Clarification of Personal Jurisdiction and Contract Privity in Insurance Claims: Smith v. Aegon USA

Introduction

Smith v. Aegon USA, decided May 9, 2025 by the Fifth Circuit Court of Appeals, addresses two core issues in federal litigation arising from an insurance‐claim delay: (1) the requirements for specific personal jurisdiction over nonresident defendants under Rule 12(b)(2), and (2) the prerequisites for contract‐based claims—particularly breach of contract, bad faith, and third‐party beneficiary claims—under Mississippi law. Velma Smith, the named plaintiff, purchased a group hospital indemnity policy through her JCPenney credit card benefits. After an accident in May 2021, she experienced difficulty submitting her claim due to a mismatched policy number, eventually received payment in December 2021, then filed a putative nationwide class action against Transamerica Life Insurance Company (“Transamerica”), its third‐party administrators, and various Aegon and Tata entities. The district court dismissed all claims for lack of personal jurisdiction (as to OpCo and TAIC) and for failure to state a claim (as to Transamerica, e-Serve, and TCSL). Smith appealed both dismissals.

Summary of the Judgment

The Fifth Circuit affirmed in full. First, it held that OpCo (the post‐bankruptcy JCPenney successor) and TAIC (a Tata subsidiary) lacked minimum contacts with Mississippi to support specific personal jurisdiction. Both defendants’ unrefuted declarations established that they neither sold nor administered the policy at issue and had no role in Smith’s claims process; their only Mississippi ties were licensure and registered agents, insufficient under the three‐prong jurisdictional test (Choice Healthcare v. Kaiser, 615 F.3d 364, 368 (5th Cir. 2010)). Second, the court found that Smith’s substantive claims failed as a matter of law:

Breach of contract and bad faith claims against e-Serve and TCSL faltered for lack of privity (Maness v. K&A Enters., 250 So. 3d 402 (Miss. 2018)).
The breach‐of‐contract claim against Transamerica failed because Smith’s own complaint showed she did not give timely notice to the correct Texas address until December 7, 2021, triggering the 45-day payment window that rendered Transamerica’s December 24 payment timely.
The implied covenant of good faith and fair dealing and bad faith claims against Transamerica were defective because no arguable basis for wrongful delay or denial was alleged once the proper notice was given.
The third‐party beneficiary claim against e-Serve lacked any contractual promise “springing” for Smith’s direct benefit (Rein v. Benchmark Constr. Co., 865 So. 2d 1134 (Miss. 2004)).
The declaratory‐judgment count fell with the underlying merits.

Analysis

Precedents Cited

Pervasive Software Inc. v. Lexware GmbH & Co. KG, 688 F.3d 214 (5th Cir. 2012) – standard of review for personal jurisdiction dismissals under Rule 12(b)(2).
Johnston v. Multidata Sys. Int’l Corp., 523 F.3d 602 (5th Cir. 2008) – prima facie standard and consideration of uncontroverted facts in jurisdictional challenges without evidentiary hearings.
Choice Healthcare Inc. v. Kaiser Found. Health Plan of Colo., 615 F.3d 364 (5th Cir. 2010) – the three‐prong test for specific jurisdiction: purposeful availment, cause of action arising out of forum contacts, and fairness.
Carmona v. Leo Ship Mgmt. Inc., 924 F.3d 190 (5th Cir. 2019) – further explication of the specific‐jurisdiction inquiry.
Pace v. Cirrus Design Corp., 93 F.4th 879 (5th Cir. 2024) – unrefuted affidavits are taken as true when undisturbed by more than bare allegations.
Maness v. K&A Enters. of Miss. LLC, 250 So. 3d 402 (Miss. 2018) – Mississippi privity requirement for breach of contract actions.
Rein v. Benchmark Constr. Co., 865 So. 2d 1134 (Miss. 2004) – third‐party beneficiary rights “spring” from a contract’s terms.
James v. State Farm Mut. Auto Ins., 743 F.3d 65 (5th Cir. 2014) – bad‐faith delay recognized as actionable under Mississippi law.

Legal Reasoning

1. Personal Jurisdiction: Applying the three‐prong specific‐jurisdiction test, the court concluded OpCo and TAIC lacked purposeful availment. OpCo’s formation post‐dating Smith’s policy purchase, its lack of insurance activities in Mississippi, and its zero involvement in claim resolution meant no relevant “minimum contacts.” Similarly, TAIC’s undisputed declarations showed no claims handling or policy sales—its mere licensure and registered agent status alone did not satisfy jurisdictional requirements (Carmona, 924 F.3d at 193).

2. Breach of Contract & Privity: Under Mississippi law, a plaintiff must be a party to the contract to sue for breach. Smith’s failure to identify any contractual nexus with TCSL or e-Serve ended those claims at the threshold. Against Transamerica, her own pleading revealed that contractual notice was not delivered to the required Texas address until December 7, 2021, making the insurer’s payment on December 24 within the 45-day contractual window.

3. Good Faith, Bad Faith & Third-Party Beneficiary: The Fifth Circuit reiterated that an implied covenant cannot be breached when the insured’s own allegations show strict compliance with payment timelines. Bad faith requires lack of any arguable basis for delay or denial, and Smith pleaded none once proper notice was given. Likewise, a third‐party beneficiary claim must arise from a contract conferring direct benefit; no such instrument linking Smith to e-Serve was alleged.

Impact

Smith v. Aegon USA underscores two critical lessons for litigants in insurance‐claim disputes:

Personal jurisdiction challenges under Rule 12(b)(2) carry heightened weight when a nonresident defendant proffers uncontroverted affidavits. Bare allegations without tailored evidentiary counterproof will not create a jurisdictional hook.
Under Mississippi law, privity remains the gatekeeper for contract‐based claims; third‐party administrators or service providers face minimal exposure absent direct contractual obligations to insureds.

Future plaintiffs will need to anticipate and expressly plead jurisdictional facts and contractual relationships to survive early motions to dismiss.

Complex Concepts Simplified

Specific Personal Jurisdiction: A court’s power over a nonresident defendant based on the defendant’s deliberate contacts with the forum state relating to the lawsuit.
Privity of Contract: The requirement that only parties to a contract (or intended third‐party beneficiaries) can enforce its terms.
Implied Covenant of Good Faith and Fair Dealing: A promise that neither party will act to deprive the other of contract benefits, breached only by unfair, unreasonable or deceitful conduct beyond contract terms.
Bad Faith in Insurance Law: Insurer conduct lacking any arguable basis for denial or delay, plus malice or gross negligence.
Third-Party Beneficiary: A non‐signatory who may enforce a contract if the pact was made expressly for that person’s direct benefit.

Conclusion

Smith v. Aegon USA reaffirms the exacting standards for establishing specific personal jurisdiction and the indispensability of privity in contract claims under Mississippi law. By endorsing deference to uncontradicted jurisdictional declarations and enforcing strict contract‐law doctrines, the Fifth Circuit has narrowed the early litigation window for plaintiffs whose claims hinge on indirect relationships or forum‐unrelated contacts. The decision serves as a clear roadmap for insurers, administrators, and policyholders on the procedural and substantive thresholds required to sustain insurance disputes in federal court.