Swing v. Weston Lumber Co.

Background

A trustee for an Ohio mutual insurance company sued a Michigan lumber company to collect the insurer’s share of an assessment imposed during the Ohio court’s liquidation of the company. The policies covered the lumber company’s property in Manistique, Michigan, including one $5,000 policy obtained through a local bank agent who placed several policies with outside agencies. The insurance company had never obtained Michigan’s required authorization, and the lumber company argued the policies were issued in violation of Michigan law.

Reasoning

The key question was whether an out-of-state mutual insurer that had not complied with Michigan’s licensing requirements could sue in Michigan to collect an assessment on a policy tied to property in Michigan. The trial court found the insurance transaction was completed in Michigan through the local office and agent. Michigan’s statutes (sections 5157 and 10467) forbid soliciting or transacting such insurance without a state certificate and bar suits by foreign corporations when they have done forbidden acts. The Michigan Supreme Court affirmed the judgment for the lumber company, and the U.S. Supreme Court dismissed federal review because no federal question had been properly raised.

Real world impact

This outcome means companies that sell insurance to Michigan property through local agents must have Michigan authorization to enforce policies or collect assessments. Businesses that accept coverage from unauthorized out-of-state insurers may avoid liability on such claims. Because the U.S. Supreme Court dismissed review rather than ruling on the merits, the state-court judgment stands and controls this dispute.