Home Ins. Co. v. Dick

Brief Fact Summary

Dick (Plaintiff) brought suit against Home Insurance Co. (Defendant), a New York Company, in Texas on a policy of fire insurance issued in Mexico on a boat located there.  Plaintiff sued within the Texas statute of limitations but beyond the period specified in the insurance contract.

Synopsis of Rule of Law

A state may impose its laws and regulations to change the terms of a contract sued upon in its courts only where the contract was entered into or was to be at least partially performed within the state.

Facts

Dick (Plaintiff), a citizen of Texas residing in Mexico, purchased a fire insurance policy in that country to cover a boat operated in Mexican waters.  The policy was issued by a Mexican company that reinsured part of the risk to Home Insurance Co. (Defendant), a New York company.  The reinsurance agreement was executed in Mexico and New York.  After the boat was lost to fire, Plaintiff brought suit in a Texas court to recover on the policy, which included a clause requiring any such suit be bought within a year of the loss.  A Texas statute required any such clause extend the time to sue to no less than two years.  Dick (Plaintiff) brought suit more than one year after the loss but the Texas court applied the Texas statute, allowing the suit to proceed.

Issue

Does application of its own laws by a state to change the terms of a contract sued upon in its courts violate due process of law where the contract was neither entered into or to be partially performed within its borders?

Held

(Brandeis, J.)  Yes.  The Texas statute is not just a statute of limitations for it can, under proper circumstances, extend liability where none would exist by the terms of the contract.  It is, however, immaterial whether the statute is looked upon as procedural or substantive or remedial.  Texas had no connection with either the original policy or with the reinsurance contract except that Dick (Plaintiff) was a citizen of the state and he brought suit in Texas courts.  Where neither the contract itself or any of the parties were subject to Texas law at the time the contract was entered into or to be performed, Texas may not apply its law to change the terms of that contract.  To do so would violate the due process clause of the federal Constitution.  Reversed.

Discussion

Applying the Due Process Clause in this case made known that states were not free to make any choice of law to apply to a case in its courts.  The minimum contacts approach is similar to that necessary to impose jurisdiction on an out-of-state party.  To hold otherwise would encourage forum shopping by plaintiffs in search of a favorable state.