Car Accident Out of State Insurance

In McClanahan v. Trans-America Ins. Co. (1957), the defendant was an Alabama insurance company which was not qualified to do business in California and did not solicit business there. However, it had issued liability automobile insurance to policyholders who drove in California, and had adjusted and defended numerous cases there. When one of its policyholders was involved in an accident in California, the insurance company investigated and defended the resulting claim, but did not pay the judgment entered against it. (McClanahan v. Trans-American Ins. Co., supra, 149 Cal. App. 2d at pp. 173-174.) The plaintiff sued under the policy, but the trial court quashed service of the summons. The Court of Appeal that cited International Shoe Co. v. Washington, supra, 326 U.S. 310 noted that the rule enunciated therein was a qualitative, rather than quantitative, test of minimum contacts, and reversed the trial court order. The court based its holding on the fact that by the very nature of the automobile insurance business, the insurance company knew that its insureds might drive in California, and that it might be necessary to come into the courts of this state to assert its rights and defend its obligations under the policies.