Conflict of Laws - Due Process and Full Faith and Credit - Direct Action Statute

Authors

Harvey A. Howard S.Ed., University of Michigan Law SchoolFollow

Abstract

Defendant issued a liability insurance policy to the manufacturer of a hair-waving product, an Illinois subsidiary of a Delaware corporation having its headquarters in Massachusetts. The policy, issued in Massachusetts and delivered in Massachusetts and Illinois, was to protect the insured against damages that might be suffered by users of the product anywhere in the United States or Canada. It contained a "no action" clause enforceable under Massachusetts and Illinois law prohibiting direct actions against the insurer until final determination of the insured's liability, either by judgment or agreement. Alleging injuries sustained in Louisiana where the product was bought and used, plaintiff sued the insurer under the Louisiana direct action statute which was applicable even though an insurance contract was made in another state and contained a clause forbidding such direct actions. Another provision, complied with by the defendant, compels foreign insurance companies to consent to such direct suits in order to do business in the state. The district court, affirmed by the court of appeals, dismissed the action, holding the statutes repugnant to the due process clause of the Federal Constitution. On appeal, held, reversed. Louisiana could apply its own law rather than that of Massachusetts or Illinois. The interests of the states where the insurance contract was negotiated and delivered cannot outweigh the contacts and interests of Louisiana in taking care of persons injured in Louisiana; hence the due process and full faith and credit clauses of the Constitution do not compel Louisiana to subordinate its policy interests in a direct action to other state's contract rules. Justice Frankfurter concurred on the ground that Louisiana had validly exacted consent from the defendant to such direct actions as a condition of doing business within the state. Watson v. Employers Liability Assurance Corp., 348 U.S. 66, 75 S.Ct. 166 (1954).

Recommended Citation

Harvey A. Howard S.Ed., Conflict of Laws - Due Process and Full Faith and Credit - Direct Action Statute, 53 Mich. L. Rev. 879 (1955).
Available at: https://repository.law.umich.edu/mlr/vol53/iss6/8