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Specialty Motorcars, LLC v. Erie Insurance Company


July 26, 2011


On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1310-10.

Per curiam.


Argued May 4, 2011

Before Judges Lihotz and J. N. Harris.

Plaintiff Specialty Motorcars, LLC appeals from an order dismissing its complaint against defendant Erie Insurance Company for lack of in personam jurisdiction. We affirm.

Prior to review of whether the court may exercise jurisdiction, we briefly recite the undisputed facts leading to plaintiff's claims for coverage under the policy issued by defendant. Plaintiff is a Virginia limited liability company, with its principal office in Virginia that is engaged in the purchase and sale of pre-owned automobiles. Defendant is a Pennsylvania insurance company, with its principal place of business in Pennsylvania. Virginia is among the states in which defendant is licensed to do business; New Jersey is not. Upon plaintiff's request, defendant issued a garage/auto insurance policy (the policy) to plaintiff in Virginia.

In July 2008, plaintiff entered into an agreement with Samuel Moncayo and his affiliated companies, collectively referred to as MD Automasters, for the purchase and resale of used automobiles in New Jersey. The arrangement provided that Moncayo would locate, purchase and resell vehicles to New Jersey dealerships on behalf of plaintiff. Consistent with this agreement, plaintiff took title to the vehicles and Moncayo acted as plaintiff's agent to complete the third-party sale transactions.

In February 2009, without notice to plaintiff, Moncayo resold plaintiff's vehicles but personally retained the sale proceeds. In June 2009, when plaintiff first became aware Moncayo had wrongfully liquidated its New Jersey inventory, comprising twenty-seven vehicles, it notified defendant that it had suffered a loss, as required by the policy. Additionally, plaintiff initiated an action against Moncayo in the Law Division, which concluded with the entry of a default judgment.

On March 16, 2010, plaintiff formally sought reimbursement under the policy for $31,199.08 in investigation costs and $159,519.00 in lost inventory caused by Moncayo's defalcations. Defendant paid only $25,000, citing the policy's loss by false pretenses limitation provision. Under the policy, "loss" is defined as "direct and accidental damage or loss" and "false pretense" is defined as "parting with an owned auto by trick, scheme or false pretext[.]" The policy limits loss by false pretense, stating:

We will deduct the Actual Cash Value of property or any money you have received toward payment for the auto from the amount of your loss. We will pay no more than $25,000 for loss caused by any one person in one policy period.

Plaintiff initiated this declaratory judgment action challenging defendant's denial of coverage and seeking declaration that the $25,000 limitation is a per vehicle loss.

Plaintiff sought compensation for the full amount of its loss and related investigation costs. In lieu of an answer, defendant moved to dismiss the action for want of personal jurisdiction, averring it had no contacts with the forum.*fn2

Plaintiff responded, arguing its loss represented a forum-related event triggering jurisdiction. Plaintiff contended the policy's territory of coverage clause represented defendant's acknowledgement it could be sued in any state where a loss was suffered. The clause provided, "The policy applies to accidents or losses that happen during the policy period in the United States of America, its territories and possessions . . . ."

After oral argument, Judge Paul Innes rejected plaintiff's view of the territory of coverage clause and disagreed that plaintiff's loss was a forum-related event. The judge noted the policy's terms provided coverage to plaintiff's Virginia facility and plaintiff's disclosures when requesting coverage admitted its location for displaying or storing its owned property was Virginia. Further, the court rejected plaintiff's jurisdictional assertions, finding defendant had insufficient minimum contacts with New Jersey to justify the State's exercise of personal jurisdiction, and had taken no action to avail itself of the benefits of the forum. Applying the Court's holding in Waste Management, Inc. v. Admiral Insurance Co., 138 N.J. 106 (1994), cert. denied sub nom. WMX Tech., Inc. v. Canadian Gen. Ins. Co., 513 U.S. 1183, 115 S. Ct. 1175, 130 L. Ed. 2d 1128 (1995), Judge Innes granted defendant's motion to dismiss. This appeal followed.

Plaintiff urges reversal, suggesting the trial judge erred in its interpretation of Waste Management. Plaintiff argues personal jurisdiction was authorized because defendant availed itself of the New Jersey forum by "directing activity to New Jersey," as evinced by the policy's territory of coverage clause coupled with the theft, which occurred in New Jersey. Prior to our review of this question, we analyze the principles guiding personal jurisdiction determinations.

New Jersey permits long-arm service of process on a non-resident defendant "consistent with due process of law." R. 4:4-4(b)(1). See also Reliance Nat'l. Ins. Co. in Liquidation v. Dana Transp., Inc., 376 N.J. Super. 537, 543 (App. Div. 2005). "Therefore, our State courts may exercise jurisdiction over a non-resident defendant 'to the uttermost limits permitted by the United States Constitution.'" Nicastro v. McIntyre Machinery Am., Ltd., 201 N.J. 48, 72 (2010), (quoting Avdel Corp. v. Mecure, 58 N.J. 264, 268 (1971)), rev'd on other grounds, __ U.S. __, ___ S. Ct. ___, ___ L. Ed. 2d ___ (2011). Due process mandates the non-resident defendant must have "certain minimum contacts" with the forum "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Lebel v. Everglades Marina, Inc., 115 N.J. 317, 322 (1989) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95, 102 (1945)). This two-pronged test requires a separate analysis of both the asserted "minimum contacts" and notions of "fair play and substantial justice." Ibid.

In such an endeavor, we note the examination of whether jurisdiction is established "is a mixed question of law and fact. . . ." Citibank, N.A. v. Estate of Simpson, 290 N.J. Super. 519, 532 (App. Div. 1996). "[T]he jurisdictional issue . . . is a matter of law that we consider de novo[,]" while "the court's factual findings with respect to jurisdiction" are reviewed "to determine whether they were supported by substantial, credible evidence . . . ." Mastondrea v. Occidental Hotels Mgmt. S.A., 391 N.J. Super. 261, 268 (App. Div. 2007). A court must evaluate the factual assertions of a defendant's minimum contacts on a case-by-case basis. Blakey v. Cont'l Airlines, 164 N.J. 38, 66 (2000).

The "minimum contacts inquiry must focus on the relationship among the defendant, the forum, and the litigation[,]" Lebel, supra, 115 N.J. at 323, and "is satisfied so long as the contacts resulted from the defendant's purposeful conduct and not the unilateral activities of the plaintiff." Ibid. (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98, 100 S. Ct. 559, 567-68, 62 L. Ed. 2d 490, 501-02 (1980)). A "contract with an out-of-state party alone" cannot "establish sufficient minimum contacts in the other party's forum." Waste Mgmt., supra, 138 N.J. at 121 (quoting Burger King v. Rudzewicz, 471 U.S. 462, 478, 105 S. Ct. 2174, 2185, 85 L. Ed. 2d 528, 545 (1985)). In sum, the critical question for evaluation asks "whether the defendant should reasonably anticipate being haled into court in the forum state." Ibid. (quoting Burger King, supra, 471 U.S. at 474, 105 S. Ct. at 2183, 85 L. Ed. 2d at 542).

Once a defendant's activities establish minimum contacts with the forum state, we examine the "fair play and substantial justice" inquiry. Lebel, supra, 115 N.J. at 328. This determination requires weighing factors comprising "the burden on the defendant, the interests of the forum State, . . . the plaintiff's interest in obtaining relief[,] . . . 'the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies.'" Ibid. (quoting Asahi Metal Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 113, 107 S. Ct. 1026, 1034, 94 L. Ed. 2d 92, 105 (1987)).

In an analysis of a motion to dismiss for lack of personal jurisdiction, the plaintiff "has the burden of proving [] defendant's contacts are sufficient to sustain the exercise of long arm jurisdiction." Pressler & Verniero, Current N.J. Court Rules, comment 3.1.1. on R. 4:4-4 (2011) (citing Catalano v. Lease & Rental Mgmt. Corp., 252 N.J. Super. 545 (Law Div. 1991)). However, on the fair and substantial justice inquiry, the burden shifts. If the "nonresident defendant . . . [is] found to have minimum contacts with the forum [it] must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." McKesson Corp. v. Hackensack Med. Imaging, 197 N.J. 262, 278-79 (2009) (internal quotations and citations omitted). "The record must demonstrate that the defendant has purposefully availed itself of the privilege of engaging in activities within the forum state, thereby gaining the benefits and protections of its laws." Waste Mgmt., supra, 138 N.J. at 120-21 (quoting Burger King, supra, 471 U.S. at 475, 105 S. Ct. at 2183, 85 L. Ed. 2d at 542). Therefore, "defendants are protected against being haled into court in a foreign jurisdiction solely on the basis of random, fortuitous, or attenuated contacts or as a result of the unilateral activity of some other party." Id. at 121 (quoting Burger King, supra, 471 U.S. at 475, 105 S. Ct. at 2183, 85 L. Ed. 2d at 542).

Here, plaintiff maintains the Law Division erred in its reading of Waste Management, arguing "New Jersey case law makes clear that a New Jersey court [has] jurisdiction over a non-resident insurer if the policy contains a territory of coverage provision that includes New Jersey and the event generating the claim against the insurer occurred in New Jersey." Under plaintiff's analysis "the forum-related event that supports the exercise of jurisdiction [] mean[s] that the forum is the situs of the event generating the claim against [defendant,] -- not that [defendant] purposefully directed activity towards New Jersey." In response, defendant suggests the meaning of the phrase "forum-related event" as used in Waste Management requires an affirmative act "sufficient to warrant the exercise of jurisdiction over defendant."

We agree the Supreme Court's holding in Waste Management is pivotal to the underlying jurisdictional determination. Consequently, we review the opinion in detail.

The plaintiffs, Waste Management, Inc. and fifty-five of its current or former subsidiaries, sought coverage for environmental damage claims owed to customers and government agencies in connection with the disposal of solid and hazardous waste products. Waste Mgmt., supra, 138 N.J. at 117. The defendant-insurers denied liability coverage, causing the plaintiffs to file a resultant declaratory-judgment action in New Jersey to establish the scope of the liability coverage for pollution damage at ninety-seven sites, seventeen of which were located in New Jersey and the remainder in twenty-one other states and Canada. Ibid.

In lieu of answering the complaint, several of the defendant out-of-state carriers moved to dismiss, alleging a lack of personal jurisdiction. Ibid. The Supreme Court granted leave to appeal to five of the defendants after the trial court denied the motion to dismiss and we declined interlocutory review. Id. at 117-18.

Of the five appellants, four from Canada and one from Michigan, not one had a connection with New Jersey. The liability policies that were written elsewhere contained no reference to New Jersey risks, but each included a "territory of coverage" clause providing liability coverage for losses occurring in the United States or Canada. Ibid. Illustrative of the type of clauses is: "The policy applies only to bodily injury or property damage . . . [that] occurs during the policy term as stated in the Declarations within the United States of America, its territories or possessions, Canada or Mexico . . . ." Id. at 117.

The Canadian carriers conducted no business in New Jersey, were not licensed to conduct business in New Jersey, and claimed their policies were issued only after determining the Waste Management subsidiary it insured conducted operations solely in Ontario, Canada. Id. at 118. Also, the Canadian Waste Management subsidiary was not licensed to conduct business in New Jersey or involved in sites related to New Jersey. Ibid. The fifth carrier, a Michigan corporation, was not authorized, licensed, or qualified to conduct business in New Jersey and had never issued a policy insuring any risks located in this state. Id. at 118-19.

The Supreme Court examined whether the trial court's exercise of personal jurisdiction violated due-process considerations. Ibid. After a restatement of the fundamental propositions governing personal jurisdiction, many of which we have recited above, the Court noted "the existence of minimum contacts turns on the presence or absence of intentional acts of the defendant to avail itself of some benefit of a forum state."

Id. at 126. The court held personal jurisdiction may not rest on "'the unilateral activity of another who merely claims a relationship to the defendant.'" Id. at 123. (quoting Charles Gendler & Co. v. Telecom Equip. Corp., 102 N.J. 460, 471 (1986)). Thus, for a state court to acquire jurisdiction over a foreign actor, a "defendant must be aware that the transaction 'will have direct consequences in [the forum state] such that it should [be] aware of the possibility of litigation arising in that forum.'" Id. at 124. (quoting Lebel, supra, 115 N.J. at 328).

Based on the facts, including that the Canadian carriers engaged in no activity in New Jersey, were not licensed in the state, and only agreed to insure the plaintiff's Canadian subsidiary after ascertaining that the company had no operations in the United States, the Court held "that in the absence of a forum-related event, a 'territory of coverage' clause alone does not create a sufficient basis on which to rest jurisdiction in this state." Id. at 127-28. The Court's review determined no contacts existed between New Jersey and the Canadian carriers, and concluded the minimum contacts prong was not satisfied, obviating further review of a "'fair play and substantial justice' inquiry." Ibid.

For substantially the same reasons, the Court also found New Jersey had no jurisdiction over the Michigan defendant. Ibid. It, too, was determined to have no contacts with New Jersey. Ibid. Also, the Court ruled the insured's ties to New Jersey were insufficient to "satisfy the requirement of the insurer's purposeful availment of the benefits and privileges of doing business in New Jersey." Ibid.

Applying the two-pronged analysis set forth in Lebel, supra, 115 N.J. at 328 and reaffirmed in Waste Management, supra, 138 N.J. at 124-25, we consider Judge Innes' factual findings regarding defendant's minimum contacts with New Jersey.

Judge Innes noted defendant is a Pennsylvania company with its principal place of business in Pennsylvania. It has no office, affiliates, agents or employees in New Jersey. Moreover, insurance is a highly regulated industry, and defendant was neither licensed to conduct business in New Jersey nor engaged in the sale or advertisement of insurance services in this state. Moreover, the policy in question was written and executed in Virginia. Its terms reference coverage for plaintiff's sole place of business, a premises in Virginia. Finally, the court found defendant's efforts were designed to avoid creating contacts with New Jersey and the policy was issued under and subject to Virginia law. The court's findings are supported by the evidence of record.

The record is devoid of proof of defendant's action, direct or indirect, supporting an intention to avail itself of the benefits of the New Jersey forum. Plaintiff directs our attention to no circumstance suggesting defendant engaged in "continuous and systematic" business activities in New Jersey, which would permit the court's exercise of general jurisdiction over defendant. Additionally, plaintiff mentions no other contacts between defendant and New Jersey relative to the subject insurance contract to sustain in personam jurisdiction. Lebel, supra, 115 N.J. 322-24. Rather, plaintiff argues the contract's territory of coverage provision, which includes New Jersey, allows its suit contesting the scope of coverage to proceed in this forum because a loss occurred in New Jersey. We disagree.

According to plaintiff, Waste Management provides that if a covered loss occurs in New Jersey (which plaintiff equates to a forum-related event) and a coverage dispute arises, then defendant should anticipate being haled into a New Jersey court, regardless of whether coverage involves a first-party or third-party loss. Plaintiff's argument misconstrues the Court's pronouncement in Waste Management.

While the Court recognized "the trend to expand the scope of jurisdiction over nonresidents and the special interest that a state may have in the field of insurance," it did not suggest as plaintiff's contentions imply, that we may overlook "the need to meet the threshold requirement for personal jurisdiction, namely, that the defendant create minimum contacts with this state by purposefully availing itself of some benefit of doing business here." 138 N.J. at 128. (emphasis in original). This is precisely why the Court in Waste Management, supra, held that the contract provision alone was insufficient to confer jurisdiction. 138 N.J. at 127-28.

The relationship between the territory of coverage clause and the forum-related event requires consideration of the entirety of the insurance contract. Unlike the insurance contract covering product liability claims of a manufacturing company whose products are sold for use in other states discussed in Wausau Underwriters Insurance Co. v. State Automobile Mutual Insurance Co., 557 F. Supp. 2d 502 (D.N.J. 2008), in this matter defendant wrote a property casualty policy encompassing only plaintiff's business premises in Virginia. On its face, the subject policy limits coverage for plaintiff's business operations at its sole location in Remington, Virginia. Therefore, the territory of loss provision may cover a loss that occurs outside Virginia, but that does not mean defendant has agreed to be subject to suit in that foreign forum. Plaintiff is incorrect in asserting the situs of its theft provides the requisite minimum contacts to allow in personam jurisdiction over defendant. Plaintiff's unilateral decision to conduct business with Moncayo in New Jersey and the subsequent theft which occurred in this state, are not the envisioned forum-related events allowing the State's invocation of its long-arm provisions over defendant. Waste Management, supra, 138 N.J. at 121.

Accordingly, we agree with Judge Innes that plaintiff has failed to show the requisite minimum contacts with the forum to satisfy the mandates of due process to allow the action to proceed in New Jersey. We will not disturb the order dismissing plaintiff's action.


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