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November 17, 1997


Appeal from the Circuit Court of Cook County. No. 91 CH 50114. Honorable Aaron Jaffe, Judge Presiding.

Released for Publication January 22, 1998.As Corrected November 18, 1997. As Corrected November 25, 1997.

The Honorable Justice O'brien delivered the opinion of the court. Campbell, P.j., and Gallagher, J., concur.

The opinion of the court was delivered by: O'brien

The Honorable Justice O'BRIEN delivered the opinion of the court:

Defendant, the Illinois Life and Health Insurance Guaranty Association (ILHGA), filed a section 2-619 motion to dismiss plaintiff's third amended complaint. 735 ILCS 5/2-619 (West 1996). The trial court granted defendant's motion and plaintiff appealed. We affirm.

Plaintiff, Donald Lawrence, was an insured of Executive Life Insurance Company (ELIC), a California-based company authorized to transact business in Illinois. As a condition of its authority to transact insurance in Illinois, ELIC maintained membership in the ILHGA and contribute to ILHGA, which is administered by a board of directors (215 ILCS 5/531.06 (West 1996)), provides coverage to Illinois policyholders of financially impaired life and health insurance companies (215 ILCS 5/31.02 (West 1996)).

ELIC became insolvent and in 1991 the superior court of California, County of Los Angeles (the California court), appointed the Insurance Commissioner of the State of California (the Insurance Commissioner) conservator. The National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) represented all participating guaranty associations. The California court did not certify a class or appoint an insured to represent the interests of the policyholders.

The conservator and NOLHGA reached a settlement and filed a rehabilitation plan with the California court. The plan called for the creation of a new insuring entity (Aurora) out of the assets of ELIC. In addition, the plan incorporated an enhancement agreement entered into between ILHGA, through NOLHGA, and the California Insurance Commissioner. According to the enhancement agreement, any ELIC insured who failed to affirmatively opt out of the agreement would be considered a plan participant. Plan participants released all claims against ELIC, the California Insurance Commissioner, and any state guaranty association taking part in the settlement in favor of the right to recover from the newly formed insurance company.

The California court set a date for hearings on the proposed ELIC rehabilitation plan and ordered the Insurance Commissioner to publish notices of the hearing in two newspapers of national circulation. The notice stated that any person wishing to appear at the ELIC hearing and to be heard or to present testimony or other evidence was entitled to appear or to submit written comments, suggestions, objections or testimony by mail. On February 13, 1992, Paul R. Rigney, originally the lead plaintiff in the instant case, filed a petition in the California court for leave to intervene in the ELIC rehabilitation proceeding, seeking to file a class action challenging the enhancement agreement on behalf of all ELIC policyholders. Rigney was represented in the ELIC rehabilitation proceedings by the same counsel that represents Lawrence in the instant case.

Following the ELIC hearing, the California court rejected Rigney's petition to certify a class and approved the enhancement agreement. Further, the California court ordered that election information be distributed to ELIC policyholders. The election information did not specifically inform policyholders residing in Illinois that, as plan participants, their rights under the Illinois guaranty fund would be extinguished, but stated, "You may wish to seek independent advice whether an election to opt out will affect your rights, if any, against parties or persons other than ELIC." The named plaintiff, Donald Lawrence, an Illinois resident, failed to return the election form and thus was deemed to be a participant of the ELIC rehabilitation plan.

Plaintiff filed a five-count class action complaint on behalf of all ELIC insureds residing in Illinois or otherwise covered by the Illinois Life Insurance and Health Insurance Guaranty Association Law (215 ILCS 5/531.01 et seq. (West 1996)) (hereinafter the Insurance Guaranty Law). Count I of plaintiff's third amended complaint seeks a declaratory judgment that the enhancement agreement impermissibly denies policyholders due process because it waives their rights against the ILHGA without their knowledge or consent. Count II seeks a declaratory judgment that the enhancement agreement violates policyholders rights under the Insurance Guaranty Law because it obviates the fund's liability to the plaintiff class in the event the newly formed insurance company should likewise become financially unstable. Count III seeks an award of damages to compensate the named plaintiff and the plaintiff class for past and future claims under their various insurance policies. Count IV seeks an accounting of amounts due to him pursuant to his ELIC insurance policy and the Illinois guaranty fund. Count V seeks to enjoin the ILHGA from pursuing or advancing on the enhancement agreement until a full hearing on the pending case. On June 7, 1995, the circuit court of Cook County dismissed plaintiff's third amended complaint pursuant to section 2-619 of the Illinois Code of Civil Procedure (735 ILCS 5/2-619 (West 1994)), ruling that the California court had jurisdiction over Lawrence and that its orders were entitled to full faith and credit. Plaintiff appealed.

On appeal, we consider (1) whether, as a resident of this state, Lawrence was subject to the limited personal jurisdiction of the California court to affect his rights against the ILHGA, (2) whether the enhancement agreement violated plaintiff's statutory and constitutional rights, and (3) whether the circuit court was required to give full faith and credit to the California court's judgment.

Personal Jurisdiction

Plaintiff was subject to the jurisdiction of the California court under California's long-arm statute. Cal. Code Civ. Proc. Ann. § 410.10 (Deering 1991). California's long-arm statute grants the broadest basis for jurisdiction consistent with due process. It provides that a California court "may exercise jurisdiction on any basis not inconsistent with the Constitution of [California] or of the United States." Cal. Code Civ. Proc. Ann. § 410.10 (Deering 1991). Accordingly, where it is found that personal jurisdiction does not offend due process, it consequently cannot violate California's long-arm statute. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471, 105 S. Ct. 2174, 2181, 85 L. Ed. 2d 528, 540 (1985). The relevant considerations in determining whether sufficient minimum contacts exist to justify the exercise of limited personal jurisdiction over a nonresident are: (1) the individual must have purposefully availed himself or herself of the privilege of conducting activities ...

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