Petition for Writ of Certiorari — Falcon Insurance Co. v. Eli Lilly & Co.
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‘@ae.Qata- Supreme Court, U.S,
SABLE ( FILED
| NOV 20 1986
No. JOSEPH F. SPANHOL, JR.
CLERK
IN THE
Supreme Court of the United States
OCTOBER TERM, 1986
FALCON INSURANCE COMPANY
and
MUTUAL FIRE, MARINE AND INLAND INSURANCE COMPANY,
Petitioners
V.
ELI LILLY AND COMPANY,
Respondent
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
RICHARD H. GIMER
Counsel of Record
JOHN G. DEGOOYER
STEPHEN L. HUMPHREY
KATHRYN A. UNDERHILL
WILLIAM J. HAMEL
HAMEL & PARK
888 Sixteenth Street, N.W.
Washington, D.C. 20006
(202) 835-8000
Counsel for Petitioners
~~
WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001
QUESTION PRESENTED
Whether the exercise of personal jurisdiction by the
United States District Court for the District of Columbia
over nonresident insurance companies (who neither
transact nor do business in the District of Columbia) in
a diversity action brought by their nonresident insured,
seeking a declaration of rights under its insurance poli-
cies (none of which was negotiated, transacted, executed
or delivered in the District), is repugnant to the Due
Process Clause of the Fifth Amendment to the United
States Constitution, where such jurisdiction is based not
on a consideration of the insurance companies’ contacts
with the District of Columbia, but solely on the imputa-
tion to such insurance companies of the insured’s pre-
sumed contacts there.
(i)
il
PARTIES TO THE PROCEEDING
The petitioners are:
(i) Falcon Insurance Company, which is a subsidiary
of The Northern Assurance Company of America, which
is, in turn, wholly owned by Commercial Union Corpora-
tion, a Delaware insurance holding company; and
(ii) Mutual Fire, Marine and Inland Insurance Com-
pany, which has the following subsidiaries or affiliates:
Rhine Reinsurance Company, Ltd., UMI Holdings, Inc.,
First New York Syndicate Corporation, and UMI Under-
writers, Inc.
The respondent is Eli Lilly and Company.
There are numerous additional parties to the proceed-
ing below that have no involvement in the issues here
presented. The Home Insurance Company and others, in-
cluding the petitioners herein, have petitioned this Court
for a writ of certiorari to review the judgment of the
court below on grounds other than the personal jurisdic-
tion issues involved here. Home Insurance Co., et al. v.
Eli Lilly and Co., petition for writ of certiorari filed
November 20, 1986. The petition in that case includes a
list of all parties to the proceedings below, and petitioners
herein adopt that list of parties and incorporate it into
this petition by reference.
TABLE OF CONTENTS
GPUPMRRRRES Br ORMECIIUIN BMUED osc snencscenccsnnsnnasisosicssscnaustinssns
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CONSTITUTIONAL AND STATUTORY
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REASONS FOR GRANTING THE WRIT .................
I. The Exercise Of In Personam Jurisdiction By
The United States District Court For The Dis-
trict Of Columbia Over A Nonresident Sur-
plus Lines Insurer In An Action Brought By
Its Insured, Based Solely On The Insured’s Con-
tacts With The District Of Columbia, Violates
pe Bg eT ee meee ee
II.
A.
Petitioners Did Not Purposefully Avail
Themselves Of The Privilege Of Conduct-
ing Business In The District Of Columbia
So As To Invoke The Benefit And Protec-
I UT I I aca ds cisciatrctulcscmbvesaigsvacaievsbcals
Imputing Their Insured’s Presumed District
Of Columbia Contacts To Petitioners In
Order To Exercise Jn Personam Jurisdic-
tion Over Them Violates The Due Process
Reuse OF Tae Constitution ............................
The Decision Of The Court Below Directly
Conflicts With A Decision Of The Highest
Court Of The Commonwealth Of Pennsylvania..
(iii)
11
18
iv
TABLE OF CONTENTS—Continued
Page
Cn saacencnsctaenienians 19
APPENDIX
Court of Anpesis Opinion .........................-..........-... la
Order Denying Petition for Rehearing ...................... 24a
Order Denying Motion to Dismiss Sent oe eee trae oe: 26a
v
TABLE OF AUTHORITIES
Cases: Page
American & Foreign Insurance Association v.
Commercial Insurance Co., 575 F.2d 980 (ist
Gs ice teedcengsecncbeac eae eoudiaeniis 6, 15, 16
Burger King Corp. v. Rudzewicz, 471 U.S. 462,
SE ie I eicseekcterade etic ecteenicns 9,13
Chung v. NANA Development Corp., 783 F.2d
RADE. CG EA. RIE hescte cts cece 14
Cohane v. Arpeja-California, Inc., 385 A.2d 153
(D.C. 1978), cert. denied, 439 U.S. 980 (1978).. 10
Colwell Realty Investments, Inc. v. Triple T Inns
of Arizona, Inc., 785 F.2d 1330 (5th Cir.
| |__| aRR a RTE E LET NOP SE NPE PLE. PMS oS te, Sine eel 14
Commonwealth of Puerto Rico v. S.S. Zoe Colo-
cotroni, 628 F.2d 652 (1st Cir. 1980), cert. de-
nied, 450 U.S. GIR CUGGE) nnn avcisinivcni cocci 6, 15, 16
Eli Lilly and Co. v. Home Insurance Co., 764 F.2d
OG ee Gay ROE vcs ects 3
Eli Lilly and Co. v. Home Insurance Co., 482
po tS. Rn en OPT ane 4
Green v. Shepherd Construction Co., 46 F.R.D.
SG. CEG. Clk Bae Makita cases 11
Hanson v. Denckla, 357 U.S. 2385 (1958) ...020000002.. 8,12
Helicopteros Nacionales de Colombia, S.A. v.
pl ae lk ee |) ere eee 12,14
Hunt v. Erie Insurance Group, 728 F.2d 1244
COU CR: Re cic idee 14
International Shoe Co. v. Washington, 326 U.S.
SEO Ce a is eee kee 8
Keene Corp. v. Insurance Co. of North America,
667 F.2d 1034 (D.C. Cir. 1981), cert. denied,
BE SR as. _. 1 PRR ee ck eee ere 3, 4
Keeton v. Hustler Magazine, Inc., 465 U.S. 770
SUE stata le Pn re ae on ES 14
Kulko v. California Superior Court, 436 U.S. 84
hc: IN IE ae ONAN SPORE AORN RRO EES 8, 12,13
Milliken v. Meyer, 311 U.S. 457 (1940) ......00000...... 8
National Mutual Insurance Co. v. Liberty Mu-
tual Insurance Co., 196 F.2d 597 (D.C. Cir.
1952), cert. denied, 344 U.S. 819 (1952)
vi
TABLE OF AUTHORITIES—Continued
Page
Rush v. Savchuk, 444 U.S. 320 (1980) .-.................. 14, 17
Sea Lift, Inc. v. Refinadora Costarricense de
Petroleo, S.A., 792 F.2d 989 (11th Cir. 1986).... 14
Shaffer v. Heitner, 483 U.S. 186 (1977) ............. 13, 14, 17
Sol Salins, Inc. v. Sure Way Refrigerated Truck
Transportation Brokers, Inc., 510 A.2d 1032
CB. INTE sabccnkestanesssbs bieapiiidecseccaaaanddalaciaiaiaaaiess 13
Travelers Indemnity Co. v. Calvert Fire Insur-
ance Co., 798 F.2d 826 (5th Cir. 1986) ............. 14
United Farm Bureau Mutual Insurance Co. v.
U.S.F. & G., 462 A.2d 1300 (Pa. 1983) -.............. 18, 19
World-Wide Volkswagen Corp. v. Woodson, 444
Sey Se CD wie kcctentnencessncecencaccnareeaaede passim
Constitutional and Statutory Provisions:
Te, CN a alginundedekeaentbahahoaned 2
a I eeseicicts sinner snintice anni dient 2
SE ee a rr pres cosines elaine 3
D.C. Code § 13-423(a) (6) (1981 & Supp. IV 1986) .. 2
D.C. Code § 35-1548 (1981) ....................................0.20 4
D.C. Code § 35-1544 (1981) 202.22 eee 4
26 L.P.RA. SCS CROTGS anno nossa ccc 16
Other Authorities:
Wright & Miller, Federal Practice and Procedure:
Cet © RGGR OR TRE CRITE D onc ncncnsiicirersicccnn... 11
IN THE
Suprenve Cot of the United States
OCTOBER TERM, 1986
No.
FALCON INSURANCE COMPANY
and
MUTUAL FIRE, MARINE AND INLAND INSURANCE COMPANY,
» Petitioners
ELI LILLY AND COMPANY,
Respondent
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Petitioners respectfully pray that a writ of certiorari
be issued to review the judgment of the United States
Court of Appeals for the District of Columbia Circuit
entered on June 24, 1986.
OPINIONS BELOW
The full opinion of the court below, reported at 794
F.2d 710 (D.C. Cir. 1986), is reproduced in the Appen-
dix hereto, la-23a. (Only pages 19a-21a thereof deal with
the question presented by this petition.) The August 22,
1986, order of the court below denying rehearing is also
reproduced in the Appendix, 24a-25a. The unreported
Order of the United States District Court for the District
of Columbia dated October 6, 1982, denying petitioners’
motions to dismiss for lack of in personam jurisdiction
2
and for improper venue is reproduced in the Appendix,
26a.
JURISDICTION
The judgment of the court below was entered on June
24, 1986. Petitioners timely filed a petition for rehear-
ing which was denied on August 22, 1986. App., 24a-
25a. This petition for a writ of certiorari was filed No-
vember 20, 1986. The jurisdiction of this Court is in-
voked pursuant to 28 U.S.C. § 1254(1).
CONSTITUTIONAL AND
STATUTORY PROVISIONS INVOLVED
The Fifth Amendment to the United States Constitu-
tion, in pertinent part, provides:
No person shall . . . be deprived of life, liberty, or
property, without due process of law....
The District of Columbia Code, § 13-423 (1981 & Supp.
IV 1986), in pertinent part, provides:
(a) A District of Columbia court may exercise per-
sonal jurisdiction over a person, who acts directly
or by an agent, as to a claim for relief arising from
the person’s—
(6) contracting to insure or act as surety for
or on any person, property, or risk, contract,
obligation or agreement located, executed, or to
be performed within the District of Columbia
at the time of contracting, unless the parties
otherwise provide in writing ....
(b) When jurisdiction over a person is based solely
upon this section, only a claim for relief arising
from acts enumerated in this section may be as-
serted against him.
STATEMENT OF THE CASE
In 1982, Eli Lilly and Company (“Lilly”) brought a
declaratory judgment action in the United States Dis-
trict Court for the District of Columbia against 267 in-
3
surance companies who, at some time during the period
from 1942 to 1976, had provided Lilly with comprehen-
sive general liability insurance coverage. Among the de-
fendants named in that suit were Falcon Insurance Com-
pany (“Falcon”) and Mutual Fire, Marine and Inland
Insurance Company (“Mutual Fire’)—the petitioners
herein. Jurisdiction of the District Court was invoked
under 28 U.S.C. § 1332 (a).
Lilly was once a major manufacturer of DES (di-
ethylstilbestrol), a drug that had often been prescribed
to pregnant women to help prevent miscarriages. In re-
cent years, claims have been asserted that DES has
caused cancer and other disorders in DES users’ daugh-
ters who were in utero when the drug was taken. As a
result, Lilly has been named as a defendant in approxi-
mately 650 tort actions involving DES claims. Because
of an alleged dispute with its insurers as to when cover-
age for DES claims was invoked or “triggered” under
its comprehensive general liability policies, Lilly brought
suit in the District of Columbia for a judicial determina-
tion of coverage. Specifically, Lilly sought a declaration
that coverage was triggered by the ingestion of DES,
and by the manifestation of injury, and at each point in
between—a so-called multiple trigger of coverage. By
suing in the District of Columbia, Lilly sought to avail
itself of the D.C. Circuit’s decision in Keene Corp. v.
Insurance Co. of North America, 667 F.2d 1034 (D.C.
Cir. 1981), cert. denied, 455 U.S. 1007 (1982) (White,
Blackmun, Powell, J.J. dissenting), in which the multi-
ple trigger concept had been applied to asbestos exposure
claims.
1QOn the initial appeal from the District Court, the court below
certified several legal questions to the Supreme Court of Indiana and
reserved decision on petitioners’ personal jurisdiction and venue
objections. Eli Lilly and Co. v. Home Insurance Co., 764 F.2d 876,
884-885 (D.C. Cir. 1985). The Supreme Court of Indiana found
that, given the language contained in the Lilly policies, the multiple
4
Lilly is an Indiana corporation with its principal place
of business in Indianapolis. Petitioner Falcon is a Dela-
ware corporation with its principal place of business in
Boston, Massachusetts and petitioner Mutual Fire is a
Pennsylvania corporation with its principal place of busi-
ness in Philadelphia.
Neither Falcon nor Mutual Fire is licensed to do busi-
ness in the District of Columbia. Both are non-admitted
surplus lines carriers and, as such, are not authorized
to transact business in the District. Under D.C. Code
§§ 35-1543 and 1544, a D.C. broker is prohibited from
placing any coverage with non-admitted surplus lines
carriers unless the broker “is, after diligent effort, un-
able to procure such policies . . . from companies duly
authorized to transact business in the District.” D.C.
Code § 35-1544 (1981). Thus, the procurement of a pol-
icy from non-admitted surplus lines insurers like Mutual
Fire and Falcon occurs as a matter of last resort and
only at the initiation of an independent surplus lines
broker acting on behalf of an insured who is unable to
obtain the coverage from a D.C.-authorized insurer.
Not only are Mutual Fire and Falcon not authorized
to transact business in the District of Columbia, they
have no employees, agents, or brokers there, nor any
office, telephone listing, property, or bank account. Nei-
ther insurer solicits business in the District of Columbia
or transacts or does business there. The only premiums
petitioners derive from insureds residing in the District
trigger theory introduced in Keene was Indiana law. Eli Lilly and
Co. v. Home Insurance Co., 482 N.E.2d 467, 470-471 (Ind. 1985).
Neither the merits of Lilly’s trigger-of-coverage claims nor the
decisions of the court below relating thereto are involved in this
petition. The Home Insurance Company and other Lilly insurers,
including petitioners herein, have petitioned this Court for a writ
of certiorari seeking review of the judgment of the court below on
grounds other than the personal jurisdiction issues here presented.
See Home Insurance Co., et al. v. Eli Lilly and Co., petition for writ
of certiorari filed November 20, 1986.
a
5
come exclusively from the surplus lines policies above
described, and these premiums have no relationship to
Lilly, the policies issued to it by petitioners, or this law-
suit.
Falcon issued three policies to Lilly from 1960-1968.
Mutual Fire insured Lilly for one year from 1975-1976.
These policies, which provided only excess liability insur-
ance coverage, were exclusively transacted between the
Indianapolis-based Lilly, or its Indianapolis-based broker
Marsh & McLennan, Inc., on the one hand, and Mutual
Fire in Philadelphia or Falcon in Boston, on the other.
None of these policies was negotiated, transacted, exe-
cuted or delivered in the District of Columbia. No pre-
miums thereunder came from the District, and Lilly’s suit
against petitioners did not relate in any way to any al-
leged conduct by petitioners in the District of Columbia.
Finally, it is undisputed that, under the policies they is-
sued to Lilly, Falcon aid Mutual Fire have no duty to
defend actions brought against Lilly in the District of
Columbia or anywhere else.
Given this dearth of contacts with the District of Co-
lumbia, petitioners timely moved the District Court to
dismiss the complaint against them for lack of personal
jurisdiction and improper venue. These motions were
denied. App., 26a. On appeal, the court below affirmed,
concluding that the exercise of personal jurisdiction over
petitioners was consistent with the due process clause of
the Constitution.*
The stated “touchstone” of the court’s due process in-
quiry was whether it was “foreseeable” that Falcon and
Mutual Fire would be “haled into court” in the District
2 While the court below discussed the implications of the consent
to suit clauses in petitioners’ insurance policies, the court correctly
concluded that these clauses provided no basis for personal jurisdic-
tion over petitioners. App., 14a-19a. Thus, the decision below rests
squarely on the constitutionality of the District Court’s exercise of
personal jurisdiction over petitioners. App. 19a-21a.
6
of Columbia, citing World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 297 (1980). App., 20a. The
court found that, given the specific relationship between
Lilly and petitioners, such a result was “quite foresee-
able.” Jd. The court reached this conclusion not by ana-
lyzing what, if any, contacts petitioners themselves had
with the District of Columbia, but by looking instead to
Lilly’s presumed contacts there, and then imputing these
contacts to petitioners:
[Petitioners] knew that their insured, Lilly, dis-
tributed its products nationwide. They therefore
were aware that Lilly was likely to be sued in any
jurisdiction in the nation, including the District of
Columbia. Moreover, as Lilly’s insurers, [petition-
ers] were aware that if Lilly was sued it was likely
to attempt to implead [petitioners] if a dispute
arose over their duty to indemnify or defend. .. .
In such an eventuality it would be completely fore-
seeable that the insured would successfully hale the
insurance company into court.
App., 20a (citations omitted).
The court below found that it was also foreseeable that
petitioners could be sued in the District of Columbia be-
cause the court assumed that petitioners possessed con-
siderable information about the scope and extent of
Lilly’s business operations and had structured their in-
suring agreements accordingly. App., 20a-2la. The court
noted with approval what it termed “the First Circuit’s
rule” that, because insurance companies have a commer-
cial interest in knowing of the contacts of their insureds
with the forum state, “an insurer should foresee being
sued in a jurisdiction where its insured has substantial
contacts.” App., 2la (citing American & Foreign In-
surance Association v. Commercial Insurance Co., 575
F.2d 980 (1st Cir. 1978) and Commonwealth of Puerto
Rico v. S.S. Zoe Colocotroni, 628 F.2d 652 (1st Cir.
1980), cert. denied, 450 U.S. 912 (1981)). The court
concluded :
q
In this case there can be no question but that Eli
Lilly’s insurers were aware of the nation-wide scope
of Lilly’s product distribution. They cannot now
claim that it was somehow unforeseeable that they
would be haled into court in a jurisdiction where
Lilly would likely be subject to suit.
App., 2la (footnote omitted).
Falcon and Mutual Fire timely petitioned the court
below for rehearing. They pointed out that the court
had erred in finding that petitioners could have foreseen
being haled into court by impleader in a hypothetical
suit brought by third persons against Lilly in the District
of Columbia. Petitioners explained that such an even-
tuality was not foreseeable because it was impossible that
Lilly could have impleaded petitioners into any such
suit.* Petitioners also pointed out that the court’s fore-
seeability finding under the so-called “First Circuit rule”
was flawed because the court had simply assumed, with-
out basis, that petitioners possessed considerable knowl-
edge and information about Lilly’s alleged activities in
the District of Columbia and had structured their in-
surance policies accordingly. Finally, petitioners demon-
strated that, in any event, it was plainly unconstitu-
tional to rely on Lilly’s presumed unilateral contacts with
the District of Columbia to maintain personal jurisdic-
tion over petitioners. Nevertheless, the court below, by
Order dated August 22, 1986, denied the petition for re-
hearing. App., 24a-25a.
3 See p. 11 n.5, infra.
8
REASONS FOR GRANTING THE WRIT
I. The Exercise Of In Personam Jurisdiction By The
United States District Court For The District Of
Columbia Over A Nonresident Surplus Lines Insurer
In An Action Brought By Its Insured, Based Solely
On The Insured’s Contacts With The District Of
Columbia, Violates The Due Process Clause.
A. Petitioners Did Not Purposefully Avail Themselves
Of The Privilege Of Conducting Business In The
District Of Columbia So As To Invoke The Benefit
And Protection Of Its Laws.
It is well-settled that a state court may exercise per-
sonal jurisdiction over a nonresident defendant only so
long as there exist minimum contacts between the de-
fendant and the forum state “such that the 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 (1945) (quoting Milliken
v. Meyer, 311 U.S. 457, 463 (1940) ).
[I]t is essential in each case that there be some
act by which the defendant purposefully avails it-
self of the privilege of conducting activities within
the forum State, thus invoking the benefits and pro-
tections of its laws.
Hanson v. Denckla, 357 U.S. 235, 253 (1958) (emphasis
added; citation omitted); Kulko v. California Superior
Court, 436 U.S. 84, 94 (1978).
In World-Wide Volkswagen Corp. v. Woodson, 444
U.S. 286 (1980), this Court reaffirmed these principles
and held unconstitutional an Oklahoma court’s exercise
of personal jurisdiction over nonresident. defendants in
circumstances similar to the instant case. There, the
fortuitous presence of an automobile in Oklahoma was
found constitutionally insufficient, by itself, to support
personal jurisdiction over its nonresident vendors in a
products liability suit involving the automobile:
A ee cee a
9
[W]e find in the record before us a total absence
of those affiliating circumstances that are a neces-
sary predicate to any exercise of state-court juris-
diction.
Id. at 295. The Court stated that the “purposeful avail-
ment” requirement is not met by “isolated” sales, but
“arises from the efforts of the manufacturer or dis-
tributor to serve, directly or indirectly, the market for
its products in other States.” Jd. at 297.
In Burger King Corp. v. Rudzewicz, 471 U.S. 462,
105 S.Ct. 2174 (1985), this Court again reiterated that
“(t]his ‘purposeful availment’ requirement ensures that
a defendant will not be haled into a jurisdiction solely
as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’
contacts,” or as a result “of the ‘unilateral activity of
another party or a third person.’” Id. at , 105
S.Ct. at 2183 (citations omitted). Instead, the court
must find that “the defendant has ‘purposely directed’
his activities at residents of the forum.” Jd. at ——,
105 S.Ct. at 2182 (citations omitted).
In Burger King, the Court held that the Florida courts
had personal jurisdiction over a Michigan-based Burger
King franchisee in an action arising out of the franchise
relationship. In that case, the governing contracts pro-
vided that they were established in Florida, the home
of the Burger King corporation, and governed by Florida
law, and called for the payment of all fees and the for-
warding of all relevant notices to the Florida headquar-
ters. Id. at , 105 S.Ct. at 2178. The Court empha-
sized that the defendant had “entered into a carefully
structured 20-year relationship that envisioned continu-
ing and wide-reaching contacts with Burger King in
Florida” and that “[i]Jn light of [defendant’s] volun-
tary acceptance of the long-term and exacting regulation
of his business from [Florida], the ‘quality and nature’
of his relationship to the company in Florida can in no
sense be viewed as ‘random,’ ‘fortuitous,’ or ‘attenuated.’ ”
Id. at ——, 105 S.Ct. at 2186 (citations omitted).
10
The record in the instant case is entirely devoid of the
“affiliating circumstances” or “purposeful availment”
constitutionally required to subject either Faleon or Mu-
tual Fire to personal jurisdiction in the District of
Columbia.
Faleon is a Delaware corporation with its principal
place of business in Massachusetts. Mutual Fire is a
Pennsylvania corporation with its principal place of bus-
iness there. Neither Falcon nor Mutual Fire is author-
ized or licensed to transact business in the District of
Columbia. Neither company solicits or does business
there. They have no employees, agents, brokers, offices,
telephone listings, property, or bank accounts in the Dis-
trict of Columbia. They have never contracted directly
with any insureds residing in the District of Columbia.
Finally, Lilly’s insurance policies involved in this case
were not negotiated, transacted, executed or delivered
in the District.
The only relationship of any kind that these petition-
ers have had with the District of Columbia is their pas-
sive receipt of surplus lines business from independent
brokers acting on behalf of insureds unable to obtain
particular insurance coverage from D.C.-authorized in-
surers. None of these premiums relate in any way to
Lilly or to Lilly’s lawsuit and, in any case, were not
relied upon by the court below in upholding the District
Court’s exercise of personal jurisdiction over petitioners.‘
Under these circumstances, to require Faleon and Mu-
tual Fire to appear and defend actions brought against
them in the District of Columbia is unfair, unreasonable,
and unconstitutional.
+The court below was correct in disregarding, for the purposes
of its jurisdictional analysis, any premiums unrelated to the Lilly
policies since “jurisdiction [under the District of Columbia long
arm statute] is limited to claims arising from the particular trans-
action of business which provides the basis for jurisdiction.”
Cohane v. Arpeja-California, Inc., 385 A.2d 153, 158 (D.C. 1978),
cert. denied, 439 U.S. 980 (1978).
nrc ana Dave Seti sd ay Sac enn
11
B. Imputing Their Insured’s Presumed District Of
Columbia Contacts To Petitioners In Order To Ex-
ercise In Personam Jurisdiction Over Them Vio-
lates The Due Process Clause Of The Constitution.
Ignoring the utter absence of petitioners’ contacts with
the forum, the court below found that it was foreseeable,
and therefore constitutionally permissible, that Lilly could
maintain suit against petitioners in the District of Co-
lumbia. The court reached this result by first looking to
Lilly’s presumed contacts with the District and con-
cluded that they were sufficient to render Lilly amen-
able to suit there by others. The court then assumed
that petitioners were aware that, if Lilly was sued, it
was likely to attempt to implead petitioners if a dispute
arose over their duty to indemnify or defend.® The court
5 Petitioners do not agree that such a possibility of impleader is
constitutionally sufficient to support the exercise of personal juris-
diction over them. In any case, impleader of these petitioners by
Lilly was impossible and, therefore, not foreseeable. Impleader was
impossible because the only two legal bases therefor—the refusal by
petitioners to indemnify or to defend Lilly—did not exist. See
National Mutual Insurance Co. v. Liberty Mutual Insurance Co.,
196 F.2d 597 (D.C. Cir. 1952), cert. denied, 344 U.S. 819 (1952) ;
Green v. Shepherd Construction Co., 46 F.R.D. 434, 488 (N.D. Ga.
1969); Wright & Miller, Federal Practice and Procedure: Civil
§ 1449 at 267 (1971). The court below found that Mutual Fire
had not refused to indemnify Lilly and said that it was unable to
find on the facts before it that Falcon had so refused. App., 18a-19a.
And it is undisputed that petitioners have no duty under their
policies to defend Lilly in the District of Columbia or anywhere
else. Indeed, as Lilly explained in its main brief in the court below,
it prefers that none of its insurers has a duty to defend:
Most initial layer products liability policies are “duty to de-
fend” policies, 7.e., the insurer is obliged to supply a defense
lawyer in the underlying cases. Lilly prefers to conduct its own
defense and send the insurers the bill. As a result of this
arrangement, Lilly has excess “indemnity” policies at its initial
layer of insurance, rather than the usual primary “duty to
defend”’ policies.
Brief of Eli Lilly and Co., filed December 13, 1984, at p. 10 (foot-
note omitted).
12
concluded: “In such an eventuality it would be com-
pletely foreseeable that the insured would successfully
hale the insurance company into court.” App., 20a.
The court offered another reason why it believed it
was foreseeable that petitioners would be sued in the
District of Columbia. Here, the court presupposed that
insurance companies in general have considerable in-
formation about the companies they insure, and structure
their policies and set their premiums accordingly. The
court concluded that, because insurance companies have
a commercial interest in knowing of the contacts of their
insureds with the forum state, “an insurer should fore-
see being sued in the jurisdiction where its insured has
substantial contacts.” App., 2la. And relying again on
its presumption that Lilly had sufficient contacts with
the District of Columbia so as to be amenable to suit
there, the court concluded that petitioners should have
foreseen being haled into a jurisdiction where Lilly would
likely have been subject to suit. Id.
This imputation to petitioners of Lilly’s presumed con-
tacts with the District of Columbia in order to exercise
im personam jurisdiction over petitioners cannot be
squared with due process. The proper touchstone for de-
termining the constitutionality of a forum’s exercise of
personal jurisdiction is an examination of the defend-
ant’s—not someone else’s—contacts with that forum.
See, e.g., Kulko, 436 U.S. at 98; Hanson, 357 U.S. at
253; Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 417 (1984).
As this Court said in World-Wide Volkswagen:
[T]he foreseeability that is critical to due process
analysis is not the mere likelihood that a product
will find its way into the forum State. Rather, it
is that the defendant’s conduct and connection with
the forum State are such that he should reasonably
anticipate being haled into court there.
13
444 U.S. at 297 (emphasis added) (citing Kulko, 436
U.S. at 97-98 and Shaffer, 483 U.S. at 216). The Court
explained:
The Due Process Clause, by ensuring the “orderly
administration of the laws,” ... gives a degree of
predictability to the legal system that allows poten-
tial defendants to structure their primary conduct
with some minimum assurance as to where that con-
duct will and will not render them liable to suit.
World-Wide Volkswagen, 444 U.S. at 297 (emphasis
added).
Although in that case it was foreseeable, as a matter
of fact, that petitioners’ automobiles might end up in
any state, including Oklahoma, the Court emphasized
that “foreseeability alone has never been a sufficient
benchmark for personal jurisdiction.” Jd. at 295. The
Court, quoting Hanson, 357 U.S. at 253, observed that
the Constitution requires more:
[T]he mere “unilateral activity of those who claim
some relationship with a nonresident defendant can-
not satisfy the requirement of contact with the
forum State.”
World-Wide Volkswagen, 444 U.S. at 298; accord Heli-
copteros, 466 U.S. at 417.°
In Burger King, this Court recently reaffirmed that
jurisdiction is proper only “where the contacts [relied
upon for jurisdiction] proximately result from actions
by the defendant himself that create a ‘substantial con-
6 The District of Columbia Court of Appeals recently relied on
the above-quoted language of this Court in Hanson, World-Wide
Volkswagen and Helicopteros in holding that D.C. Code § 13-423, the
long arm statute upon which the court below relied, did not provide
a basis for personal jurisdiction over a defendant whose only busi-
ness contacts with the District of Columbia took place at the initia-
tion of the plaintiff or a third party. Sol Salins, Inc. v. Sure Way
Refrigerated Truck Transportation Brokers, Inc., 510 A.2d 1032,
1034-35 (D.C. 1986).
14
nection’ with the forum State.” 471 U.S. at ——, 105
S.Ct. at 2183-84 (emphasis in original).
In judging whether a party has sufficient minimum
contacts such that personal jurisdiction can be constitu-
tionally exercised over that party, a court must focus on
“the relationship among the defendant, the forum, and
the litigation.” Keeton v. Hustler Magazine, Inc., 465
U.S. 770, 775 (1984) (quoting Shaffer, 433 US. at 204) ;
accord Helicopteros, 466 U.S. at 414. Indeed, an ap-
proach like that taken by the court below,, which would
“shift the focus of the inquiry from the relationship
among the defendant, the forum, and the litigation to
that among the plaintiff, the forum, the insurer, and the
litigation . . . is forbidden by International Shoe and its
progeny.” Rush v. Savchuk, 444 U.S. 320, 332 (1980).
See also Helicopteros, 466 U.S. at 412 n.5 (Nothing in
the relationship between a plaintiff and defendant “could
possibly enhance [the defendant’s] contact with [the
forum]”’).’
7 Unlike the court below, other Courts of Appeals have followed
this Court’s rule and have focused their personal jurisdiction
analyses on the defendant’s contacts with the forum, not the plain-
tiff’s contacts with the forum or the plaintiff’s contacts or con-
tractual relationship with the defendant. See, e.g., Hunt v. Erie
Insurance Group, 728 F.2d 1244, 1247 (9th Cir. 1984) (Court held
that insured’s contacts with California could not be imputed to its
insurer because “[t]o characterize [the insured’s] decision [to
move to California] as an intentional action by [the insurer], for
purposes of meeting the purposeful availment requirement of due
process, would frustrate the very policy behind that requirement:
ensuring that a ‘defendant’s conduct and connection with the forum
State are such that he should reasonably anticipate being haled into
court there.’”) (emphasis in original; citations omitted); Travel-
ers Indemnity Co. v. Calvert Fire Insurance Co., 798 F.2d 826, 833
(5th Cir. 1986) ; Sea Lift, Inc. v. Refinadora Costarricense de Petro-
leo, S.A., 792 F.2d 989, 993 (11th Cir. 1986) ; Colwell Realty Invest-
ments, Inc. v. Triple T Inns of Arizona, Inc., 785 F.2d 1330, 1333
(5th Cir. 1986); Chung v. NANA Development Corp., 783 F.2d
1124, 1127 (4th Cir. 1986).
15
The two First Circuit decisions upon which the court
below relied are inapposite. It is clear from a reading
of those cases that the circumstances leading the First
Circuit to uphold Puerto Rico’s exercise of personal juris-
diction over the insurers there were far different from
the circumstances presented here.
In American & Foreign Insurance Association—a case
decided before World-Wide Volkswagen—the First Cir-
cuit affirmed Puerto Rico’s exercise of jurisdiction over
two Colombian insurers. These companies had insured a
large volume of bottles shipped to Puerto Rico by a
Colombian manufacturer. One of the bottles exploded,
causing injury in Puerto Rico and giving rise to the
lawsuit. The court found that the bottles “constituted
a substantial subject of insurance located in Puerto
Rico.” 575 F.2d at 982. The court further emphasized
that “[t]he insurance companies knew that they were
covering the product liability risk arising from these
bottles ‘since the terms of the policy assured full knowl-
edge of both the volume of export sales as well as the
actual location of the customers.’”’ Id. (emphasis added).
Similarly, in S.S. Zoe Colocotroni, the First Circuit
found that the insurance company “plainly knew” that
the vessels it insured regularly stopped in Puerto Rico,
that the insurer, through its agents in Puerto Rico, pro-
vided “substantial” insurance-related services to its cus-
tomers there through a local correspondent, and that
the insurer had, in fact, advertised to its customers that
these services were available to them in Puerto Rico. 628
F.2d at 668. In these circumstances, the court concluded
that the insured was “unavoidably aware that it was re-
sponsible to cover losses arising from a subject of insur-
ance regularly present in Puerto Rico... .” Jd. at 669.
The specificity of the First Circuit’s findings in both of
these cases stands in marked contrast to the generalized
and unsubstantiated assumptions offered by the court be-
low to justify the exercise of personal jurisdiction over
16
the petitioners here. But there is an even more funda-
mental and compelling reason why these cases have no
application to the instant case. Both of the First Cir-
cuit cases were decided under Puerto Rico law. Puerto
Rico is a so-called “direct action” jurisdiction in which
injured parties are permitted at their option to bypass
suing the alleged tortfeasor and instead bring an action
directly against the tortfeasor’s insurer. See 26 L.P.R.A.
§ 2003 (1976).
In American & Foreign Insurance Association, the court
implicitly recognized the significance of a direct action
statute in a forum’s exercise of personal jurisdiction.
575 F.2d at 982. Moreover, in S.S. Zoe Colocotroni, the
court made plain that Puerto Rico’s status as a direct ac-
tion jurisdiction bore directly on the foreseeability that
the insurers might be sued there and was an essential
element of its affirmance of personal jurisdiction over
the insurers:
[The insurer] was unavoidably aware that it was
responsible to cover losses arising from a substantial
subject of insurance regularly present in Puerto
Rico, a direct action jurisdiction.
* * * * *
Where, as here, the insurer has the means avail-
able to structure its primary conduct so as to con-
trol the area within which it will be subject to
direct action, where it is undoubtedly aware that
the objects of its policies are regularly present in a
particular jurisdiction, and where it not only does
not act to curtail such presence but actively pro-
motes it by providing contractual services in the
jurisdiction, we hold that such an insurer is amen-
able to personal jurisdiction in the forum.
628 F.2d at 670 (emphasis added; footnote omitted).
Unlike Puerto Rico, the District of Columbia has no
provision of law providing for direct action against in-
surers.
17
This Court has never held that an insured’s conduct
in the forum state may, in and of itself, constitute a
sufficient basis for exercising personal jurisdiction over
its insurer. Indeed, in the converse situation presented
in Rush, 444 U.S. at 331-32, this Court found unconstitu-
tional the exercise of personal jurisdiction over a non-
resident insured based on his insurer’s contact with the
forum. Rejecting the notion that the insured was pres-
ent in the forum merely because its insurer was obli-
gated by contract to defend it there, the Court stated
that “the fictitious presence of the insurer’s obligation
in Minnesota does not, without more, provide a basis for
concluding that there is any contact in the International
Shoe sense between Minnesota and the insured.” Jd. at
329-30 (emphasis in original).* Finally, the Court
stated:
The Minnesota court also attempted to attribute
[the insurer’s] contacts to [the insured] by...
aggregating their forum contacts in determining
whether it had jurisdiction. The result was the as-
sertion of jurisdiction over [the insured] based
solely on the activities of [the insurer]. Such a
result is plainly unconstitutional. Naturally, the
parties’ relationships with each other may be sig-
nificant in evaluating their ties to the forum. The
requirements of International Shoe, however, must
be met as to each defendant over whom a state court
exercises jurisdiction.
Id. at 331-32 (emphasis added; footnote omitted).
The same principle must apply in the instant case.
Lilly’s contacts with the District of Columbia, whatever
they may be, cannot constitutionally support the exercise
of personal jurisdiction over petitioners here.
8 Although Rush was a quasi in rem action, the Court acknowl-
edged “that ‘all assertions of state-court jurisdiction must be evalu-
ated according to the standards set forth in International Shoe and
its progeny.’” 444 U.S. at 327 (citing Shaffer, 483 U.S. at 212).
18
II. The Decision Of The Court Below Directly Conflicts
With A Decision Of The Highest Court Of The
Commonwealth Of Pennsylvania.
The decision of the court below directly conflicts with
the holding of the Supreme Court of Pennsylvania in
United Farm Bureau Mutual Insurance Co. v. U.S.F.
& G., 462 A.2d 1300 (Pa. 1983). In United Farm Bu-
reau, the Pennsylvania court refused to permit. the asser-
tion of personal jurisdiction over a nonresident insurer
despite the fact that its insured (the plaintiff) was pres-
ent in the forum state and its insurance policy covered
losses wherever they might arise nationwide. The Penn-
sylvania long arm statute involved in the case was in
all relevant respects identical to the District of Columbia
long arm statute involved in the instant case. Jd. at
1304. The court concluded:
Assuming United Farm under its liability policy in-
sured a risk located within this Commonwealth when
it issued the policy, nevertheless the risk was limited
by its promises to defend its insureds and indem-
nify them in suits against the insureds, not itself,
for damages arising out of the insureds’ liability
for claims .... Thus, it insured only the risk of
paying those sums which its insureds become obli-
gated to pay. Such a promise to defend and pay
judgments does indeed extend to the entire United
States .... The policy does not, howcver, require
United Farm to submit itself to the jurisdiction of
a foreign state as a defendant in its own person,
Id. at 1306-07 (emphasis added).
In United Farm Bureau, as in the instant case, there
was no evidence of any substantial contacts by the in-
sured or the insurer with the forum. Since the insurer
lacked any contact with the forum in its own right and
had no particular knowledge of the insured’s contacts
there, the court refused to permit the exercise of per-
19
sonal jurisdiction. Unlike the insurer in United Farm
Bureau, petitioners here have no duty whatsoever to de-
fend Lilly. See p. 11 n.5, supra. Thus, the court below
has affirmed the exercise of personal jurisdiction over
petitioners in a setting even more tenuous than that
presented in United Farm Bureau.
CONCLUSION
For the foregoing reasons, the petition for a writ of
certiorari should be granted.
Respectfully submitted,
RICHARD H. GIMER
Counsel of Record
JOHN G. DEGOOYER
STEPHEN L. HUMPHREY
KATHRYN A. UNDERHILL
WILLIAM J. HAMEL
HAMEL & PARK
888 Sixteenth Street, N.W.
Washington, D.C. 20006
(202) 835-8000
Counsel for Petitioners
APPENDIX
la
APPENDIX
UNITED STATES COURT OF APPEALS
DISTRICT OF COLUMBIA CIRCUIT
No. 84-5391
ELI LILLY AND COMPANY
V.
HOME INSURANCE COMPANY, et al.,
FIREMEN’S FUND INSURANCE COMPANY,
Appellant.’
June 24, 1986
Appeals from the United States District Court
for the District of Columbia
1 Consolidated with the following cases (identified by this court's
case number and appellant(s) ), in all of which Eli Lilly & Company
is the appellee: 84-5394, Zurich American Insurance Company; 84-
5395, International Surplus Lines Insurance Company et al; 84-
5396, Interstate Fire & Casualty Company et al.; 84-5397, American
Employers’ Insurance Company; 84-5398, Falcon Insurance Com-
pany; 84-5399, Mutual Fire, Marine & Inland Insurance Company;
84-5400, St. Paul Fire & Marine Insurance Company; 84-5401,
American Home Assurance Co. et al.; 84-5402, Insurance Company
of North America et al.; 84-5403, American Motorists Insurance
Company et al.; 84-5404, Aetna Casualty & Surety Company et al.;
84-5405, Allan Peter Denis Haycock and Paul Malcolm Johnson
et al.; 84-5406, Home Insurance Company; and 84-5407, Travelers
Indemnity Company.
2a
Following Remand from the Supreme Court of Indiana
(D.C. Civil Action No. 82-669)
George Marshall Moriarty, Kenneth W. Erickson,
Boston, Mass., Michael Nussbaum, Earl C. Dudley, Jr.,
Dennis M. Flannery, A. Stephen Hut, Jr., Washington,
D.C., Sheila L. Birnbaum, New York City, Lawrence E.
Carr, Jr., James F. Lee, Jr., Washington, D.C., James
E. Rocap, III, Indianapolis, Ind., Stephen L. Nightingale,
Washington, D.C., James P. Schaller, M. Elizabeth
Medaglia, Brendan V. Sullivan, Jr., John J. Buckley, Jr.,
R. Harrison, Pledger, William John Hickey, Jr., Richard
H. Gimer, Brian C. Shevlin, James C. Gregg and James
E. Greene were on the supplemental brief following re-
mand for appellants.
Theodore B. Boehm, Indianapolis, Ind., Christopher G.
Seanlon, Ralph Earle, II, and Michael A. Nardolilli,
Washington, D.C., were on the supplemenal brief follow-
ing remand for appellee.
Before EDWARDS and SCALIA, Circuit Judges, and
WRIGHT, Senior Circuit Judge.?
Opinion for the court filed by Senior Circuit Judge
WRIGHT.
J. SKELLY WRIGHT, Senior Circuit Judge:
In Eli Lilly & Co. v. Home Ins. Co., 764 F.2d 876
(D.C.Cir.1985) (Eli Lilly I), this court certified several
legal questions to the Supreme Court of Indiana concern-
ing the scope of insurance coverage for the manufacturer
of the drug DES. The Indiana court having issued an
* Judge Tamm, a member of the panel of this court that issued
the certification decision, died before the Indiana Supreme Court
remanded the case to this court. Judge Scalia was selected to re-
place Judge Tamm following the Indiana court’s remand. Judge
Wald subsequently recused herself and was replaced by Judge
Edwards.
3a
opinion answering our questions, the case is once again
before us. The Indiana court held that undey Indiana
law extrinsic evidence would not be considered in con-
struction of an ambiguous term in an insurance contract.
Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d 467 (Ind.
1985). It further held that in the case of the contract
before this court “coverage is triggered at any point
between ingestion of DES, and the manifestation of a
DES-related disease.” Jd. at 470-471. These holdings
dictate affirmance of the order of the District Court
granting appellee’s summary judgment motion on its
declaratory claim.®
I. BACKGROUND
A. The DES Dispute
From the late 1940’s until 1971 doctors often pre-
scribed the drug DES (diethylstilbestrol) to pregnant
women to help prevent miscarriages. In 1970, however,
researchers reported a connection between ingestion of
DES and development of cancers in the DES users’
daughters who were in utero at the time the drug was
taken. Massive tort litigation followed, much of it against
appellee Eli Lily, one of the largest manufacturers of
DES.*
From the time it first produced DES until 1976 Eli
Lilly purchased some 242 insurance policies to cover its
DES risks. All of these policies provided that the in-
surer would indemnify Lilly for its tort liabilities if the
underlying tort suit were based on an “injury” that
3In Eli Lilly i this court reserved decision on the personal juris-
diction and venue objections of three excess insurance companies.
We now address these objections and find them without merit. See
Part IV infra.
4 Lilly manufactured DES from 1947 to 1967. Over 600 lawsuits
have been filed against Lilly for DES-related illnesses.
4a
occurred during the policy period.’ The term “injury” is
not defined with precision in the policies themselves. See
2 Joint Appendix (JA) 96. Nor is the time at which
injury “occurs” self-evident. Given that cancer often
only develops when a DES daughter is between 15 and
25 years of age, Memorandum Opinion filed April 12,
1984 (Mem.Op.) at 4 n. * * * (D.D.C. Civil Action No.
82-669), 5 JA 697, it was not unusual for several in-
surance companies to have issued insurance policies to
Lilly during the period between ingestion of DES and
manifestation of the first diagnosable symptoms.
When Lilly notified its insurers of the DES claims
filed against it, the insurers responded by adopting con-
flicting interpretations of the term “injury.” See Eli
Lilly I, 764 F.2d at 880. The general thrust of each
insurance company’s interpretation, however, was that
some other insurance company was on the risk at the
time the “injury” occurred. According to the District
Court:
In general, those insurers at risk prior to the diag-
nosis of DES-related diseases took the position that
policies in force on the “date of manifestation” of
the injury covered DES claims. Similarly, those in-
surers whose policies were in force on the date of
manifestation of DES-related injuries took the posi-
tion that policies in force on the date of ingestion of
DES covered DES claims.
Mem.Op. at 5 n. * *, 5 JA 698.
By contrast, Lilly maintained that the policies should
be governed by the “multiple trigger” theory: the injury
5 There are four basic variants on the policy provision triggering
liability. One of them refers to injuries “sustained” during the
policy period. 2 Joint Appendix (JA) 97. The other three refer
to injuries that “occur” during the policy period. 2 JA 96, 98, 99-
100. As noted in Eli Lilly I, the parties do not contend that these
differences require different interpretations. 764 F.2d at 879.
5a
should be understood to have “occurred” at any time
between exposure to DES and manifestation of symptoms
of a DES-related disease.
Lilly filed a declaratory judgment action in the Dis-
trict Court in March 1982. After extensive discovery,
Lilly filed a motion for summary judgment in March
1983. Purporting to rely on Indiana law, the District
Court granted Lilly’s motion on April 12, 1984. The
court held that (1) each insurer on the risk between the
initial ingestion of DES and the manifestation of a DES-
related disease is liable to Lilly for indemnification, (2)
each insurer is liable in full once coverage under its
policy is triggered, (3) Lilly can apply only one policy’s
limit to each injury, and (4) Lilly may select the policy
under which it is to be indemnified (subject to the pro-
visions in the policies governing allocation of liability
when more than one policy covers an injury). See Mem.
Op. at 22-23, 5 JA 715-716. The insurers appealed.
B. The Initial Appeal to This Court
On appeal the insurers argued that under Indiana law
they should be allowed to introduce extrinsic evidence of
the parties actual intent in adopting the policies, their
course of conduct in applying the policies, Lilly’s sophisti-
cation and strength as a bargaining partner, and the
etiology of DES-related illnesses. The insurance com-
panies therefore argued that summary judgment had
been improvidently granted because there were genuine
factual disputes on three material issues: (1) the author-
ship of the policies, (2) the actual intent of the parties
on the question of multiple trigger liability, and (3) the
views of medical experts on when injury actually “oc-
curs.”
In reviewing these challenges this court agreed with
the District Court that the law of Indiana governs the
case. A review of Indiana cases, however, suggested that
the law of that state was unsettled on the question
6a
whether extrinsic evidence is admissible to construe an
ambiguous trigger provision in an insurance contract
and on the issue of which interpretation a court should
adopt if it did not admit such extrinsic evidence. Conse-
quently, in an opinion issued June 18, 1985 a divided
panel of this court (Wright, Tamm,° and Wald) certified
three questions of law to the Indiana Supreme Court.’
C. The Indiana Decision
On September 12, 1985 the Supreme Court of Indiana
issued its opinion responding to this court’s certification.
A petition for rehearing was denied on November 19,
1985, and the case was remanded to this court.
6 Judge Tamm would have applied this circuit’s holding in Keene
Corp. v. Ins. Co. of North America, 667 F.2d 1034 (D.C. Cir. 1981),
cert. denied, 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875 (1982).
Consequently, he opposed certification to the Indiana Supreme Court
and filed a dissent.
7 The three questions were:
1. Under Indiana insurance contract law, should the types of
extrinsic evidence proffered by the insurers be considered in the
interpretation of the disputed “trigger” provisions?
2. If any aspect of the insurers’ extrinsic evidence should be
considered, would Indiana courts require a determination of the
parties’ actual intent concerning the application of the “trigger”
provision to delayed manifestation injuries? Or would Indiana
courts permit a determination, after consideration of the extrinsic
evidence, that the parties did not hold or convey a clear understand-
ing of the trigger provision’s applicability to delayed manifestation
injuries and that, thus, the provision must be interpreted by the
court as a matter of Indiana insurance law?
3. If the insurers’ extrinsic evidence should not be considered,
or if that evidence is not determinative of the parties’ intent, how
should the insurance policy provision at issue be interpreted under
Indiana law? In other words, would Indiana courts adopt an expo-
sure, a manifestation, a multiple trigger, or some other interpre-
. tation of the “injury”/“occurrence” language in Eli Lilly’s policies?
Eli Lilly I, 764 F.2d at 884-885.
Ta
| The Indiana court answered two of the three questions
| certified by this court. First, the Indiana court held
that it would not consider extrinsic evidence to determine
the meaning of the trigger provisions of Lilly’s insur-
ance.® The court grounded this rule against admitting
extrinsic evidence on two alternative rationales. First,
the court cited the policy of construing ambiguous policy
language against the insurer. It hinted that this inter-
pretive policy rested, in part, on the more general rule
that construction should favor the nondrafter. 482 N.E.
2d at 470. But the court also relied on the policy of con-
struing ambiguous language in this manner because it
“further[s] the policy’s basic purpose of indemnity.”
Id. Finally, the Indiana court partially justified the
policy of promoting indemnity on the basis of its tend-
ency to conform with the “reasonable expectations” of
the insured. Jd.
The Indiana court also held that, given the trigger
provisions involved in this litigation, the policies’ “cover-
age is triggered at any point between ingestion of DES
and the manifestation of a DES-related disease.” Jd. at
471 (the “multiple trigger” theory). The rationale for
this rule was the same as the rationale for exclusion of
extrinsic evidence: to further insurance policies’ “domi-
nant” purpose of providing indemnification. See id.
The only limitation the Indiana court imposed on the
multiple trigger thesis was that the insurance policy
must first be found to be “ambiguous” before its special
rules of construction will apply. Jd. at 470. The court,
however, specifically held the language of the policies
covering Eli Lilly to be ambiguous.
8 Having thereby answered this court’s first question in this
manner, the Indiana court saw no need to answer the second (i.e.,
assuming that some extrinsic evidence was introduced, would In-
diana courts require a determination of the parties’ actual intent
concerning the trigger provisions of the policies?).
a
8a
Broadly stated, the insurers make three arguments as
to why the Indiana opinion does not require this court to
affirm the judgment of the District Court. First, ap-
pellants argue that, notwithstanding its seemingly clear
holding, evidence of authorship, actual intent, and eti-
ology is still admissible under the Indiana opinion. Sec-
ond, and in the alternative, the insurers argue that if
Indiana has established a rule of substantive law exclud-
ing evidence of authorship, intent, and etiology, the law
is unconstitutional. Finally, a handful of the insurers
argue that the District Court lacked personal jurisdic-
tion over them and that venue was not proper in the
District of Columbia. We address these arguments
seriatim.
II. ADMISSIBILITY OF EXTRINSIC EVIDENCE
A. Admissibility of Evidence of Authorship
Appellants contend that the Indiana court made evi-
dence of authorship a material issue in construing in-
surance contracts. They read the Indiana opinion to
make the insurer’s authorship of a policy a necessary
predicate of the general rule that ambiguities in such
policies are to be construed against the insurer and, by
implication, a necessary predicate of the court’s conclu-
sion that the multiple trigger interpretation should be
applied here.
Appellants further argue that, although the Indiana
court could determine the substantive law and thereby
define the material issues in this case, that court could
not determine what evidence was relevant to that issue.
Issues of relevance, appellants correctly note, are to be
determined under the Federal Rules of Evidence. Appel-
lants therefore conclude that this court can and must
ignore the Indiana court’s statement that the insurers’
evidence of authorship would be excluded under Indiana
law. That ruling, they argue, is a gratuitous statement
of the Indiana law of evidence. Because appellants in-
9a
troduced evidence of Lilly’s participation in drafting the
trigger provision of at least some of the policies, they
argue that summary judgment should not have been
granted.°
The short answer to appellants’ contentions is that the
Indiana court did not make authorship a predicate of
the general rules controlling the construction of insur-
ance contracts or of its holdings in this case. As already
noted, we read the Indiana court to have based the
general rule that insurance contracts are to be construed
against the insurer on three policies: assuring indemnifi-
cation, fulfilling the reasonable expectations of the in-
sured, and contra proferentem. 482 N.E.2d at 470. It
is true that the rule that insurance contracts should be
construed against the insurer is a predicate for the Indi-
ana court’s two holdings. And it is also true that the
third rationale underlying this rule of interpretation—
contra proferentem—does turn on authorship. Nonethe-
less, the Indiana opinion does not suggest that each of
these rationales is a necessary predicate of the rule that
a court should construe ambiguities against the insurer.
The Indiana court’s passing reference to the issue of
authorship is therefore mere dicta.
B. Admissibility of Evidence of Actual Expectations
As with the Indiana court’s reference to authorship,
its statements concerning “expectations” merely eluci-
date one of the several policies underlying its holdings.
As such, these statements are mere dicta. Moreover, the
® The insurers argue that Lilly shared in the drafting and was
responsible for the wording of several important policy provisions.
See Joint Post-Certification Supplemental Memorandum of Defend-
ants-Appellants filed Nov. 27, 1985 at 18. Lilly responds by argu-
ing that, although it may have bargained for certain policy changes,
it did not bargain in any substantive fashion over the terms of the
trigger provision at issue in this case. See appellee’s Post-Certifi-
cation Supplemental Memorandum filed Dec. 10, 1985 at 16 n. 1.
_—————————
10a
“expectations” of which the Indiana court speaks are
the objectively reasonable expectations of an insured.
The Indiana opinion speaks ‘of expectations that an in-
sured “could” have had, not of the expectations it had in
fact. See id. It is also notable that the Indiana court
referred to the principle of “reasonable expectations” in
the context of explaining why it was going to construe
insurance contracts against the insurer, as well as in the
course of stating its rationale for adoption of the multi-
ple trigger thesis. Thus, contrary to the contention of
appellants, see Joint Post-Certification Supplemental
Memorandum of Defendants-Appellants filed November
27, 1985 at 16, the Indiana court apparently did not
think extrinsic evidence should be used to determine the
character of such “reasonable expectations.” Instead the
court seemed to have determined the content of such
expectations—the multiple trigger thesis—as a matter of
law."
C. Admissibility of Evidence of Etiology
The insurers argue that the Indiana court held that
liability is triggered if diagnosable “injury” occurs at
any point between ingestion and manifestation. They
therefore argue that they had a right to introduce rele-
vant evidence on the issue of when injury occurred.
10 The Indiana court adverted to such “reasonable expectations”
by citing this court’s opinion in Keene Corp. v. Ins. Co. of North
America, supra note 6. In the passage in Keene cited by the Indiana
court, this court defined “reasonable expectations” as those expec-
tations that the insured “could have reasonably formed, as an
objective matter, on the basis of the policies’ language.”’ 667 F.2d
at 1042 n. 12 (emphasis added).
11 Thus in the hands of the Indiana court the concept of ‘“objec-
tively reasonable expectations” becomes a way of emphasizing one
aspect of the policy of furthering indemnification: its assurance
of certainty for the insured. Although this concept is susceptible
of a variety of meanings, see Keeton, /nsurance Law Rights at
Variance With Policy Provisions, 83 HARv. L. REv. 961 (1970), the
lla
Appellants flatly misread the Indiana opinion. The
Indiana court said that “coverage is triggered at any
point betwen ingestion of DES and the manifestation of
a DES-related disease.” 482 N.E.2d at 471 (emphasis
added). There is no requirement that diagnosable “in-
jury” be shown during the time the insurer is on the
risk.”
Appellants argue that when the Indiana court stated
that “the determinative question * * * [is] when the
DES-related ‘injury’ ‘occurs’ for purposes of the poli-
cies[,]” 482 N.E.2d at 469-470, it made the existence
vel non of actual injury a material question in constru-
ing the trigger provision. Appellants fail to grasp the
importance of the quotation marks around the terms
“injury” and “occurs” in the Indiana court’s formula-
tion of the issue. By inserting the quotation marks the
Indiana court plainly sought to signal that it understood
those words to be terms of art that might well have a
somewhat artificial legal meaning. If the Indiana court’s
phrasing of the “determinative question” is read in this
manner, there is nothing surprising about its answer:
coverage is triggered from the time of ingestion to the
time of manifestation.
In sum, the only factual predicate of the rule that in-
surance contracts should be construed against the in-
Indiana court’s view is not an irrational application of that idea.
Indeed, Professor (now Judge) Keeton has suggested that certain
situation-specific evidence of actual intent or knowledge must be
disregarded in construing the “objective” intentions of the insured.
See id. at 967, 974-975.
12 Tronically, the insurers seek to transform the Indiana opinion
from an adoption of the Keene multiple trigger rule into the “injury
in fact” view of American Home Products Corp. v. Liberty Mutual
Ins. Co., 565 F.Supp. 1485 (S.D.N.Y. 1983), aff'd as modified, 748
F.2d 760 (2d Cir. 1984). This court, however, certified this case
to the Indiana court partially because it sought to clarify Indiana's
view of the multiple trigger, injury in fact, manifestation, and
exposure theories of liability.
12a
surer is the requirement that the contract be ambigu-
ous. Once that factual predicate was satisfied no quan-
tum of evidence on the issues of authorship, intent, or
etiology should have defeated a motion for summary
judgment.
III. WAIVER OF CONSTITUTIONAL OBJECTIONS TO THE
INDIANA OPINION
Appellee challenges appellants’ efforts to attack the
constitutionality of the Indiana opinion at this stage of
the proceedings. Appellee argues that these arguments
should have been presented in appellants’ memoranda
opposing appellee’s motion for summary judgment in the
District Court. Appellants contend that these issues were
not ripe for resolution until the Indiana court provided
a definitive statement of Indiana law. We do not find
appellants’ argument persuasive and hold that they
waived their right to challenge the constitutionality of
the Indiana opinion.
Once the District Court rendered its decision,” a con-
stitutional attack on its construction of Indiana law was
ripe for review. In its memorandum opinion granting
appellee’s motion for summary judgment the District
Court determined that the law of Indiana governed this
case. See Mem.Op. at 15, 5 JA 708. It also held that
13 Although Lilly’s arguments in the District Court did fore-
shadow that court's ultimate basis of decision, see Statement of
Points and Authorities in Support of Plaintiff Eli Lilly’s Motion
for Summary Judgment filed March 31, 1983, 2 JA 37-42, and al-
though appellants failed to attack the constitutionality of such a
course in the District Court, see Statement of Points and Authori-
ties in Opposition to Plaintiff's Motion for Summary Judgment
filed May 31, 1983, 2 JA 683, 748-751; Joint Supplemental Memo-
randum of Defendants in Opposition to Plaintiff's Motion for Sum-
mary Judgment filed Aug. 31, 1983, 4 JA 108, appellants could
reasonably have thought a constitutional challenge to the implica-
tions of Lilly’s thesis would be premature until there was a legal
ruling focusing the issues.
13a
an Indiana court would not admit extrinsic evidence to
construe this sort of ambiguous insurance contract, see
id. at 20, 5 JA 713, and that an Indiana court would
apply the Keene rule. See id at 22, 5 JA 715. Thus
all of the legal rulings that appellants find to be con-
stitutionally offensive were stated with some precision in
the District Court’s memorandum opinion.
Appellants, however, failed to raise their constitutional
arguments in their appeal to this court. See Joint Brief
of Defendants-Appellants filed October 30, 1984. Nor did
they bring these issues to the attention of the Indiana
court before it rendered its decision. Instead, appellants
raised their constitutional arguments for the first time
in their petition for rehearing to the Indiana Supreme
Court.
The rule in this cireuit is that litigants must raise
their claims on their initial appeal and not in subsequent
hearings following a remand. Laffey v. Northwest Air-
lines, Ine., 740 F.2d 1071, 1089-1092 (D.C.Cir.1984),
cert. denied, —— U.S. ——, 105 S.Ct. 939, 83 L.Ed.2d
951 (1985). This is a specific application of the general
waiver rule, which bends only in “exceptional circum-
stances, where injustice might otherwise result.” Dis-
trict of Columbia v. Air Florida, Inc., 750 F.2d 1077,
1085 (D.C.Cir.1984). There are no such circumstances
in this case, and we see no need to create a blanket
exception to the rule in Laffey and Air Florida for cer-
tification proceedings. We therefore find that appellants
waived their constitutional claims by failing to raise
them on their initial appeal to this court.
IV. PERSONAL JURISDICTION AND VENUE
Three of the appellant insurance companies contend
that the District Court lacked personal jurisdiction over
™ See Joint Post-Certification Supplemental Memorandum of
Defendants-Appellants, supra note 9, at 42.
l4a
them and that venue in the District of Columbia was
improper.'® These appellants are all “excess” insurers:
they provide supplemental coverage under roughly the
same terms as Lilly’s primary insurers. Appellee con-
tends that these appellants effectively waived such per-
sonal jurisdiction and venue objections through consent
to suit clauses in their insurance policies. Alternatively,
appellee argues that jurisdiction and venue were prop-
erly exercised under the applicable statutes and the Due
Process Clause. We examine these arguments seriatim.
A. The Consent To Suit Clause
All three of these carriers ’* are bound by the follow-
ing contractual provision:
It is agreed that in the event of the failure of the
Insurer(s) hereon to pay any amount claimed to be
due hereunder, Insurer(s) hereon, at the request of
the Insured, will submit to the jurisdiction of any
Court of competent jurisdiction within the United
States and will comply with all requirements neces-
sary to give such Court jurisdiction and all matters
arising hereunder shall be determined in accordance
with the law and practice of such Court.
Mutual Fire Cover Note, CN 500528, 2 JA 670. See also
1 JA 183 (finding of the District Court that the consent
to suit clause was adopted by reference by appellants
Falcon and Interstate).
Appellants raise two arguments as to why this consent
to suit clause does not eradicate their jurisdiction and
1° The three are Falcon Insurance Company, Interstate Indemnity
Company, and Mutual Fire, Marine & Inland Insurance Company.
16 Interstate and Falcon are bound through the provision in their
policies that makes them subject to the terms of the primary in-
surer’s policy. Mutual’s policy contains its own consent to suit
clause that is identical to the provision reproduced in text.
l5a
venue objections. First, they argue that a court of “com-
petent” jurisdiction must be a court that has in per-
sonam jurisdiction as well as subject matter jurisdiction.
This argument largely reduces the consent to suit clause
to a waiver of venue or forum non conveniens. As an
initial matter, we find this reading hypertechnical, given
that in many jurisdictions it is difficult to distinguish
the outer perimeter of venue and in personam jurisdic-
tion.” Moreover, by its terms the clause requires the
insured to do what is necessary to “give such Court juris-
diction.” Although it is hardly clear just what that
phrase means, it is certain that it does not refer to the
collusive creation of subject matter jurisdiction. It there-
fore presumably refers to in personam jurisdiction and
constitutes an implicit promise to consent to the exercise
of such jurisdiction.
On the other hand, it would seem that if the term
“competent” in the consent to suit clause is reduced to
consent to subject matter jurisdiction, that term would
be mere surplusage. Because parties could never “con-
sent” to suit by a court that lacked subject matter juris-
diction, it must be assumed that any consent to suit
would implicitly constitute consent to suit in a court
that had subject matter jurisdiction. Under this reading
the term “competent” would only be added to the consent
to suit clause if the parties felt a need to specify that
they had only consented to suit in courts that were
already able to exercise personal jurisdiction over them.
17 Compare Du-Al Corp. v. Rudolph Beaver, Inc., 540 F.2d 1230,
1233 (4th Cir. 1976) (implicitly equating the two tests); Houston
Fearless Corp. v. Teter, 318 F.2d 822, 826 (10th Cir. 1963) (ex-
pressly equating the two tests), with Johnson Creative Arts, Inc.
v. Wool Masters, Inc., 743 F.2d 947, 954 (1st Cir. 1984) (finding
that the outer limits of the “doing business” provision of the fed-
eral venue statute are defined by the dormant Commerce Clause,
not the Due Process Clause). See also 15 C. WRIGHT, A. MILLER &
E. COOPER, FEDERAL PRACTICE AND PROCEDURE: JURISDICTION § 3811
at 117-130 (1986) (criticizing the Commerce Clause test).
l6a
Accepting that the term “competent jurisdiction” may
be ambiguous in this context, we must construe that term
in accordance with Indiana law. As already noted, the
general rule of construction in Indiana is that ambigu-
ous terms in insurance contracts are to be construed
against the insurer. Under this rule it would seem that
the contractual waiver of jurisdictional objections should
be read broadly to include waiver of personal jurisdiction
as well as a waiver of any venue objections.”
Appellants’ second argument is that this provision is
only operative after presentation of a claim by the in-
sured to an insurer and a default by the insurer on its
obligations to the insured. Appellants’ obligations as
excess insurers are not triggered until the primary pol-
icy limits have been exhausted. Because the primary
insurers have failed to honor Lilly’s claims during the
pendency of this litigation, the excess insurers assert
that they have not yet had occasion to default on their
obligations and therefore that a condition precedent of
their consent to suit has yet to be fulfilled.
Appellant Interstate, however, failed to raise the ques-
tion of the condition precedent during the proceedings
before the District Court. It cannot raise it here at
18 We also note that the Indiana rule, announced in Eli Lilly &
Co. v. Home Ins. Co., 482 N.E.2d 467, 470 (Ind. 1985), that extrin-
sic evidence of actual intent is inadmissible applies to this issue.
Therefore we have no occasion to remand the case for factual find-
ings by the District Court on the parties’ actual intent concerning
the scope of the consent to suit clause.
19 Interstate failed to raise the issue in its arguments during the
pendency of its motion to dismiss, see Memorandum of Law in
Support of Motion to Dismiss by Defendant Interstate Indemnity
Company, 1 JA 122-128; Reply of Interstate Indemnity Company
to Plaintiff's Memorandum in Opposition to Defendant’s Motion to
Dismiss, 1 JA 172-179. It is true that in its subsequent Answer to
appellee’s Complaint for Declaratory Judgment appellant Interstate
did aver “a failure of conditions precedent to insurance coverage
* * *” (Emphasis added.) This statement, listed as Interstate’s
17a
this late date. See District of Columbia v. Air Florida,
Inc., supra, 750 F.2d at 1084-1085. We therefore find
the consent to suit clause fully operative as to appellant
Interstate and affirm the District Court’s order denying
its motion to dismiss appellee’s complaint for want of
personal jurisdiction or venue.
Appellants Falcon and Mutual, however, did raise the
issue of the condition precedent before the District
Court.” Appellee argues that under the law of Indiana
conditions precedent are waived by an “anticipatory
breach,” 1.e., by an insurer’s repudiation of its liability
under the policy. This is a correct statement of Indiana
law. See McNall v. Farmers Insurance Group, 181
Ind.App. 501, 392 N.E.2d 520, 523 (Ind. 1979); Ohio
Farmers Ins. Co. v. Vogel, 166 Ind. 239, 76 N.E. 977,
978 (1906). Unfortunately, the law of Indiana does
“Seventh Defense,” was not linked to Interstate’s jurisdiction and
venue objections (its “Fourth Defense’’). If this general reference
to “conditions precedent” was intended to amend the rather de-
tailed arguments raised by Interstate on the jurisdictional issue,
Interstate should have expressed this point with greater specificity.
20 See Reply to Plaintiff’s Opposition to Motions to Dismiss by
Defendants Mutual Fire, Marine & Inland Insurance Company and
Falcon Insurance Company at 4-6 (July 26, 1982).
21 Appellants rely on dicta in China Union Lines v. Amercian
Marine Underwriters, Inc., 458 F.Supp. 132, 186 (S.D.N.Y. 1978),
to the effect that a consent to suit clause is only triggered upon an
actual default, not upon a mere anticipatory breach. The issue in
Chima Union was whether a consent to suit clause constituted a
waivers of an arbitration clause in the same contract. The court
stated that it was not inclined to read the consent to suit clause
as a waiver of the arbitration clause, in light of the strong federal
policy favoring arbitration. See 9 U.S.C. §4 (1982). Thus, al-
though the China Union opinion does contain broad dicta on the
inadequacy of an anticipatory breach to trigger a consent to suit
clause, such dicta is best read in light of the court’s concern to
accommodate a particular federal policy, a policy that is not appli-
cable to this case. Moreover, the China Union court did not purport
to construe the law of Indiana, the law that controls our construc-
18a
not appear to define the term “anticipatory breach” with
precision. Nor does it indicate whether anticipatory
repudiation will waive all conditions precedent or only
those conditions that remain in effect after the innocent
party has substantially performed. But whatever the
rule in Indiana, it appears that there was a failure of
the condition precedent in the consent to suit clause as
te appellant Mutual.
Prior to the District Court’s ruling on the question of
personal jurisdiction, Mutual had failed to take a specific
position on the trigger provision of its policies.” Thus
as to Mutual it is clear that there was no repudiation of
liability. Although this may have generated some un-
certainty for appellee Lilly, we cannot find that such
uncertainty was enough to nullify a bargained-for condi-
tion precedent.
Appellant Falcon presents a harder case. Unlike Mu-
tual, Falcon had adopted a specific view of the trigger
clause: the manifestation theory.“ Falcon issued policies
to Lilly from 1960 to 1968. Lilly may still be seeking
indemnification for claims based on illnesses that first
tion of the insurance policy at hand and requires us to apply the
rule that an anticipatory breach waives conditions precedent.
22 See Defendant Mutual Fire, Marine & Inland Insurance Com-
pany’s Response to Plaintiff’s Third Set of Interrogatories, Answers
to Interrogatories Nos. 27-29 (June 2, 1983). Mutual merely stated
that its interpretation “differs from that advanced by Lilly * * *.”
Given the variety of interpretive theories attending such contracts,
the mere fact that an insurer might dispute the view of the insured
would not, without more, automatically lead to the conclusion that
the insurer had repudiated its obligations. Mutual may simply be
maintaining a consistent litigation position here, knowing that it
would ultimately have to pay Lilly, because it was intent on dis-
puting its liabilities under similar trigger provisions included in
other policies.
23 See Defendant Falcon Insurance Company’s Response to Plain-
tiff’s Third Set of Interrogatories, Answer to Interrogatories Nos.
27-29 (June 2, 1983).
a abet Ashes - i Sate
19a
became manifest before 1968, during the time Falcon
would be liable to Lilly even under a manifestation
theory. Thus on the facts before us it is simply not
possible to determine whether Lilly might only present
Falcon, as its excess insurer, with a set of claims that
qualified under the manifestation theory.
Ordinarily we would remand this issue for further
determinations by the District Court. But given the
clear failure of the condition precedent as to appellant
Mutual’s consent to suit we must, in any event, reach
the issue of whether due process allowed the District
Court to exercise personal jurisdiction under the District
of Columbia long arm statute. Because we find that
personal jurisdiction was properly exercised under that
statute, we find no need to consume additional judicial
resources through a remand.
B. D.C. Long Arm Statute and Due Process
The D.C. long arm statute, 13 D.C.Code § 423(a) (3)
(1981 & 1985 Supp.), provides for jurisdiction over any
person who contracts to insure any “risk * * * within
the District of Columbia at the time of contracting.”
Appellee contends that the risk against which it insured
here was the risk of liability arising from the use of its
products, and that this risk existed wherever its products
were used, including the District of Columbia. See sup-
plemental brief of appellee filed December 13, 1984 at 15.
We find appellee’s reading of the D.C. long arm statute
24 We do not suggest that it is impossible or even unlikely that
Falcon’s position did effectively amount to a repudiation; we are
simply unwilling to take that step absent more elaborate findings
by the District Court on the likely effect of this position on Falcon’s
obligations. Although the District Court did find that the insurers
had taken a position that “generally” would minimize their liability,
see Mem. Op. at 5 n. **, 5 JA 698, such a broad finding does not
speak to the narrow question whether Falcon’s adoption of the
manifestation theory would necessarily have resulted in a repudia-
tion of its obligations in this case.
20a
to be natural and persuasive. Although we must apply
the D.C. long arm statute in this case, see Gatewood v.
Fiat, S.p.A., 617 F.2d 820, 822 n. 3 (D.C.Cir. 1980), we
can only apply that statute in a manner consistent with
the Due Process Clause. See Johnson Creative Arts, Inc.
v. Wool Masters, Inc., 743 F.2d 947, 950 (ist Cir. 1984).
The touchstone of our due process inquiry is whether
it would have been “foreseeable” that the excess insurers
would be “haled into court” in the District of Columbia.
See World-Wide Volkswagen Corp. v. Woodson, 444 U.S.
286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).
Given the specific relationship between appellants and
appellee in this case, we have little difficulty finding that
such a result was in fact quite foreseeable.
Appellants knew that their insured, Lilly, distributed
its products nationwide. They therefore were aware that
Lilly was likely to be sued in any jurisdiction in the
nation, including the District of Columbia. Moreover, as
Lilly’s insurers, appellants were aware that if Lilly was
sued it was likely to attempt to implead appellants if a
dispute arose over their duty to indemnify or defend.
Cf., e.g., Porter v. American Optical Corp., 641 F.2d
1128, 1131 (5th Cir.), cert. denied, 454 U.S. 1109, 102
S.Ct. 686, 70 L.Ed.2d 650 (1981) (asbestos manufac-
turer’s insurers named as third-party defendants in
products liability suit). In such an eventuality it would
be completely foreseeable that the insured would success-
fully hale the insurance company into court.
The likelihood of impleader actions is not the sole
reason for considering the contacts of the insured with a
forum state in determining the foreseeability of an in-
surer being haled into court in that jurisdiction. Insur-
ers must carefully gauge the riskiness of the products
they insure. In determining the scope of the risk they
have insured, insurers must consider the scale on which
its insured has distributed a potentially dangerous prod-
uct. The broader the distribution the greater the risk—
a
o NO OAM eee Nel Nl I a ty NN ce ane be Ne ee
21a
and presumably the higher the premium. Thus insurers
cannot be said to have failed to avail themselves, in a
conscious and deliberate manner, of the benefits of doing
business in those fora in which the insured manufacturer
distributes its products. Moreover, an insurer has a
commercial interest in knowing how, and to what degree,
an insured manufacturer has contacts with a forum
state.
The commercial interest of the insurer in knowing
of the contacts of its insured with the forum state pro-
vides the rationale for the First Circuit’s rule that an
insurer should foresee being sued in a jurisdiction where
its insured has substantial contacts. Thus in American
& Foreign Ins. Ass’n v. Commercial Ins. Co., 575 F.2d
980, 982 (1st Cir. 1978), the court found that a products
liability insurer was subject to personal jurisdiction
where (1) the insured had shipped its products into the
forum state, and (2) the terms of the policy “assured
full knowledge of both the volume of export sales [and]
the actual location of the customers.” In Commonwealth
of Puerto Rico v. S.S. Zoe Colocotroni, 628 F.2d 652, 669
(1st Cir. 1980), cert. denied, 450 U.S. 912, 101 S.Ct.
1350, 67 L.Ed.2d 336 (1981), the First Circuit indicated
that the lack of an explicit understanding between the
insurer and insured indicating that the insurer knew
of the insured’s contact with the forum state did not bar
the exercise of in personam jurisdiction where the in-
surer plainly knew that the insured was likely to have
substantial contacts with the forum. In this case there
can be no question but that Eli Lilly’s insurers were
aware of the nation-wide scope of Lilly’s product dis-
tribution. They cannot now claim that it was somehow
unforeseeable that they would be haled into court in a
jurisdiction where Lilly would likely be subject to suit.
25 Appellants’ situation is therefore distinguishable from that of
the manufacturer in Hughes v. A.H. Robins Co., 490 A.2d 1140,
1150-1151 (D.C. C.A. 1985). In that case the District of Columbia
Court of Appeals found that due process was not satisfied where
22a
C. Venue
Under 28 U.S.C. § 1891(c) (1982) venue is proper in
any forum state where a corporation is “doing business.”
In Nowell Corp. v. Firehouse No. 1 Bar-B-Que Restau-
rant, 760 F.2d 312 (D.C.Cir. 1985), this court adopted
this construction of the doing business test:
“TD]oing business” in a district for the purposes of
§ 1391(c) [should be] read to mean engaging in
transactions there to such an extent and of such a
nature that the state in which the district is located
could require the foreign corporation to qualify to
“do business” there.
Id. at 316 n. 7 (quoting Johnsen Creative Arts, supra,
743 F.2d at 954) (brackets & emphasis in original) ).
Consistent with this view, a corporation is “doing busi-
ness” under Section 1391(c) whenever the Constitution
would permit a state to require a foreign corporation to
comply with a licensing scheme. See Johnson Creative
Arts, supra, 743 F.2d at 954.
Appellants Mutual and Falcon both allocated premi-
ums to policies sold in the District of Columbia.*® Such
the manufacturer had only done substantial business within the
forum on an intermittent basis and the cause of action did not
arise from such contacts within the forum. See also Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413-415, 104
S.Ct. 1868, 1872-1873, 80 L.Ed.2d 404 (1984). Here the “contacts”
of the insurers are much more substantial because they include the
decision to insure a manufacturer that distributed products in the
forum state. Even in non-insurance cases the activities of various
middlemen may be relevant to an evaluation of the contacts of the
defendant with the forum state. See, e.g., Coulter v. Sears, Roe-
buck & Co., 426 F.2d 1315, 1318 (5th Cir. 1970) (court could exer-
cise personal jurisdiction over third-party defendant manufacturer
where manufacturer sold products to Sears with knowledge that
Sears would ship a substantial number to forum state). It is par-
ticularly appropriate, however, when evaluating the contacts of a
products liability insurer with the forum state to consider its rela-
tionship with its insured and the insured’s contacts with the forum
state.
26 See Affidavit of Paul D. Dooley (June 14, 1982) (for appellant
Mutual), 1 JA 116-117; Affidavit of Ross C. Cowan (June 14, 1982)
23a
policies were sold by independent brokers; neither appel-
lant maintained an office in the District or had em-
ployees in the District. It is clear that the District of
Columbia could impose such a burden on foreign excess
insurers before independent brokers could sell their poli-
cies. Such practices are common in other jurisdictions
without being upset by constitutional challenge.*’ See,
e.g., Md.Code Ann. Art. 48A, § 190 (1979 & 1985 Supp.).
See also Schwing, A Comparative Analysis of the Quali-
fication Requirements Applicable to Alien Stock Insurers,
to Surplus Line Insurers, and to Reinsurers, INS.L.J.
649, 674-678 (November 1976). Thus it would seem
that under the Novwell/Johnson test venue was proper in
the District of Columbia.
V. CONCLUSION
Authorship, intent, and etiology are not material is-
sues under Indiana law, and evidence bearing on such
issues was rightly excluded. As the District Court held,
any insurer on the risk between the time of ingestion
and the manifestation of symptoms has a duty to in-
demnify appellee. The District Court’s grant of appel-
lee’s motion for summary judgment is therefore affirmed.
We also find the appellant excess insurer’s personal
jurisdiction and venue arguments to be ultimately un-
persuasive. We therefore also affirm the District Court’s
order denying these appellants’ motion to dismiss.
Affirmed.
(for appellant Falcon), 1 JA 118-120. The record does not reveal
any similar business contacts by appellant Interstate. But because
we find that the consent to suit clause was fully operative against
Interstate, we hold that Interstate effectively waived its venue ob-
jections as weil as its personal jurisdiction objections.
27 Indeed, the Supreme Court has read the passage of the Mc-
Carran-Ferguson Act, 59 STAT. 338, 15 U.S.C. § 1011 (1982), as a
removal of all dormant Commerce Clause limitations on the power
of the states to regulate insurance. Western & Southern Life Ins.
Co. v. State Board of Equalization, 451 U.S. 648, 653-655, 101 S.Ct.
2070, 2075-76, 68 L.Ed.2d 514 (1981).
24a
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
September Term, 1985
CA No. 82-00669
No, 84-5391
ELI LILLY AND COMPANY
Vv.
THE HOME INSURANCE Co., et al.
And Consolidated Case Nos. 84-5394, 84-5395,
84-5396, 84-5397, 84-5398, 84-5399, 84-5400,
84-5401, 84-5402, 84-5408, 84-5404, 84-5405,
84-5406 and 84-5407
[Filed Aug. 29, 1986]
Before: EDWARDS and SCALIA, Circuit Judges;
WRIGHT, Senior Circuit Judge
ORDER
Upon consideration of the petitions for rehearing of
the Insurers and of Falcon Insurance Company and Mu-
25a
tual Fire, Marine and Inland Insurance Company, and
of the joinders therein, it is
ORDERED, by the Court, that the petitions for re-
hearing are denied.
Per Curiam
FOR THE COURT:
GEORGE A, FISHER
Clerk
By: /s/ Robert A. Bonner
RoBERT A. BONNER
Chief Deputy Clerk
26a
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
Civil Action No. 82-0669
ELI LILLY AND COMPANY,
Plaintiff,
Vv.
THE HOME INSURANCE COMPANY, et al.,
Defendants.
[Filed Oct. 5, 1982]
ORDER
Upon consideration of the motions to dismiss for lack
of in personam jurisdiction and improper venue filed by
defendants Interstate Indemnity Company; Falcon Insur-
ance Company (formerly Commercial Union Surplus
Lines Insurance Company); and Mutual Fire, Marine,
and Inland Insurance Company, supporting memoranda
thereof, and plaintiff’s opposition thereto, it is by the
Court this 5th day of October, 1982,
ORDERED that the motions by Interstate Indemnity
Company; Falcon Insurance Company; and Mutual Fire,
Marine, and Inland Insurance Company to dismiss this
action as to them pursuant to Fed. R. Civ. P. 12(b) (2)
and 28 U.S.C. §1391(a) and (c) be, and are hereby,
denied.
/s/ Norma Holloway Johnson
NORMA HOLLOWAY JOHNSON
United States District Judge
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