By Leah S. Poniatowski, J.D.
Bicycle manufacturer’s insurer failed to meet due process requirements in order to allow personal jurisdiction over suppliers’ insurers.
The primary insurer of a Wisconsin-based bicycle manufacturer failed to establish personal jurisdiction over the insurers of two Taiwanese suppliers in a lawsuit seeking to recover the settlement payment the primary insurer made to a rider seriously injured after the front wheel separated from a bicycle, the U.S. Court of Appeals for the Seventh Circuit ruled, affirming the lower court. The primary insurer’s reliance on the manufacturer’s status as an additional insured to the suppliers’ products liability insurance policies and the policies’ "worldwide coverage" language was not sufficient to satisfy the due process requirement of the state’s long-arm statute without additional evidence of the insurers’ purposeful contact with the forum state (Lexington Insurance Co. v. Hotai Insurance Co., September 12, 2019, Barrett, A.).
Trek Bicycle Corporation, a Wisconsin company, manufactures bicycles and is insured by Lexington Insurance Company. Trek is also party to purchase order contracts with two Taiwanese companies, Giant Manufacturing Company and Formula Hubs, Inc., for bicycles and bicycle parts, respectively. These companies are insured by Zurich Insurance (Taiwan), Ltd. (now Hotai Insurance Co., Ltd.) and Taian Insurance Company, Ltd., and as part of the contracts with the Taiwanese companies, Trek is recognized as an additional insured under both the Zurich and Taian products-liability policies.
In 2012, an individual rented a Trek bicycle on a trip to Texas. Unfortunately, the front wheel separated from the bicycle frame and the individual was rendered a quadriplegic from the resulting fall. The individual and his family filed a lawsuit against Trek in Texas, but did not name either Taiwanese company as a defendant. Lexington defended Trek and attempted to notify both companies and their insurers of the proceedings. After the case settled, Lexington sought reimbursement from the Taiwanese insurers. Both refused to pay, prompting Lexington to file a lawsuit against the insurers in Wisconsin. The insurers filed a motion to dismiss for lack of personal jurisdiction and improper venue. The court agreed that there was no personal jurisdiction over the insurers. Lexington filed the present appeal.
Personal jurisdiction. In order for the court to have personal jurisdiction over the insurers, it must be permitted by Wisconsin’s long-arm statute and by the Due Process Clause, the appellate court explained. Because the parties agreed that the state long-arm statute applied, the only issue was whether due process would be satisfied. Lexington asserted that Wisconsin had specific jurisdiction over the insurers.
"Purposefully availed". The first of three elements to demonstrate specific jurisdiction requires showing that the insurers’ contacts with Wisconsin demonstrate that the insurers "purposefully availed" themselves "of the privilege of conducting business in the forum state or purposefully directed [their] activities at the state." Under the minimum-contacts analysis, neither insurer was shown to have made contact with Wisconsin. Specifically, there was no purposeful contact with the state before, during, or after Trek entered into the contracts with the companies because the contracts were all negotiated and drafted in Taiwan, the policies stipulated that Taiwanese law governed the agreements and that disputes would be resolved in Taiwan. Neither insurer solicited the American company or targeted Wisconsin as a market.
"Worldwide" coverage. Lexington pointed to the insurers’ policies’ acknowledgement of Trek as an additional insured and the policy language that coverage was "worldwide" to support its position, but the Seventh Circuit was not persuaded. According to established U.S. Supreme Court precedent, it is not the insurer’s contacts with the insured which determine personal jurisdiction—it is the contact the insurer has with the forum state. Because there was no evidence that the insurers reached out to Wisconsin when putting together and finalizing the contracts, or evidence that the insurers had contact with Trek at all, there was nothing to show purposeful contact.
Second, the policies’ "worldwide" coverage provision was also insufficient to support personal jurisdiction under Supreme Court precedent. The Seventh Circuit distinguished the policies’ "worldwide" coverage provisions from "doing business" in Wisconsin. Lexington argued that the Taiwanese insurers would reap a financial benefit by providing "worldwide" coverage, but without a duty-to-defend or similar clause in the policy, there was no demonstrated connection to Wisconsin.
The appellate court also explained that the "worldwide" language did not make defending a lawsuit in Wisconsin foreseeable without additional evidence of a purposeful connection to Wisconsin. The body of law upon which Lexington relied involved duty-to-defend provisions and, thus, was distinct as no such clause existed in the policies at issue. Although the policies provided for the right to control litigation, they did not provide for the obligation to control. Because there was no proof of minimum contacts with Wisconsin to satisfy due process, the lower court’s dismissal for lack of personal jurisdiction over the insurers was affirmed.
The case is No. 18-1141.
Attorneys: Mark John Sobczak (Nicolaides Fink Thorpe Michaelides Sullivan LLP) for Lexington Insurance Co. Kimberly A. Jansen (Hinshaw & Culbertson LLP) for Hotai Insurance Co. Ltd. Douglas Knott (Leib Knott Gaynor LLP) for Taian Insurance Co. Ltd.
Companies: Lexington Insurance Co.; Hotai Insurance Co. Ltd.; Taian Insurance Co. Ltd
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