Topics: Jurisdiction

Note: Lincoln General Insurance Company (Insurer), a Pennsylvania company, issued an insurance policy to A&G Commercial Trucking, Inc. and GKD Management, LP (Insureds), both incorporated in Arizona with principal places of business in Tennessee and Arizona, respectively. The policy provided liability and uninsured motorist coverage and stated that Insurer had the right and duty to defend Insureds against claims and to investigate and settle suits as Insurer deemed appropriate. In exchange for reduced deductibles, Insureds were required to maintain an escrow account of USD 120,000 and were required to replenish the escrow account within 60 days of billing. An Alabama bank (Issuer) issued a standby letter of credit on behalf of Insureds/Applicants in favor of Insurer/Beneficiary to satisfy the escrow account requirement. Information relating to the letter of credit is not included in the opinion.

Insured/Applicant failed to pay deductibles for 2005, 2006, and 2007. Insurer/Beneficiary sued Insureds/Applicants, alleging a breach of the insurance contract. Insured/Applicants filed a Fed. R. Civ. P. 12(b)(2) motion to dismiss for lack of personal jurisdiction. The United States District Court for the Middle District of Pennsylvania, Schwab, Magistrate J., recommended denial of Insured/Applicants' motion.

In a previous case involving the parties, Insurer/ Beneficiary had drawn on the standby to pay claim deductibles for claims incurred. Insured/Applicants complained and sued Insurer/Beneficiary in Missouri, but settled out of court. During the course of this proceeding, Insured/Applicants took depositions of Insurer/Beneficiary's employees in Pennsylvania. Additionally, evidence showed that each claim made by Insured/Applicants generated a series of contacts with Insurer/Beneficiary in Pennsylvania, including filing a notice of claim with Insurer/Beneficiary and correspondence between Insured/Applicants and Insurer/Beneficiary to adjudicate claims.

The Magistrate recommended that Insured/ Applicants' filing of numerous claims with Insurer/ Beneficiary in the Middle District of Pennsylvania, where Insurer/Beneficiary had its primary place of business, was sufficient to justify a finding that Insured/Applicants' had purposefully availed themselves of the privileges of conducting business in the forum state. Insured/Applicants' claims-related activity in the forum was closely related to the alleged breach of contract. Finally, the Magistrate could not recommend that the exercise of personal jurisdiction in the Middle District of Pennsylvania did not comport with the traditional notions of fair play and substantial justice because Insured/Applicants did not present any evidence to the contrary.



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.