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Elkman v. National States Insurance Co.

May 14, 2009


APPEAL from an order of the Superior Court of Los Angeles County, Charles Lee, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC373982).

The opinion of the court was delivered by: Croskey, J.


Plaintiff and appellant Esther Elkman (Elkman) appeals an order granting a motion to quash service of summons and complaint filed by defendant and respondent National States Insurance Company (National).*fn1

National, an out-of-state insurer which is not licensed or authorized to do business in California, receives insurance premiums from California and processes and pays claims submitted by its insureds who are domiciled in this state. The essential issue presented is whether such circumstances provide a basis to justify the imposition of either general or specific jurisdiction over National in California.

We conclude no basis is present here. National did not subject itself to either general or specific jurisdiction in California merely by accepting premium payments from California and by processing and paying claims submitted by its California insureds for services rendered in this state. Thus, the trial court properly found National lacks sufficient contacts with California for jurisdiction to attach. Therefore, the order granting the motion to quash is affirmed.


1. Overview

In 1998, National, a Missouri corporation, issued a long term care insurance policy to Elkman. The policy was delivered to Elkman at her residence in Pompano Beach, Florida.

The policy contained a provision stating "Policy guaranteed renewable for life at your option subject to our table of premium rates in effect at time of renewal." The "guaranteed renewable" provision was mandated by Florida law.*fn2

In December 2001, Elkman relocated to Sherman Oaks, California.

In April 2004, Elkman made a claim to National for benefits under the policy. The policy's schedule of benefits specifies a home care benefit maximum of 24 months. For a two-year period, National paid for home health care services needed by Elkman pursuant to its contractual obligations under the policy.

At the end of the two-year period, on May 17, 2006, National's claims department sent a letter to Elkman stating she had reached the maximum benefit limit of her policy. The letter explained "Generally, you must have a period of at least 180 consecutive days during which you require no assistance and/or receive no care or services, in order for benefits to be restored." The letter advised: "If you anticipate recovery or an improvement in your condition, and feel there is a possibility you may be able to meet the policy requirements to restore your benefits at some time in the future, then you may want to continue to pay premiums to keep the coverage in force. If you do not feel you will be able to meet those requirements, and therefore would not be able to derive any future benefits from your policy, you may decide it is in your best interest to cancel the policy. It is entirely your choice. The policy is guaranteed renewable, which means you have the right to continue this policy as long as you pay your premiums on time."

2. Pleadings

On July 9, 2007, Elkman filed suit against National in the Los Angeles Superior Court, alleging causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing and elder abuse. Elkman disputed National's interpretation of the policy, alleging that after the two-year period ended, she ceased using home care services as defined by the policy, and instead, occasionally received assistance from an unlicensed caregiver. Elkman pled that after six months of receiving no benefits from National, she was entitled to file a new claim requesting that National once again pay for home health care services pursuant to the policy.

3. National's Motion to Quash

On or about September 10, 2007, National specially appeared and filed a motion to quash service of summons and complaint on the ground of lack of personal jurisdiction over National. The motion asserted insufficient contacts between National and California to support any constitutional basis for jurisdiction over it.

The supporting declaration of William Morrison, a vice president of National, set forth the following jurisdictional facts: National is a Missouri corporation and is licensed or authorized to do business only in certain states. National is not, and never has been, licensed or authorized to do business in California. National is licensed and/or authorized to do business in Florida. National maintains no office or bank account in California, nor does it have any agents licensed to sell National's insurance products in California. National has never advertised its insurance products for sale in California. National has never sought or received approval from the California Department of Insurance for the issuance or delivery of its insurance products in California, nor has National ever issued or delivered its insurance products in California.*fn3

4. Opposition

In opposition, Elkman asserted National's contacts with California justify the exercise of general jurisdiction. Elkman relied on a letter from National's counsel which indicated "there were 321 health policies billed to California addresses during approximately the past five years, and 68 life insurance policies billed to California addresses during the same time period."*fn4 Elkman argued National maintained ongoing, systematic contact with at least 389 California residents -- in addition to collection of premiums from California customers, National "investigates, adjusts, pays, and denies claims in California." These ongoing contacts "with California's citizens, regardless of [National's] formal relationship to the Department of Insurance or Secretary of State, warrant general jurisdiction."

Elkman further contended California has specific jurisdiction over National on the ground that National has purposefully availed itself of the privilege of conducting business in California "by maintaining insureds throughout the State, paying and denying claim benefits in the State, and continuing to collect significant premium monies from nearly 400 California residents over the last five years. . . . Further, [National] clearly has continuing obligations to California residents through the policies it has in force and issued to California insureds, such as Ms. Elkman."

Elkman's papers also included as an exhibit a copy of a March 2004 report by the U.S. Department of Commerce concerning the mobility of the United States population. Elkman argued that given the high degree of mobility of the American population, and consequently National's insureds, National reasonably could anticipate being brought into courts in states to which its insureds had migrated.

5. Reply

National disputed Elkman's attempt to characterize the 389 premium payers in California as a substantial number, pointing out that those 389 policies represented a mere 0.337 percent of National's 115,415 policies in force during the relevant time frame. National contended its contact with California were "minuscule" at best and certainly not enough to subject it to general or specific jurisdiction.

National denied it had purposefully availed itself of conducting activities in California -- it issued and delivered the policy to Elkman in Florida and had no input into Elkman's ...

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