New York Law Review

Tag: Insurance Attachment

  • Simpson v. Loehmann, 21 N.Y.2d 305 (1967): Upholding Seider v. Roth and Quasi In Rem Jurisdiction Based on Insurer’s Obligation

    Simpson v. Loehmann, 21 N.Y.2d 305 (1967)

    A liability insurer’s contractual obligation to defend and indemnify its insured, who is a non-resident defendant, constitutes a “debt” sufficient to establish quasi in rem jurisdiction in New York, permitting attachment of the insurance policy to satisfy potential judgments.

    Summary

    The New York Court of Appeals reaffirmed its prior holding in Seider v. Roth, upholding the attachment of a liability insurance policy issued by an insurer doing business in New York to a non-resident defendant as a basis for quasi in rem jurisdiction. The court rejected constitutional challenges, asserting that the insurer’s obligation to defend and indemnify constitutes a debt located in New York, providing a sufficient connection to allow New York courts to exercise jurisdiction. The recovery, however, is limited to the policy’s face value. The court emphasized the insurer’s control over the litigation and the state’s interest in protecting its residents.

    Facts

    A New York resident was injured in Connecticut by a boat owned by a Connecticut resident (Loehmann). Unable to obtain personal jurisdiction over Loehmann in New York, the plaintiff (Simpson) served the summons and complaint in Connecticut and attached Loehmann’s liability insurance policy issued by Insurance Company of North America (INA), which does business in New York.

    Procedural History

    The defendant moved to vacate the attachment based on jurisdictional and constitutional grounds. The Special Term denied the motion. The Appellate Division affirmed, citing Seider v. Roth. The defendant was granted leave to appeal to the New York Court of Appeals.

    Issue(s)

    Whether the contractual obligation of a liability insurer to defend and indemnify a non-resident defendant constitutes a “debt” subject to attachment in New York, thereby conferring quasi in rem jurisdiction, and whether such jurisdiction violates the Due Process Clause of the Fourteenth Amendment.

    Holding

    Yes, because the insurer’s obligation represents a contingent debt located in New York, providing a sufficient property right to empower New York courts to exercise quasi in rem jurisdiction over the non-resident defendant. This does not violate Due Process because the presence of the debt in the state creates a sufficient nexus.

    Court’s Reasoning

    The court relied heavily on its decision in Seider v. Roth and Matter of Riggle, stating that the insurer’s obligation to defend and indemnify constitutes a debt owed to the insured. The court reasoned that the presence of this debt in New York provides a sufficient connection to allow the state to exercise quasi in rem jurisdiction, even if the defendant is a non-resident and the cause of action arose outside of New York. The court emphasized that the recovery is limited to the face value of the insurance policy, so it does not expand in personam jurisdiction.

    The court addressed the due process concerns by stating that the attachment of the insurance policy represents a sufficient property right in the defendant to furnish the nexus with, and the interest in, New York to empower its courts to exercise an in rem jurisdiction over him.

    The court further reasoned that the historical limitations on jurisdiction are evolving towards a more realistic and reasonable evaluation of the rights of plaintiffs, defendants, and the state. The court noted that the insurer is in full control of the litigation, selecting attorneys and making procedural decisions. This practical control, combined with the plaintiff’s residency and the insurer’s presence in New York, creates a substantial and continuing relationship with the controversy.

    The court quoted from Seider v. Roth: “It is said that by affirmance here we would be setting up a ‘direct action’ against the insurer. That is true to the extent only that affirmance will put jurisdiction in New York State and require the insurer to defend here, not because a debt owing by it to the defendant has been attached but because by its policy it has agreed to defend in any place where jurisdiction is obtained against its insured.”

    The court suggested that the Law Revision Commission and the Advisory Committee of the Judicial Conference should conduct studies on the impact of in rem jurisdiction on litigants, the insurance industry, and the public.

  • Seider v. Roth, 17 N.Y.2d 111 (1966): Establishing Quasi In Rem Jurisdiction Based on Insurer’s Duty to Defend

    Seider v. Roth, 17 N.Y.2d 111 (1966)

    An insurance company’s obligation to defend and indemnify a nonresident defendant constitutes a debt subject to attachment, providing a basis for quasi in rem jurisdiction in the state where the insurer does business.

    Summary

    This case addresses whether a New York court can exercise quasi in rem jurisdiction over a nonresident defendant by attaching the contractual obligation of the defendant’s insurance company to defend and indemnify him. The New York Court of Appeals held that the insurer’s obligation is a debt subject to attachment under CPLR 6202, allowing the New York resident plaintiffs to sue the nonresident defendant in New York. This decision established a novel jurisdictional basis, allowing plaintiffs to pursue claims against out-of-state defendants when the insurance company has a presence within the state.

    Facts

    Two New York residents, husband and wife, were injured in an automobile accident in Vermont, allegedly due to the negligence of Lemiux, a resident of Quebec. Lemiux was insured by Hartford Accident and Indemnity Company, which does business in New York. The plaintiffs sought to establish jurisdiction over Lemiux in New York by attaching Hartford’s contractual obligation to defend and indemnify Lemiux under the insurance policy.

    Procedural History

    The plaintiffs obtained an order of attachment directing the Sheriff to levy upon Hartford’s contractual obligation to defend and indemnify Lemiux. Lemiux moved to vacate the attachment and service of the summons and complaint. Special Term denied the motion, relying on a similar case, Fishman v. Sanders. The Appellate Division affirmed, and Lemiux appealed to the New York Court of Appeals.

    Issue(s)

    Whether, in a personal injury action against a nonresident defendant, the defendant’s liability insurer’s contractual obligation to defend and indemnify the defendant is a “debt” owing to the defendant and subject to attachment under CPLR 6202, thereby providing a basis for quasi in rem jurisdiction.

    Holding

    Yes, because Hartford’s contractual obligation to defend and indemnify Lemiux is a debt that can be attached, establishing jurisdiction in New York.

    Court’s Reasoning

    The Court of Appeals relied on CPLR 5201 and 6202, which define what constitutes a debt subject to attachment. The court reasoned that Hartford’s policy imposed contractual obligations as soon as the accident occurred, including the duty to investigate, negotiate, and defend Lemiux in any negligence action. Quoting the case, “as soon as the accident occurred there was imposed on Hartford a contractual obligation which should be considered a ‘debt’ within the meaning of CPLR 5201 and 6202.” The court cited Matter of Riggle, 11 N.Y.2d 73, where a similar insurance obligation was deemed a debt for jurisdictional purposes. The court dismissed concerns about creating a “direct action” against the insurer, clarifying that jurisdiction was acquired because the policy obligation was a debt owed to the defendant by the insurer, which was considered a resident of New York. The court further reasoned that requiring the insurer to defend in New York for an accident injuring New York residents was reasonable, similar to allowing direct actions against insurers when New York residents were injured outside the state, as in Oltarsh v. Aetna Ins. Co. 15 N.Y.2d 111. Ultimately, the decision rests on the principle that the insurer’s promise to defend and indemnify constitutes a valuable right of the insured, which can be treated as property for jurisdictional purposes.