Seider v. Roth
216 N.E.2d 312, 269 N.Y.S.2d 99, 17 N.Y.2d 111 (1966)
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Rule of Law:
A nonresident defendant's liability insurer's contractual obligation to defend and indemnify, when the insurer conducts business in New York, constitutes an attachable 'debt' under CPLR 6202, thereby allowing a New York court to establish quasi in rem jurisdiction over the nonresident defendant in a personal injury action.
Facts:
- Plaintiffs, a husband and wife, who were residents of New York, were injured in an automobile accident on a highway in Vermont.
- The accident was allegedly caused by the negligence of defendant Lemiux, a resident of Quebec, Canada.
- Defendant Lemiux held an automobile liability insurance policy from Hartford Accident and Indemnity Company.
- The Hartford-Lemiux liability policy was issued in Canada, but Hartford Accident and Indemnity Company is an insurer doing business in New York State.
Procedural Posture:
- Plaintiffs, New York residents, initiated a personal injury action against defendant Lemiux, a nonresident, and obtained an order of attachment.
- The order directed the Sheriff to levy upon the contractual obligation of Hartford Accident and Indemnity Company to defend and indemnify Lemiux under his automobile liability policy.
- Attachment papers were served on Hartford Accident and Indemnity Company in New York State, and Lemiux was personally served in Quebec.
- Defendant Lemiux moved at Special Term (trial court) to vacate the attachment and the service of the summons and complaint.
- Special Term denied Lemiux's motion, relying on a prior Second Department decision, Fishman v. Sanders.
- Defendant Lemiux appealed Special Term's decision to the Appellate Division (intermediate appellate court).
- The Appellate Division affirmed the denial of the motion, with one Justice dissenting.
- The Appellate Division granted leave for defendant Lemiux to appeal to the New York Court of Appeals (the present court).
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Issue:
Does a nonresident defendant's liability insurer's contractual obligation to defend and indemnify the defendant constitute a 'debt' subject to attachment under CPLR 6202, thereby allowing a New York court to acquire quasi in rem jurisdiction in a personal injury action?
Opinions:
Majority - Chief Judge Desmond
Yes, a nonresident defendant's liability insurer's contractual obligation to defend and indemnify the defendant is a 'debt' subject to attachment under CPLR 6202. The court found that as soon as the accident occurred, Hartford Accident and Indemnity Company (Hartford) incurred a contractual obligation to Lemiux, which should be considered a 'debt' within the meaning of CPLR 5201 and 6202. This obligation includes the duty to defend Lemiux in any negligence action, to indemnify him for any judgment, and to investigate or settle claims. The court relied on Matter of Riggle (11 N.Y.2d 73), which held that a liability insurance policy, even before judgment, made a decedent's estate a 'creditor' and the insurer a 'debtor' for the purpose of conferring Surrogate's Court jurisdiction. The court clarified that jurisdiction is properly acquired by this attachment because the policy obligation is a debt owed to the defendant by the insurer, with the insurer regarded as a resident of New York for these purposes. This approach, while facilitating jurisdiction, was not considered a 'direct action' against the insurer but rather an obligation of the insurer to defend its insured where jurisdiction is obtained.
Dissenting - Burke, J.
No, a nonresident defendant's liability insurer's contractual obligation is not a 'debt' subject to attachment because it is contingent. The dissenting justices argued that the insurer's promise to defend and indemnify is contingent upon a suit being commenced and damages being awarded, and therefore it is not an 'absolutely payable' debt as required by CPLR 5201 (subd. [a]) for attachment. They cited Herrmann & Grace v. City of New York (130 App. Div. 531) for the rule that an indebtedness is not attachable unless it is absolutely payable at present or in the future and not dependent upon any contingency. The dissent criticized the majority's reasoning as a 'bootstrap situation,' where the existence of the policy is used to gain jurisdiction, which in turn is necessary to activate the insurer's obligation under the policy. They distinguished Matter of Riggle and similar cases, noting that in those precedents, personal jurisdiction over the defendant had already been properly obtained, and the insurer's obligation to defend had thus accrued. Furthermore, the dissent contended that the definition of 'property' for attachment purposes differs significantly from that used for appointing an administrator in estate cases. They also dismissed the insurer's obligations to investigate/negotiate or pay medical expenses as either discretionary or irrelevant to the third-party liability claim.
Analysis:
This case significantly expanded New York's jurisdictional reach by allowing plaintiffs to establish quasi in rem jurisdiction over nonresident defendants by attaching their liability insurance policies within the state. It created a powerful tool for New York residents seeking to sue out-of-state individuals involved in accidents, shifting the burden of defense to the insurer within New York. However, the ruling was highly controversial, drawing criticism for its 'bootstrap' logic and perceived expansion of jurisdiction beyond traditional notions of fairness and due process, which ultimately led to its effective overruling for state-court jurisdiction by the U.S. Supreme Court in Shaffer v. Heitner (1977), which required minimum contacts for quasi in rem jurisdiction.
