McGee v International Life Ins
355 U S 220 [1957]
Author:- Sam Biers

Relevant Facts: Lowell Franklin purchased a life insurance policy (an insurer subsequently bought by respondent, who) then mailed a reinsurance certificate to Franklin offering to insure him. He accepted and paid premiums from CA to respondent’s TX office.  When the beneficiary notified Int’l of Franklin’s death it refused to pay claiming he committed suicide.  Neither the original insurer or Int’l ever had an office or agent in CA. 

Legal Issue(s): Whether Due Process precluded entry of judgment against Texas insurance company by California court, which based its jurisdiction on statute subjecting foreign corporations to suit on insurance contracts with residents of that state, even though Texas company had no offices or agents in California and had apparently never solicited or done any insurance business in California apart from policy involved?

Court’s Holding: Yes

Procedure: The Texas District Court, Harris County, refused to enforce a judgment recovered by beneficiary in California on ground that it was void under the Fourteenth Amendment because service of process was made on insurer outside California.

Law or Rule(s):  California suit based on insurance contract issued by foreign corporation to resident of California had substantial connection with that state sufficient to meet requirements of due process.

Court Rationale: The increase in nationalization of commerce has come a great increase in the amt of business conducted by mail across state lines.  Modern transportation and communication have made it less burdensome for a party sued to defend himself in a State where he engages in economic activity.  The Due Process Clause did not preclude the CA court from entering a judgment binding on respondent. 

For the purposes of Due Process the suit was based on a contract which had a substantial connection with that State.  The Contract was delivered to CA, the premiums were mailed from there and the insured was a resident of that State when he died.  CA has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims.  These residents would be at a sever disadvantage if they were forced to follow the insurance company to a distant State in order to hold it legally accountable.  There is no contention that respondents did not have adequate notice or sufficient time to prepare its defenses and appear.

 Plaintiff’s Argument: The Insurance Company had sufficient minimum contacts with the petitioner in the State of California to establish jurisdiction.

Defendant’s Argument: The CA suit was void for lack of jurisdiction over the respondents.