located in Vermont and only insures customers in Vermont, sought dismissal on the grounds of improper venue and a lack of personal jurisdiction.
In 2006, the insured, while living temporarily in Pennsylvania, was a passenger in a car that was struck by a third party, sustaining injuries. The insured pursued claims against the individual who caused the accident and the driver of the car that she was in. Each of those individuals’ insurers tendered $50,000 and $15,000, respectively. However, the insured sought in excess of $200,000 in damages and pursued underinsured motorist coverage from her insurer as a result. The insurer offered $135,000, which was rejected, and subsequently brought this diversity based suit alleging breach of contract and bad faith. The insurer moved to dismiss on venue and personal jurisdiction grounds.
The court initially rejected any grounds for general jurisdiction over the insurer in Pennsylvania. It then engaged in an analysis of specific jurisdiction, pursuant to International Shoe Co. v. Washington and its progeny. First, the court found that the insurer did not purposely avail itself of Pennsylvania law, but was only implicated by the unilateral activity of the insured, who moved to Pennsylvania temporarily. Second, the court found that the insurer should not have anticipated suit in the forum state. As the contract was formed in Vermont, the insurer did not know of the insured’s presence in the forum state until after the accident. The court examined the parties’ forum selection clause, which stipulated that all arbitration would occur in Vermont. Because the clause did not indicate an intent to litigate in a forum to which the insured unilaterally moved, the court found that its language did not support specific jurisdiction.
Third, pursuant to World-Wide Volkswagon Corp. v. Woodson, the court found that “Pennsylvania courts did not have personal jurisdiction over a non-forum insurance company whose only contact with the forum was the issuance of an insurance policy with nationwide coverage.” In other words, the court refused to exercise its long-arm jurisdiction over the insurance carrier. Fourth, the court found that the insured’s communications with the insurer, during her time in Pennsylvania, did not suffice to establish specific jurisdiction over the insurer.
The court then brought its attention to the second-prong of this inquiry; whether or not the insurer directed its business activities at Pennsylvania residents. Because this litigation did not arise out of the insurer’s communications and dealings with Pennsylvania residents, the court held, the claim did not “arise out of” the insurer’s failure to tender the policy limits to the insured in Pennsylvania. However, the court did find that, because the parties’ agreement included Pennsylvania in its territory coverage clause, the litigation was directly related to the insurer’s actions in the forum state.
Regardless, the court concluded that specific jurisdiction over the insurer would violate notions of “fair play and substantial justice” and was therefore unreasonable. Although Pennsylvania does have an interest in resolving this litigation, it recognized that Vermont’s policy interest is greater – that state must be able to regulate the insurance industry within its boarders.
In conclusion, the court denied personal jurisdiction over the insurer without reaching the issue of venue and did not address the merits of the carrier’s bad faith claim.
Date of Decision: August 19, 2011
Ryan v. Union Mutual Fire Insurance Company, 10-4438, U.S. District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 93713 (E.D. Pa. Aug. 19, 2011) (Rufe, J.)