Bahn v. Chicago Motor Club Insurance

MOTZ, Judge. This appeal involves the question of whether a Maryland court has personal jurisdiction over a foreign automobile in ⁵⁶² surer sued by its own insured. The Circuit Court for Montgomery County held that it did not and so dismissed the claims of the insureds, appellants, Allen K. Bahn and his wife Sansherma Bahn, against the insurer, appellee, Chicago Motor Club Insurance Company (C.M.C.). These claims arise out of a motor vehicle accident between Mr. Bahn and Loi H. Hang.

On December 21, 1988, a vehicle driven by Mr. Hang smashed into a 1984 Volkswagen Rabbit driven by Mr. Bahn. Mr. Bahn sustained personal injuries and damage to his car, which was titled in the name of Lockheed Research, Inc., a family-owned business incorporated by Mr. Bahn and of which he was president. Lockheed is an Illinois corporation, and the car was titled and registered in that state under Lockheed’s name. In 1985, however, Mr. and Mrs. Bahn moved to Maryland, brought the car with them, and then drove it in this State.

The insurer of the car, C.M.C., is incorporated in Illinois and licensed to do business only there and in Indiana. C.M.C. does not advertise in Maryland, maintains no agents in Maryland, and does not insure vehicles registered in Maryland. On February 11, 1986, after the Bahns had moved to Maryland, Mrs. Bahn, on behalf of Lockheed, obtained insurance from C.M.C. on the car. Mrs. Bahn supplied C.M.C. with Illinois addresses for both the mailing address and the place where the insured vehicle was “principally kept.” Although Mr. Bahn swore in an affidavit that he advised C.M.C. “sometime in 1986, and certainly by January of 1987” that the new address of Lockheed was Gaithersburg, Maryland, between September, 1986 and October, 1987, the policy was twice renewed by C.M.C. and each renewal continued to reflect Illinois addresses.

In October, 1987, C.M.C. sent Lockheed a “Lapse of Coverage” notice, which C.M.C. mailed to one of Lockheed’s Illinois addresses. The “Lapse of Coverage” notice stated: This is to inform you that the required downpayment on your renewal policy has not been received, and your policy ⁵⁶³ has expired at 12:00 a.m. standard time on the expiration date shown above [October 22, 1987]. In order to renew this policy, the required downpayment must be received in this office not later than: 11/02/87. Upon receipt of this notice, the Bahns sent C.M.C., from Maryland, payment and the “Lapse of Coverage” notice, on which the Bahns had crossed out the Illinois mailing address and inserted as Lockheed’s address: P.O. Box 850, Gaithersburg, Maryland 20877.

C.M.C. then sent Lockheed, at the Gaithersburg address, a policy “declaration,” dated November 23, 1987, for the policy period October 22, 1987 to April 22, 1988. The declaration contained the notation “policy renewed, change mailing address.” 1 C.M.C. sent Lockheed, at the Gaithersburg address, another insurance policy “declaration,” dated April 21, 1988 for the policy period April 22, 1988 to October 22, 1988. On October 24, 1988, a second “Lapse of Coverage Notice” was issued by C.M.C. and sent to Lockheed at the Gaithersburg address. This notice contained language identical to that set forth above and requested a “total renewal premium” of $655 by “no later than” November 2, 1988 “in order to renew this policy.” A check dated October 22, 1988, in that amount was mailed by Lockheed from Maryland to C.M.C. and was cashed by C.M.C. on November 9, 1988.

C.M.C. then sent Lockheed, at the Gaithersburg address, another policy “declaration” marked “policy renewed.” This one was dated November 9, 1988 and covered the period October 22, 1988 to April 22, 1989; it was the renewal in effect at the time of Mr. Bahn’s accident with Mr. Hang. The policy provided that “the ordinary use of [the] vehicle” was “pleasure/less than 3 miles to work [in Illinois] one way.” The policy at all times also provided: ⁵⁶⁴ This policy applies only to accidents, occurrences and losses during the policy period while the automobile is within the United States of America, its territories or possessions, or Canada, or is being transported between ports thereof. Mrs. Bahn reported the December 21, 1988 accident to C.M.C. on the next day by telephone. In response to that report, C.M.C. sent a letter to Lockheed in Maryland requesting additional information and advising its insureds not to give statements concerning the accident to anyone other than authorized agents of C.M.C. Mr. Bahn later received a letter, dated June 15, 1989, from a representative of Johns Eastern Company, Inc., a Maryland corporation, indicating that he was the local claims adjuster for C.M.C. and requesting that Mr. Bahn contact him so that repairs could be initiated on the vehicle.

An appraisal was done of the vehicle in Bethesda, Maryland by Reed Appraisers, Inc., a company located in Wheaton, Maryland and hired by C.M.C. On August 3, 1989, C.M.C. wrote to Lockheed advising that the vehicle was a total loss and making an offer of settlement on the property damage aspect of the accident. A settlement as to property damage was reached and C.M.C. mailed a check to Maryland payable to Mr. Bahn in the amount of $2,250.00 in March of 1991. On March 25, 1991, C.M.C. wrote to the attorney for the Bahns requesting signatures on medical and wage authorizations. C.M.C. accepted a property damage subrogation settlement from Geico Insurance Company in Maryland in the amount of $1,380.00 on August 21, 1991.

The insurance policy included an under-insured motorist endorsement that provided coverage up to $500,000 for any one person per accident. Mr. Hang also was insured at the time of the accident, but his policy provided a $20,000 limit of liability. Therefore, the Bahns demanded payment from C.M.C. for personal injury to Mr. Bahn and loss of consortium in the amounts suffered in excess of $20,000. C.M.C. refused payment.

On December 17, 1991, the Bahns filed a four-count complaint in the circuit court. Counts I and II (personal injury ⁵⁶⁵ and loss of consortium, respectively) sought damages from Mr. Hang; Counts III and IV alleged that C.M.C. had breached its insurance contract by refusing to pay the Bahns damages for those injuries under the under-insured motorist coverage. Mr. Hang answered the complaint, asserting that he was not liable. C.M.C. filed a motion to dismiss for lack of personal jurisdiction.

After hearing argument of counsel, the circuit court dismissed 2 Counts III and IV against C.M.C. for lack of personal jurisdiction. In finding that it had no jurisdiction over C.M.C., the circuit court reasoned: [T]he essence of the dealings between the parties really came down to a billing situation. The Court finds that is not sufficient to establish jurisdiction in Maryland. The motion to dismiss on the basis claimed is granted.

Although Counts I and II remained against Mr. Hang, the Bahns moved, pursuant to Maryland Rule 2-602, to certify the judgment on the counts against C.M.C. as final, with no just reason for delay. The circuit court entered an order certifying the judgment as final, as requested. After entry of judgment in favor of C.M.C., the Bahns appealed. They present a single issue for our consideration: Whether the court erred in dismissing Counts III and IV of appellant’s complaint on the grounds of lack of personal jurisdiction over the appellee.

Before addressing this question, we examine the circuit court’s certification of the judgment for immediate appeal pursuant to Md.Rule 2-602(b). That rule provides in pertinent part: ⁵⁶⁶ ... If the court expressly determines in a written order that there is no just reason for delay, it may direct in the order the entry of a final judgment: (1) as to one or more but fewer than all of the claims or parties____ The order of the court below clearly is a final judgment within the scope of Md.Rule 2-602(b) in that it finally adjudicates the rights of one, but not all, of the parties. In addition, dismissal for lack of personal jurisdiction is a judgment that, absent the presence of multiple claims, is immediately appeal-able.

See e.g., Camelback Ski Corp. v. Behning, 307 Md. 270 , 513 A.2d 874 , vacated and remanded, 480 U.S. 901 , 107 S.Ct. 1341 , 94 L.Ed.2d 512 (1987), opinion on remand, 312 Md. 330 , 539 A.2d 1107 (1988). A trial court’s exercise of its discretionary power to certify a final judgment for immediate appeal pursuant to Md.Rule 2-602(b) is, however, only to be exercised in the “very infrequent harsh case” in which an “early appellate decision of a particular point is of sufficient importance, or [in which] delay will produce sufficient hardship or unfairness, to outweigh the general policy against piecemeal appeals.” Planning Board v. Mortimer, 310 Md. 639, 648 , 530 A.2d 1237 (1987); see also Diener Enters. v. Miller, 266 Md. 551, 556 , 295 A.2d 470 (1972); Allstate Ins. Co. v. Angeletti, 71 Md.App. 210, 219 , 524 A.2d 798 (1987). In moving for judgment pursuant to Md.Rule 2-602, the Bahns asserted: Because of the nature of the case involved herein, Government Employees Insurance Company on behalf of the Defendant Hang has offered its $20,000 policy limits to settle Hang’s potential liability.

The Plaintiffs have refused to accept the offer, and cannot accept the offer until the issue of whether or not Chicago Motor Club Insurance Company is or is not properly before the Court is finally determined. If the Plaintiff settles with the Defendant Hang, and gives a release, the Plaintiffs may potentially be releasing any liability against Chicago. ⁵⁶⁷ It is a waste of judicial time and effort, as well as an unnecessary expenditure of time on behalf of counsel and the parties to proceed in this case and try it against the Defendant Hang, appeal the issue of Chicago’s dismissal on the jurisdictional grounds, and, if successful, have to return to this Court for the second trial against Chicago. It makes more sense to try the two cases together, particularly the damage issues, at one time. There is no just reason for delay in entry of Judgment in favor of Chicago under the facts of this case.

When neither C.M.C. nor Hang opposed this motion, the circuit court adopted these reasons as the basis for its decision to certify the judgment as immediately appealable. On appeal, no party maintains that this certification was an abuse of discretion. Without addressing whether the circuit court properly exercised its discretion, we shall exercise ours and entertain the appeal. Turning then to the merits, the Court of Appeals has directed that when a Maryland court determines whether it may exercise personal jurisdiction over a nonresident defendant, it must engage in a two prong analysis.

First, it must determine whether jurisdiction is established under Maryland’s long arm statute, Md.Code (1974, 1989 Ropl.Vol.), § 6-103 of the Courts & Judicial Proceedings Article, and if so, then it must determine whether the exercise of jurisdiction comports with the Fourteenth Amendment Due Process Clause. Mohamed v. Michael, 279 Md. 653, 657 , 370 A.2d 551 (1977); Jason Pharmaceutical v. Jianas Bros. Packaging Co., 94 Md.App. 425, 434 , 617 A.2d 1125 (1993). The analysis of these two elements is intertwined, because the intent of the statute was to expand the scope of personal jurisdiction over non-resident defendants to the full extent of the Due Process Clause.

Mohamed, 279 Md. at 657 , 370 A.2d 551 . 3 ⁵⁶⁸ The Bahns suggest that three provisions of the long arm statute confer jurisdiction on Maryland courts in this case: A court may exercise personal jurisdiction over a person, who directly or by an agent: (1) Transacts any business or performs any character of work or service in the State; (2) Contracts to supply goods, food, services, or manufactured products in the State; (6) Contracts to insure ... any person, property, risk, contract, obligation, or agreement located, executed, or to be performed within the State at the time the contract is made, unless the parties otherwise provide in writing. § 6-103(b). Only one provision of the statute need be satisfied in order to assert jurisdiction. Tate v. Blue Cross of Washington and Alaska, 59 Md.App. 206, 217 , 474 A.2d 1353 (1984). The first provision, the transaction of business under § 6-103(b)(l), requires “actions [that] culminate in purposeful activity within the State.” Sleph v. Radtke, 76 Md.App. 418, 427 , 545 A.2d 111 , cert. denied, 314 Md. 193 , 550 A.2d 381 (1988).

The defendant need never have been physically present in the state. Id. Therefore, that C.M.C. is incorporated in Illinois and licensed to do business only in that state and Indiana does not preclude personal jurisdiction in Maryland, if the insurer transacted business here. Tate, 59 Md.App. at 214-15 , 474 A.2d 1353 .

Under Maryland law, the renewal of an insurance policy is a new contract. Reserve Ins. Co. v. Duckett, 249 Md. 108, 119 , 238 A.2d 536 (1968). The place of contracting is the state to which the policy is delivered and from which the ⁵⁶⁹ premiums were paid.

Aetna Casualty & Sur. v. Souras, 78 Md.App. 71, 77 , 552 A.2d 908 (1989). It seems to us, therefore, that C.M.C. was transacting business in Maryland when it sent the renewals here, and accepted payment under the renewals from Maryland. Jason Pharmaceuticals, 94 Md. App. at 432 , 617 A.2d 1125 (foreign corporation’s “one-transaction contract” with a Maryland corporation constitutes transaction of business “within meaning of § 6 — 103(b)(1)”). Cf.

Harris v. Arlen Properties, Inc., 256 Md. 185, 198 , 260 A.2d 22 (1969) (finding sufficient contacts to constitute transaction of business although contract was not executed in Maryland and implying that execution of contract here would be transaction of business). C.M.C. asserts that it has neither transacted business nor formed any contracts in Maryland because it was told by the Bahns that the insured automobile remained in Illinois, so when it sent renewals to and received premiums from Maryland it was not intending to make any contract here. Rather, C.M.C. argues, the need to correspond with Maryland was initiated unilaterally by the Bahns who moved here and who failed to pay their premiums, necessitating that the insurer send the lapse of coverage notices. In sum, C.M.C. maintains that the renewals do not constitute contracts made in Maryland because the Bahns allegedly concealed from the insurer the location of the car and if it had known the car was located in Maryland, it would never have provided insurance. 4 The problem with this argument is that whether the Bahns breached the insurance contract, thus relieving C.M.C. of liability, is a question going to the merits of the claim against C.M.C., not the jurisdictional issue.

See Jason Pharmaceuti ⁵⁷⁰ cals, 94 Md.App. at 431 n. 3, 617 A.2d 1125 . In Groom v. Margulies, 257 Md. 691 , 265 A.2d 249 (1970), the Court of Appeals specifically explained that when “considering problems arising under the Long Arm Statute, it is important to distinguish between the jurisdiction of the forum state over the out-of-state defendant, on the one hand, and the merits of the case, on the other.” Id. at 703 , 265 A.2d 249 . (emphasis in original). Thus, it concluded that a Maryland court did have jurisdiction over an individual defendant who negotiated contracts in Maryland; if, as the defendant asserted, he was acting for a disclosed principal, then he would have a defense to the claim but this did not mean that the Maryland courts lacked jurisdiction over him.

Id. at 703-04 , 265 A.2d 249 . Here, although the sending of lapse of coverage notices was necessitated by the Bahns’ failure to pay on time, the fact remains that C.M.C. sent the notices in order to retain the Bahns’ business. “In the last analysis, the ‘business’ of [C.M.C.] was to collect premiums and to disburse benefits.” Tate, 59 Md.App. at 215 , 474 A.2d 1353 . In order to carry out this business, C.M.C. sent notices to the Bahns in Maryland, contracted with them in this State, and received payments from them sent from this State. The fact that C.M.C. believed the automobile to be in another state does not change the nature of C.M.C.’s activity in Maryland.

Because C.M.C. sent notices to the Bahns in Maryland, contracted with the Bahns in Maryland, and received payments sent by the Bahns from Maryland, the insurer transacted business in this State within the meaning of § 6-103(b)(l). Having concluded that C.M.C. “transacted business” within the meaning of Maryland’s long-arm statute, we must determine whether the exercise of jurisdiction is consistent with the Due Process Clause of the Fourteenth Amendment. The standard applied in this analysis is whether the defendant has sufficient “minimum contacts” with the forum state to justify assumption of personal jurisdiction and whether, under all the circumstances, maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S. 310, 316 , 66 S.Ct. 154 , ⁵⁷¹ 158, 90 L.Ed. 95 (1945); Camelback Ski Corp. v. Behning, 312 Md. 330, 335 , 539 A.2d 1107 (1988). Generally, when “the cause of action does not arise out of, or is not directly related to, the conduct of the defendant within the forum, contacts reflecting continuous and general business conduct will be required to sustain jurisdiction; ” this is “general jurisdiction.” Camelback, 312 Md. at 338 , 539 A.2d 1107 and cases cited therein. “On the other hand, when the cause of action arises out of the contacts that the defendant had with the forum, it may be entirely fair to permit the exercise of jurisdiction” simply on the basis of those contacts; this is “specific jurisdiction.” Id. at 336-39 , 539 A.2d 1107 .

It is clear that “specific jurisdiction,” i.e., “a claim arising out of the issuance and delivery of a single ... insurance policy” is at issue here. Id. at 339 , 539 A.2d 1107 (so characterizing the claim in McGee v. International Life Ins. Co., 355 U.S. 220 , 78 S.Ct. 199 , 2 L.Ed.2d 223 (1957)). See also Farmers Ins.

Exch. v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 913 (9th Cir.1990); Lynch v. New Jersey Auto. Full Ins.

Underwriting Ass’n, 762 F.Supp. 101, 103 (E.D.Pa.1991); Batton v. Tennessee Farmers Mut. Ins. Co., 153 Ariz. 268, 270 , 736 P.2d 2, 5 (1987) (en bane). In contrast, in Camelback the “contacts required to support jurisdiction more nearly resemblefd] those of a general jurisdiction case.” Camelback, 312 Md. at 339 , 539 A.2d 1107 .

Thus, C.M.C.’s heavy reliance on Camelback as setting forth “the relevant factors” necessary to establish “the quality and quantity of contacts required” in the ease at hand is misplaced. When, as here, “specific jurisdiction is at issue, the minimum-contacts inquiry focuses on the relationship between the defendant, the forum, and the litigation.” Batton, 736 P.2d at 5 (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 , 104 S.Ct. 1473, 1478 , 79 L.Ed.2d 790 (1984) and Shaffer v. Heitner, 433 U.S. 186, 204 , 97 S.Ct. 2569, 2580 , 53 L.Ed.2d 683 (1977)). The critical question is whether a defendant's “connection with the forum State [is] such that he should reasonably anticipate being haled