Car Wreck – Choice of Law in Insurance Policy
Monday, November 10th, 2014
Plaintiffs were involved in a car wreck in Tennessee while driving a vehicle they borrowed from North Carolina residents. The car owners had selected an insurance policy with a Missouri choice of law provision because their daughter principally used the car in Missouri where she attended college. The issue before the Court of Appeals was whether the law of Missouri or North Carolina controls. Unlike North Carolina, Missouri law did not provide for underinsured motorist coverage. Plaintiffs contended that the laws of North Carolina governed the insurance policy. The trial court disagreed, finding that the Missouri choice of law provision was valid and enforceable because the choice of law provision was not contrary to a fundamental policy of North Carolina.
Citing Ohio Cas. Ins. Co. v. Travelers Indem. Co, 493 S.W.3d 465, 476 (Tenn. 1973), the Court of Appeals noted that Tennessee’s conflict of law doctrine provides that a contract is presumed to be governed by the law of the jurisdiction in which it was executed absent a contrary intent. If the parties manifest an intent to instead apply the laws of another jurisdiction, then that will be honored provided that the provision was executed in good faith and the jurisdiction whose law is chosen bears a material connection into the transaction.
In this case, although the car was registered in North Carolina, it was seldom used there. The principle location and use of the insured vehicle was in Missouri, therefore, the principle risk associated with the vehicle was in Missouri. Because North Carolina’s interest in the regulation of an insurance policy of an automobile primarily operated in Missouri does not constitute a fundamental policy, the choice of law provision was valid and enforceable.
Williams v. Smith, No. M2013-02606-COA-R3-CV (Tenn. Ct. App. Nov. 6, 2014)