AIG unit loses Trek bicycle case against Zurich Taiwan unit

A Wisconsin court does not have jurisdiction over Taiwanese insurers, says a federal appeals court, in affirming dismissal of litigation filed by an American International Group Inc. unit against a Taiwanese unit of Zurich Insurance Group Ltd. and another Taiwanese insurer.

Waterloo, Wisconsin-based Trek Bicycle Corp. had two purchase order agreements with Taiwanese companies to buy bicycles and bicycle parts, according to Thursday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in Lexington Insurance Co. v. Hotai Insurance Co., Ltd. and Taian Insurance Co. Ltd.

Both companies were required under their agreements to add Trek as an additional insured under their products liability insurance coverage, which they did with Taiwanese insurers Zurich Insurance (Taiwan) Ltd., which operates as Hotai Insurance Co. Ltd., and Taian.

In 2012, a Louisiana resident became a quadriplegic when he fell after the front wheel of the Trek bicycle he had rented detached from its frame. He, his wife and son sued Trek, among others, but neither of the Taiwanese companies.

AIG unit Lexington Insurance Co., which insures Trek through comprehensive general liability and commercial umbrella policies, settled the case, then sought reimbursement from Zurich and Taian.

After they refused reimbursement, AIG filed suit against the insurers in U.S. District Court in Madison, Wisconsin, which dismissed the case, holding it did not have personal jurisdiction over the Taiwanese insurers. 

Its ruling was affirmed by a unanimous three-judge appeals court panel. “Lexington has failed to demonstrate that either Zurich or Taian made any purposeful contact with Wisconsin before, during, or after the formation of the insurance contracts,” said the ruling. 

“Indeed, Lexington points to no evidence that Zurich or Taian ever sent anything – even a copy of either insurance policy to Wisconsin.”

“Both contracts acknowledged Trek as an additional insured and extended coverage for liabilities incurred ‘worldwide.’ But neither of these provisions constitute a contact with the state of Wisconsin, so they do not single or together provide a basis for personal jurisdiction,” said the ruling.

“Because Lexington failed to show that Zurich and Taian have sufficient minimum contacts with the state of Wisconsin, we agree with the district court that exercising jurisdiction over the insurance companies would violate due process,” said the panel, in affirming the lower court’s ruling.

Defense attorney Samuel J. Leib, of Leib Knott Gaynor LLC in Milwaukee, said, “It’s a well-reasoned opinion. It does a nice job of discussing not only the bases upon which the trial judge dismissed the case, but elaborates on well-founded and established reasons why foreign insurers are not subject to jurisdiction unless there clearly is due process in doing so.”

An AIG attorney could not be reached for comment. 

In January, a federal appeals court reinstated a German company whose machine crushed a worker’s hand as a defendant in the ensuing litigation.