Opinion
Civ. A. No. C64-693
Decided February 4, 1966.
Messrs. Baker, Hostetler Patterson, Mr. Russell Leasure and Mr. H. H. Felsman, for plaintiffs.
Messrs. Zellmer Gruber, Mr. Maxwell Gruber, Messrs. Wiles, Doucher, Tressler, Martin Ford and Mr. Thomas A. Doucher, for defendant.
Insurance — Foreign insurer — Jurisdiction — Section 3901.17, Revised Code — Transacting insurance business in Ohio — Action dependent upon such jurisdictional basis in Federal court located in Ohio — Section 3901.18, Revised Code — Right of defendant insurer to plead — Not subject to requirement of security to pay judgment or obtaining Ohio license until jurisdictional issue resolved.
A foreign insurer sued in a Federal court in Ohio upon grounds of having transacted insurance business in this state, as provided in Section 3901.17, Revised Code, may not be required to file security for payment of judgment or obtain a license to do business as a requisite to filing a pleading, as required in Section 3901.18, Revised Code, unless it has first been determined subject to the court's jurisdiction.
This action was brought by plaintiffs on October 22, 1964, based upon defendant's alleged liability in the amount of $450,000 under a contract of insurance insuring plaintiffs against fire and other risks of physical loss and damage.
Defendant moved to quash service of summons or to dismiss the complaint, contending that it was a foreign corporation not licensed to do business, nor actually doing business, in Ohio. Plaintiffs contended that defendant was subject to the jurisdiction of this court by virtue of the provisions of Section 3901.17, Revised Code. That statute provides that a foreign insurer who issues a contract of insurance to an Ohio resident or transacts any insurance business in the state of Ohio is subject to suit in Ohio courts.
Counter-affidavits were filed by both sides on the question of whether defendant did transact any insurance business within the scope of Section 3901.17, Revised Code. After considering the matters of record, this court concluded:
"It is immediately obvious that disposition of this jurisdictional issue will vitally affect the merits of this case, for if defendant prevails on this motion it necessarily follows that plaintiffs may have no cause of action on the merits.
"* * *.
"It is this court's conclusion that the allegations of the complaint and the averments of the affidavits leave too many unanswered questions for a determination to be made at this time of the factual issues posed by defendant's motions. Therefore determination of defendant's motions to dismiss or quash service of summons will be deferred until the trial."
On June 10, 1965, following the court's ruling, the defendant filed its answer. Thereafter, defendant served interrogatories upon the plaintiffs, to which response was made on January 17, 1966.
On January 10, 1966, plaintiffs moved to strike the answer of the defendant. Plaintiffs' motion is based upon the provisions of Section 3901.18, Revised Code. That section provides:
"Sec. 3901.18 Pleading by foreign companies.
"(A) Before any unauthorized foreign or alien insurer files or causes to be filed any pleading in any action, suit, or proceeding instituted against it, such unauthorized insurer shall either:
"(1) Deposit with the clerk of the court in which such action, suit, or proceeding is pending, cash or securities or file with such clerk a bond with good and sufficient sureties, to be approved by the court, in an amount to be fixed by the court sufficient to secure the payment of any final judgment which may be rendered in such action, suit, of proceeding;
"(2) Procure a certificate of authority to transact the business of insurance in this state."
Plaintiffs contend that defendant's answer was filed without complying with the terms of this statute, and should be stricken from the files as violative of law and a nullity.
Defendant contends that the terms of Section 3901.18, Revised Code, cannot be applied to a Federal Court action. Defendant argues that the United States District Courts derive their jurisdiction from the Constitution and Laws of the United States and that the states may not, by exertion of authority in any form, directly or indirectly, determine, abridge or limit Federal jurisdiction.
Section 3901.18, Revised Code, has been the subject of limited judicial construction. In fact, the only prior ruling involving the said section of which this court is aware was handed down by this court in Akron Company v. Fidelity General Ins. Co., 250 F. Supp. 201, 35 O.O.2d 373 (D.C. N.D. Ohio, 1964). In that case the defendant raised essentially the same argument here presented concerning the applicability of Section 3901.18, Revised Code, in a federal diversity action. This court ruled therein that Section 3901.18, Revised Code, did so apply. The arguments here presented by defendant have not altered the court's views on the issue.
There is, however, a distinguishing factor between the instant action and the Akron Company case. In the Akron Company case, as herein, the defendant initially challenged the court's jurisdiction over it under Section 3901.17, Revised Code. In the Akron Company case this court found that the defendant insurance company had done acts sufficient to support jurisdiction under Section 3901.17, Revised Code. Akron Company v. Fidelity General Ins. Co., 229 F. Supp. 397, 29 O.O.2d 49 (D.C. N.D. Ohio, 1964). In this case the jurisdictional issue has been reserved for decision at the time of trial.
The fact of the reservation of the jurisdictional issue under Section 3901.17, Revised Code, is, in this court's opinion, of prime importance in deciding the issues herein under Section 3901.18, Revised Code. These two statutes were enacted together, effective July 25, 1955, and in the court's opinion are so interrelated that Section 3901.18, cannot be construed without taking Section 3901.17 into account. Section 3901.17, Revised Code, provides a basis for the assertion of jurisdiction by an Ohio court over a foreign or alien insurer. Section 3901.18, Revised Code, then defines the procedures which must be followed by such an insurer who has been found subject to the court's jurisdiction under Section 3901.17, Revised Code.
It is this court's belief that until such time as a foreign or alien insurer is found to be properly before an Ohio court by virtue of the reach of Section 3901.17 the procedural requirements of Section 3901.18 cannot be enforced against such insurer.
The requisite jurisdictional determination has not yet been made herein. It is, therefore, this court's conclusion that defendant cannot be made to comply with Section 3901.18, Revised Code, nor its sanctions imposed against defendant, until such time as the jurisdictional issue is concluded. Plaintiffs' motion to strike defendant's answer is denied.
Motion denied.