State Farm Mutual Automobile Insurance v. Superior Court

This is an action against a mutual automobile insurance company incorporated and headquartered in Illinois, where the board of directors holds its meetings. A group of policyholders contends that the insurance company’s board of directors did not pay the dividends it promised. The trial court certified the case as a nationwide class action and ruled that California law, not Illinois law, governs the policyholders’ causes of action.

The insurance company has filed a petition for a writ of mandate, challenging the trial court’s ruling that California law applies. We conclude that, because the declaration of dividends concerns the internal affairs of the insurance company, Illinois law applies in this case. We therefore grant the petition.

I

BACKGROUND

Defendant State Farm Mutual Automobile Insurance Company (State Farm) was created in 1922 under the laws of the State of Illinois. It is incorporated there and is headquartered in Bloomington, Illinois. The board of directors meets in Bloomington when making decisions about whether to declare dividends. State Farm’s primary financial records are maintained there.

During the early to mid-1980’s, State Farm automobile…