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Greenwell v. Auto-Owners Insurance Co.

California Court of Appeals, Third District, San Joaquin

January 27, 2015

JACOB W. GREENWELL, JR., Plaintiff and Appellant,
v.
AUTO-OWNERS INSURANCE COMPANY, Defendant and Respondent.

APPEAL from a judgment of the Superior Court of San Joaquin County, No. 39201300293169CUBTSTK Linda L. Lofthus, Judge.

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COUNSEL

Hereford Kerley, J. Edward Kerley; Law Office of Dylan Schaffer and Dylan Schaffer for Plaintiff and Appellant.

Ericksen Arbuthnot, William A. Jenkins and Gregory A. Mase for Defendant and Respondent.

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OPINION

ROBIE, J.

This case goes to show that sometimes life can be like an essay question on a law school exam. Here, a California resident owned an apartment building in Arkansas that was insured by a Michigan insurance company under a policy the owner obtained through an insurance agent in Arkansas. That policy included commercial property coverage for the Arkansas apartment building and commercial general liability coverage for the owner’s property ownership business, which he operated from California. Other than writing this policy, the insurer did no business in California.

Both the commercial property coverage and the commercial general liability coverage in the policy covered some risks, losses, or damages that could have arisen in California, but the dispute at issue here arose out of two fires that damaged the building in Arkansas. Initially, the insurer agreed to treat the two fires as separate losses but later reversed its position and took the position that both incidents were subject to only a single policy limit payment. As a result, the owner sued the insurer in a California state court for breach of contract and bad faith.

Here is the question: Under the foregoing circumstances, did the insurer have sufficient minimum contacts with California to allow the state court to exercise personal jurisdiction over the company in this action? We conclude the answer is “no.” Under the federal constitutional test for specific jurisdiction, we agree with the owner that the insurer purposefully availed itself of the privilege of conducting activities in California by writing a policy that covered various risks, losses, and damages that could have arisen in California. Nevertheless, we also conclude that there was no substantial nexus between the insurer’s activities in California and the present action because the owner is not suing the insurer for any California risk that came to fruition; he is suing the insurer because of something that happened to his business property in Arkansas, which is where he obtained the insurance at issue, the main purpose of which was to cover potential risks and damage to that Arkansas property. In the absence of a substantial nexus between the insurer’s California activities and this suit, the exercise of personal jurisdiction over the insurer in this case does not comport with due process. Accordingly, we affirm the trial court’s order granting the insurance company’s motion to quash the service of summons.

FACTUAL AND PROCEDURAL BACKGROUND

In 2007, plaintiff Jacob W. Greenwell, Jr., resided in Tracy and was doing business there as Greenwell Properties. At some point (perhaps in 2007), he acquired ownership of an apartment building in Little Rock, Arkansas. In

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September 2007, working through an insurance agency in Little Rock, Greenwell applied to defendant Auto-Owners Insurance Company for a tailored protection insurance policy—in particular, for commercial property coverage and commercial general liability coverage. On the application, the applicant was listed as “Jacob W. Greenwell dba Greenwell Properties.” The application described the business’s operations as “property owner.” An address in Tracy was listed as the mailing address for the business, but the commercial property coverage was obtained specifically for the apartment building in Arkansas. The commercial general liability section of the application also specifically referenced the apartment building.

Auto-Owners issued the policy to Greenwell effective September 14, 2007, and delivered the policy to him at his address in Tracy. The annual premium for the commercial property coverage was $5, 899 and the annual premium for the commercial general liability coverage was $257.

Greenwell’s policy was renewed three times, through September 2011. There is no evidence in the record of the mechanics of the renewal. Throughout the period the insurance was in place, Greenwell mailed all of his premiums from his address in Tracy and communicated with representatives of Auto-Owners from there also.

In February 2013, Greenwell commenced the present action against Auto-Owners in San Joaquin County Superior Court alleging causes of action for breach of contract and breach of the covenant of good faith and fair dealing. He alleged that in June 2010 his apartment building in Arkansas was damaged by a fire and the next day was damaged by a second fire. He claimed that although Auto-Owners originally treated the incidents as two separate losses under the policy, after he entered into a repair contract for more than $1 million, the insurer wrongfully reversed its position and claimed that “only a single [policy] limit applied to both losses.” As a result of Auto-Owner’s conduct, Greenwell claimed he defaulted on the construction contract and on the secured loan on the apartments and had to sell the property for less than $50, 000.

Auto-Owners moved to quash service of summons for lack of jurisdiction. In support of its motion, Auto-Owners submitted evidence to the effect that, other than this one policy, it does not do any business in California. In response, Greenwell asserted that Auto-Owners had “availed itself of the benefits of California by entering into a relationship in California with [him] beginning in 2007” and had “provided insurance to [him] covering myriad facets of his business liability.”

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The trial court concluded that Greenwell had not met his burden of establishing that Auto-Owners had the minimum contacts with California necessary to justify the exercise of personal jurisdiction over the company. Accordingly, the court granted the motion to quash service of summons. Greenwell timely appealed.

DISCUSSION

On appeal, Greenwell contends the trial court erred in finding that it lacked personal jurisdiction over Auto-Owners in this action. We disagree.

I

General Principles Of Personal ...


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