Watson v. Employers Liability Assurance Corporation, Ltd.

348 U.S. 66 (1954)

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Nature of the Case

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Facts

Ps brought this action in a Louisiana state court claiming damages against D on account of alleged personal injuries suffered by P. The injuries occurred in Louisiana when P used 'Toni Home Permanent' a hair-waving product alleged to have contained a highly dangerous latent ingredient put there by its manufacturer. Toni Company of Illinois makes the product and is a subsidiary of the Gillette Safety Razor Company which has its headquarters in Massachusetts. D issued an insurance policy to Toni in Massachusetts. The contract contained a clause prohibiting direct actions against D until any tort litigation against Toni had been declared final. Contrary to this contractual 'no action' clause, Louisiana statutory provisions permit injured persons to sue an insurance company before a final determination. The State's direct action statute makes it applicable, even though an insurance contract is made in another state and contains a clause forbidding such direct actions. A Louisiana statutory provision, with which D long ago complied, compels foreign insurance companies to consent to such direct suits in order to get a certificate to do business in the State. The matter was removed to federal court on grounds of diversity. D then moved to dismiss on grounds that the extraterritorial application of the Louisiana statutes violated Equal Protection, Contract, Due Process, and Full Faith and Credit. The District Court dismissed the case on due process grounds, holding both statutory provisions unconstitutional as to policies written and delivered outside the State of Louisiana. The Court of Appeals affirmed. P appealed.