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NUTMEG INSURANCE COMPANY v. IOWA MUTUAL INSURANCE COMPANY

June 28, 2005.

NUTMEG INSURANCE COMPANY, Plaintiff,
v.
IOWA MUTUAL INSURANCE COMPANY, Defendant.



The opinion of the court was delivered by: CHARLES HAIGHT, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Nutmeg Insurance Company ("Nutmeg"), an issuer of errors and omissions liability and financial products insurance, brings this action against defendant Iowa Mutual Insurance Company ("IMIC") seeking declaratory judgments that (1) it is not obligated to reimburse IMIC for Loss or Claims Expenses resulting from IMIC's settlement payment to the Estate of Marquise Henderson ("the Estate") and (2) IMIC's settlement with the Estate does not constitute a "Loss" covered under Nutmeg's contractual obligations to IMIC. Currently before the Court is IMIC's motion, pursuant to Fed.R.Civ.P. 12(b)(2), to dismiss the complaint on grounds of lack of personal jurisdiction and 12(b)(3) for improper venue.

I. BACKGROUND

  A. Facts Leading to this Motion

  This litigation between insurers arises out of an automobile accident that occurred on November 14, 1998. While driving drunk, Richard Thompson struck from behind a vehicle occupied by Marquis Henderson, killing him. The decedent's mother, Dessazzar Henderson, acting as special administrator of his estate, filed a suit against Thompson in the Circuit Court of St. Clair County, Illinois. Following a one-day bench trial, the Estate was awarded $1,453,000. Thompson then assigned to the Estate his rights against two insurers, County Mutual Insurance Company and IMIC.*fn1 Both insurers eventually settled with the Estate of Henderson; County Mutual for $1,161,000 and IMIC for $500,000.*fn2

  Before settling with the Estate, IMIC notified Nutmeg — an issuer of financial products insurance — of the claim, and sought coverage under Error and Omissions Policy No. NDE 0102033-98H (the "E&O Policy" or "Policy") which Nutmeg had issued to IMIC. According to this Policy, the Policy Period ran from July 1, 2000 to June 1, 2001. The limit of liability was $3,000,000 for each claim as well as for the Policy in aggregate. Nutmeg denied coverage under the Policy on various grounds, and now seeks a declaratory judgment that it has no liability under the Policy for Loss or Claims Expenses as a result of any claim made by Dessazzar Henderson, as the special administrator for the Estate.

  B. The Parties

  IMIC is a mutual insurance company organized under the laws of the State of Iowa, with its principal place of business in Dewitt, Iowa. IMIC is licensed to do business in eleven states: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, and Wisconsin. IMIC has never maintained any office or other facility in New York. It is not licensed to do business in, nor does it have any agents in New York.

  Nutmeg is a corporation organized under the laws of the State of Connecticut, with its principal place of business in Hartford, Connecticut. It is in the business of, inter alia, issuing certain policies of errors and omissions liability and financial products insurance. Nutmeg transacts business in the State of New York and avails itself to the laws of the State of New York.

  Both Nutmeg and IMIC hired intermediaries to negotiate the E&O Policy on their behalf. IMIC hired Daniel Molyneaux, an insurance agent for Molyneaux Insurance, based in Davenport Iowa, and licensed to do business in the State of Iowa, while Nutmeg relied on the assistance of Wendy Johnston, agent for Heath Insurance Brokers, Inc. ("Heath"), located in Dallas, Texas. Molyneaux and Johnston negotiated the E&O Policy over the phone.

  Once negotiations were complete, Heath requested that the Reliance Insurance Company of Illinois ("Reliance"), from its offices in New York, underwrite and issue the E&O Policy. This task was performed by Assistant Vice President and Underwriter Jason Hawkins, under the supervision of Assistant Vice President and Underwriter Thomas Iorio, in Reliance's New York office.

  Subsequent to this action, Reliance sold its Financial Products Team to The Hartford, an investment and insurance company with corporate headquarters in Hartford, Connecticut. Nutmeg is a wholly owned subsidiary of The Hartford, and is licensed to act as its agent for purposes of procuring insurance in different states. After the acquisition, Hawkins, on behalf of Nutmeg and as employee of The Hartford, cancelled, rewrote, and reissued the E&O Policy to accommodate the merger of Reliance's Financial Products Team to The Hartford. The material terms of the E&O Policy do not appear to have changed upon reissuance.

  On this motion, IMIC contends that this Court does not have personal jurisdiction over it. Nutmeg contends that personal jurisdiction is proper over IMIC since it entered into a contract (the E&O Policy) with Nutmeg that ultimately was underwritten and issued in New York. IMIC responds that any action taken by Reliance, The Hartford, or Nutmeg with respect to the issuance of the Policy is only reflective of the unilateral activities ...


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