Court lacks jurisdiction over policyholder

Where an insurance carrier sought a declaratory judgment that it had no duty to defend its policyholder in an underlying suit, but the court lacked jurisdiction over the policyholder, the declaratory judgment suit was dismissed.

Background

Medmarc Casualty Insurance Company is an insurance company. GD Group USA Company is a distributor of disposable surgical gowns. Alcon Research LLC is a major provider of surgical equipment used by ophthalmologists throughout North America.

In this suit, Medmarc seeks a declaratory judgment that it owes no duty to defend or indemnify GD against counterclaims made by Alcon in an underlying lawsuit GD filed against Alcon in Texas state court. GD filed a motion to dismiss for lack of personal jurisdiction. Alcorn filed a motion to dismiss for lack of jurisdiction or, in the alternative, motion to transfer for improper venue.

GD’s motion

Medmarc argues that the following three facts support a finding of specific jurisdiction over GD: (1) GD operates one of its three domestic distribution centers in Richmond; (2) GD obtained the insurance policy from a Medmarc unit in Virginia through a Virginia-based broker and (3) some of the allegedly defective surgical gowns that gave rise to the underlying litigation ended up in the hands of at least six Virginia healthcare providers.

First, even assuming that GD does operate a distribution center in Virginia, Medmarc has failed to make the critical showing that GD’s contact with this forum state is related to the instant insurance policy dispute. Second, GD asserts that Medmarc’s focus on where Medmarc and its affiliated broker are located, as well as where it performed some administrative tasks related to the contract, are misplaced.

This court finds GD’s argument persuasive. The insurance policy did not require performance from either party in Virginia. Rather, Medmarc’s performance under the policy would most likely involve providing a defense against claims by third parties, and in the instant case, the defense would be provided in Texas, not Virginia.

To be sure, GD did, in a sense, reach into the forum state by communicating with a Medmarc-affiliated broker via email about procuring insurance coverage and later on by notifying the broker of the original underlying counterclaims. However, these communications were, at most, fortuitous contacts with Virginia, dictated by where the broker happened to be located rather than a purposeful availment by GD of the benefits of doing business in Virginia.

Finally, the court addresses whether GD’s presumed understanding that its products would end up in Virginia, given Alcon’s nationwide distribution, is sufficient for the court to exercise specific jurisdiction over GD. The court concludes that it is not. As GD correctly points out, the Supreme Court has held that the mere placement of a product into the stream of commerce, by itself, is not the kind of act that can give rise to specific jurisdiction.

Alcon’s motion

Alcon argues that, if the court grants GD’s motion, there would no longer be a justiciable claim against Alcon given that Medmarc admits that it has named Alcon as a defendant solely because Alcon is interested in the outcome of the dispute between Medmarc and GD. In its opposition to Alcon’s motion, Medmarc does not contest that dismissal of the instant case as to GD would render Medmarc’s claims against Alcon moot. Accordingly, Medmarc’s claims against Alcon are dismissed as moot.

Defendants’ motions to dismiss granted.

Medmarc Casualty Insurance Company v. GD Group USA Company, Case No. 1:22-cv-712, April 18, 2023. EDVA at Alexandria (Alston). VLW 023-3-212. 16 pp.