AGA purchased insulated glass units (IGUs) for the glazing system from their manufacturer, Viracon, Inc. Viracon purchased a sealant, polyisobutylene (PIB), used to manufacture the IGUs from Quanex I.G. Systems, Inc.

Viracon shipped the IGUs to Midwest, and Midwest fabricated the individual aluminum curtain wall units to be installed on the project by AGA.

CDC subsequently brought a construction defect case against Webcor, AGA, Midwest, Viracon and Quanex in a California state court (the SF Action). CDC alleged that the IGUs used to create the curtain walls for the project developed a film and discoloration due to use of incompatible materials. CDC sought to hold the defendants in the SF Action liable for the cost of replacing and repairing 6,400 IGUs.

The parties ultimately settled the action.

But wait! There's more!

The litigation wasn't over. Webcor and AGA filed an insurance coverage action in federal district court in California against National Union Fire Insurance of Pittsburgh, Pa., Old Republic General Insurance Corporation, Liberty Insurance Underwriters Inc., and Zurich American Insurance Company. Webcor and AGA alleged that Old Republic was AGA's insurer, and that Webcor was an additional insured on the policies.

Old Republic then filed a third-party complaint against Acuity Mutual Insurance Company and Motorists Mutual Insurance Company. Old Republic claimed that it had paid defense costs for AGA and Webcor in the SF Action and incurred other costs of defense. Old Republic also alleged that the policy issued to Midwest, the material supplier, by Acuity required that Acuity defend Webcor and AGA as well. Old Republic asked for contribution from Acuity for the defense costs it had paid.

Acuity moved to dismiss Old Republic's third-party complaint for lack of personal jurisdiction under the Federal Rules of Civil Procedure.

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The district court's decision

The district court granted Acuity's motion, finding that Old Republic had not established a basis for personal jurisdiction over Acuity in the district court.

In its decision, the district court first ruled that general jurisdiction had not been established over Acuity. The district court reasoned that Acuity:

• Was a Wisconsin insurance company with its principal place of business in Sheboygan, Wisconsin;
• Conducted no business in California, was not licensed to do business in California, did not sell insurance in California and had no brokers or agents based in California; and
• Did not accept insurance applications, collect premiums, or maintain any offices, bank accounts or employees in California.

The district court rejected Old Republic's contention that Acuity's filing of two prior, unrelated claims in litigation in California courts established general jurisdiction over it. The district court pointed out that the two other actions were (1) when Acuity filed a complaint-in-intervention on behalf of an involuntarily dissolved insured and (2) a small claims action. The “unrelated litigation,” the district court said, did “nothing to establish continuous and systematic activity in California by Acuity.”

The district court also ruled that Acuity's online workers' compensation claim form, which included language specific to claims in California, did not support general jurisdiction in California, given that the form was a standardized form produced by the Association for Cooperative Operations Research and Development (ACORD), was meant to be used by any insurance company, agent, or broker throughout the country, and included language specific to many states in addition to California.

Not enough contact

The district court then rejected the Old Republic argument that the district court had “specific jurisdiction” over Acuity based on a provision in Acuity's policy stating that the policy applied to claims in the “coverage territory,” which included the entire United States and which, therefore, contractually bound Acuity to defend Midwest in California.

The district court ruled that the existence of a nationwide coverage provision in the Acuity policy, and an underlying lawsuit brought in California, did not constitute sufficient contact with California to support specific jurisdiction. The court pointed out that Acuity was an insurer licensed to do business in Ohio and had an Ohio agent who sold a policy to Midwest, an Ohio corporation with an Ohio principal place of business. “No part of Midwest's application for insurance had any contact or involvement with California,” the district court said. The facts were insufficient to establish “purposeful availment” of a California forum by Acuity.

Given that the only contacts Acuity had with California appeared to be letters from Acuity's counsel in Ohio sent to AGA's counsel stating the reasons Acuity was declining tender under the policy, the district court also ruled that Acuity had no forum-related activities sufficient to support specific jurisdiction.

The case is Webcor Construction, LP v. Zurich American Ins. Co.

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Steven A. Meyerowitz, Esq., ([email protected]) is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. This story is reprinted with permission from FC&S Legal, the industry's only comprehensive digital resource designed for insurance coverage law.