How Nationwide Coverage Clauses Can Affect Where You Sue

Insurance companies often contain “nationwide coverage” clauses in their policies. Generally, these clauses mean that the policy covers accidents occurring anywhere in the United States. Contracting to provide such broad coverage can subject insurers to personal jurisdiction in states where the insured resides or the covered event occurs – even if the insurance company has no employees, agents, or offices in the state and does not otherwise conduct business there. However, recently, a federal district court in California ruled that it did not have personal jurisdiction over an insurance company despite a nationwide coverage clause in the insurance policy issued by the insurer.[1]

The Case:

CDC San Francisco LLC entered into a construction contract with Webcor Construction, L.P., to build the InterContinental San Francisco Hotel. Webcor contracted with Architectural Glass and Aluminum Co., Inc. (AGA) for the design, construction, and installation of a curtain wall glazing system that would form the building’s exterior. In turn, AGA subcontracted with multiple other companies for the project.  

CDC subsequently brought a construction defense cast against Webcor, AGA, Midwest, Viracon and Quanex in a California state court, which resulted in a settlement.

After the parties settled, AGA and Webcor brought an insurance action in federal district court against multiple insurers, including Old Republic. Webcor and AGA alleged that Old Republic was AGA’s insurer, and Webcor was an additional insured on the policies.

Old Republic then filed a third party complaint against Acuity Mutual Insurance Company claiming it had paid defense costs for AGA and Webcor in the underlying action and incurred other costs of defense. Old Republic asked for contribution from Acuity for the defense costs it had paid; Old Republic claimed that Acuity was also required to defend Webcor and AGA per its policy with Midwest.

Acuity moved to dismiss Old Republic’s third-party complaint for lack of personal jurisdiction under the Federal Rules of Civil Procedure.

The District Court’s Decision:

The district court granted Acuity’s motion, holding that Old Republic had not established a basis for personal jurisdiction over Acuity in district court. First, the district ruled that general jurisdiction had not been established over Acuity since Acuity was a Wisconsin insurance company with its principal place of business there, it conducted no business in California, and had no brokers or agents based in California.

Second, the district court rejected Old Republic’s argument that the district court had “specific jurisdiction” over Acuity based on a its nationwide coverage provision in the policy.  

The district court ruled that the existence of a nationwide coverage provision in the Acuity policy, and an underlying lawsuit brought in California, did not constitute sufficient contact with California to support specific jurisdiction. The court pointed out the insurer was licensed to do business in Ohio and had an Ohio agent who sold a policy to Midwest, an Ohio corporation with its principal place of business in Ohio. Further, the court stated that no part of Midwest’s insurance application had any contact or involvement with California.

Given that the only contacts Acuity had with California appeared to be letters from Acuity’s counsel in Ohio sent to AGA’s counsel stating the reasons it was declining tender under the policy, the district court also ruled that Acuity had no forum-related activities sufficient to support specific jurisdiction.

There is a split of authority in the Ninth Circuit as to whether the existence of a nationwide clause constitutes sufficient contact with the forum to support specific jurisdiction. This case indicates that a nationwide coverage clause, without more, is insufficient to subject defendants to personal jurisdiction over any contractual dispute in any given forum unless the case arises out of a defendant’s duty to indemnify or defend claims in any state.  

At Kerr & Wagstaffe LLP, our attorneys specialize in insurance policyholder rights. To learn more about the attorneys and their insurance practice, please explore the links at the top of this page.

[1]           Webcor Constr., LP v. Zurich Am. Ins. Co., No. 17-CV-02220-YGR, slip op. (N.D. Cal. Nov. 3, 2017).