Anderson v. State Farm Mut. Automobile Ins. Co.

Decision Date08 November 1946
Docket NumberNo. 34237.,34237.
Citation222 Minn. 428,24 N.W.2d 836
PartiesANDERSON v. STATE FARM MUT. AUTOMOBILE INS. CO.
CourtMinnesota Supreme Court

Appeal from District Court, Hennepin County; John A. Weeks, Judge.

Action by Arne L. Anderson against the State Farm Mutual Automobile Insurance Company to recover for personal injuries and property damage sustained as result of a collision between plaintiff's automobile and an automobile of the defendant's insured. From an order sustaining defendant's demurrer to the complaint, the plaintiff appeals.

Order affirmed.

William H. DeParcq, Robert J. McDonald and Donald T. Barbeau, all of Minneapolis (Michael Levin, of Milwaukee, Wis., of counsel, on the brief), for appellant.

Freeman & King, of Minneapolis, for respondent.

PETERSON, Justice.

This case is here on plaintiff's appeal from the order sustaining defendant's demurrer to the complaint. The question for decision is whether, in an action brought in Minnesota by a person injured in Wisconsin by the negligence of the insured named in an automobile liability insurance policy containing a no-action clause issued to him at his residence in Wisconsin, the insurer is liable directly to the person injured for the negligence of the insured where the insured's liability for negligence has not been established by a judgment recovered against him after actual trial.

Plaintiff sustained personal injuries and property damage as the result of a collision between his automobile and that of Edward J. Maitrejean, defendant's insured, on a public highway in Wisconsin. Insured's automobile was operated at the time by a third person, but under the circumstances his negligence was legally attributable to insured under the law of Wisconsin. At the time of the accident insured, who was a resident of Wisconsin, was insured against liability for such risks by defendant under a policy of automobile liability insurance issued in that state. The policy provided that defendant agreed to pay in behalf of the insured all sums for which he should become obligated by reason of liability imposed upon him for either personal injuries or property damage caused by accident or arising out of the ownership, maintenance, or use of his automobile, subject to the conditions set forth in the policy. Among the conditions is the no-action clause1 already mentioned. It provides that no action shall lie against the insurer unless as a condition precedent thereto the amount of the insured's obligation shall have been determined either by a judgment against the insured after actual trial or by an agreement joined in by the insurer. Plaintiff asserts that the policy, having been issued in Wisconsin, is governed by the law of that state and that under § 85.93 an insurer is liable directly to a person injured by its insured's negligence without the recovery of a judgment establishing liability against the insured. Plaintiff has not recovered a judgment against the insured. Section 85.93 provides in effect that the provisions thereof shall be deemed a part of the contract of insurance and that the insurer shall be liable to a person injured by the insured's negligence. Section 260.11(1) provides in effect that in an action by an injured person for injuries caused by the negligence of the insured the insurer may be joined as a party defendant. For present purposes, it is conceded that defendant's liability to plaintiff, if any, arises under and is to be determined by these statutes.2

Plaintiff contends that § 85.93 imposes upon the insurer liability directly to the person injured for the insured's negligence without joinder of the insured, and that § 260.11(1), by providing for the joinder of the insurer under an automobile liability insurance policy in an action by the injured party to recover damages caused by the negligence of the insured in operating a motor vehicle, in effect nullifies and supersedes the no-action clause. Defendant's contention is that § 85.93 as construed by the supreme court of Wisconsin creates whatever substantive rights an injured person has to hold an insurer directly liable for the negligence of the insured and permits limitation of that liability by a no-action clause, so that, absent an agreement joined in by the insurer mentioned in the policy, no action against the insurer can be brought until after the insured's liability for damages has been determined by a judgment rendered against him after actual trial; that § 260.11(1) creates no substantive rights and relates only to procedure in the courts of Wisconsin and authorizes the joinder there of the insurer as a party defendant in an action by the injured person to enforce liability for the insured's negligence; that under the rules of the conflict of laws plaintiff, as the injured person, may enforce in our courts only substantive rights conferred by § 85.93 and not procedural rights under § 260.11(1); that, because of plaintiff's failure to recover a judgment against the insured establishing his obligation as required by the no-action clause, he has no substantive right under § 85.93 to hold defendant as the insurer directly liable for the negligence of its insured; that, because any procedural rights an injured party may have under § 260.11(1) to join the insurer in an action such as this are not enforceable in our courts and because our local law does not permit such a joinder, defendant was improperly joined in this action; and that for the reasons mentioned plaintiff's action must fail.

The issues thus raised are to be resolved by the application of a few simple rules of the conflict of laws. We shall assume, as the parties have and as we held in Kertson v. Johnson, 185 Minn. 591, 242 N.W. 329, 85 A.L.R. 1, that the insurer's liability is a contractual one embracing within its coverage the substantive provisions of the law of Wisconsin relating to such liability. In transitory actions, matters of substantive law are governed by the law of the place of the transaction, which in this case is that of the place where the insurance policy is issued (lex loci contractus), and matters of procedure by the law of the place where the action is brought (lex fori).3 The court of the forum, subject only to the limitations of the federal constitution (a matter not involved here), determines whether a given question involves one of substance or of remedy.4 Joinder of parties relates to the remedy, with the consequence that the law of the forum with respect to that subject matter governs.5 Once the court of the forum has decided which matters are substantive and which are procedural, it will determine substantive rights in accordance with the foreign law. In construing a foreign statute to determine whether it creates substantive or remedial rights, the courts of the forum will adopt the construction of the statute with respect to the matter which the courts of the state of the statute have given it.6

The case of Kertson v. Johnson, 185 Minn. 591, 242 N.W. 329, 85 A.L.R. 1, supra, is decisive here. There the plaintiff, a person injured in Wisconsin by the negligence of the insured, sued the insurer under an automobile liability insurance policy issued in that state without joining the insured as a defendant to enforce the direct liability imposed by § 85.93 upon such an insurer for the negligence of its insured. The policy did not contain a no-action clause. We held that plaintiff could enforce by action in our courts whatever substantive rights he had under § 85.93 as construed by the supreme court of Wisconsin; that, while the injured party had the right in Wisconsin to join the insurer, his remedial rights in our courts, including that of joining the insurer, were governed by our local law; that § 85.93, as construed by the supreme court of Wisconsin, imported into every policy of automobile liability insurance, whether written in that state or not, a provision making the insurer liable directly to the injured party to the extent of the insurance for injuries for which the insured tort-feasor would be liable; that the rights in favor of the injured party created by the statute were substantive and not remedial in nature; that such rights were enforceable in this state; and that (185 Minn. at page 595, 242 N.W. at page 330, 85 A.L.R. 1) "the insurer may be joined [in an action in the courts of this state to enforce the liability] by virtue, not of Wisconsin procedure but of the nature of the substantive liability created by the tenor of the insurance policy as provided by the law of that state." Here, the policy sued on differs from the one in the Kertson case, in that it contains a no-action clause, while the one there involved did not. The question then is: What effect does the no-action clause have under the law of Wisconsin? If it is the law of Wisconsin that § 85.93, where the policy contains a no-action clause, does not impose upon the insurer liability directly to the injured party in such cases unless he first recovers a judgment against the insured establishing the latter's liability, and that § 260.11(1) is a purely procedural statute relating to joinder of parties, then this action cannot be maintained.

Decisions of the supreme court of Wisconsin have determined that § 85.93 relates to substantive rights and that § 260.11(1) relates to the matter of procedure. While § 85.93 in its original form provided that the insurer in cases of this kind should be liable directly to the injured party where the insured would be, it was held that where the policy contained a no-action clause the insurer was not liable directly to a party injured by the insured's negligence unless he had first recovered a judgment against the insured establishing his liability. Morgan v. Hunt, 196 Wis. 298, 220 N.W. 224. After the decision in the Morgan case, § 85.93 was amended to read as it now does, by providing that the insurer shall be directly liable to the injured party "irrespective of whether such...

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