Nadler v. Liberty Mut. Fire Ins. Co.

• Decision Date: 13 November 1992
• Docket Number: No. 21004,21004
• Citation: 424 S.E.2d 256,188 W.Va. 329
• Court: West Virginia Supreme Court
• Parties: Roger NADLER, Executor of the Estate of James A. Schoettker and Administrator of the Estate of Sara R. Schoettker; Sylvia B. Schoettker, Individually, and as Mother and Natural Guardian of Robert Maxwell Schoettker, Kathleen Suzette Schoettker, Matthew Alan Schoettker, Allyson Marie Schoettker, and Tiffany Noelle Schoettker, Plaintiffs, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant.

Page 256

424 S.E.2d 256

188 W.Va. 329

Roger NADLER, Executor of the Estate of James A. Schoettker and Administrator of the Estate of Sara R. Schoettker Sylvia B. Schoettker, Individually, and as Mother and Natural Guardian of Robert Maxwell Schoettker, Kathleen Suzette Schoettker, Matthew Alan Schoettker, Allyson Marie Schoettker, and Tiffany Noelle Schoettker, Plaintiffs, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant.

No. 21004.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 16, 1992.

Decided Nov. 13, 1992.

Syllabus by the Court

1. "Where in a suit for the recovery of uninsured motorist insurance benefits an issue arises which involves insurance coverage, that issue is to be resolved under conflict of laws principles applicable to contracts." Syllabus Point 1, Lee v. Saliga, 179 W.Va. 762, 373 S.E.2d 345 (1988).

2. "The provisions of a motor vehicle policy will ordinarily be construed according to the laws of the state where the policy was issued and the risk insured was principally located, unless another state has a more significant relationship to the transaction and the parties." Syllabus Point 2, Lee v. Saliga, 179 W.Va. 762, 373 S.E.2d 345 (1988).

3. The mere fact that the substantive law of another jurisdiction differs from or is less favorable than the law of the forum state does not, by itself, demonstrate that application of the foreign law under recognized conflict of laws principles is contrary to the public policy of the forum state.

4. Where a choice of law question arises with regard to the interpretation of coverage provisions in a motor vehicle insurance policy executed in another state, the public policy considerations inherent in the fact that the substantive law of the other state differs from our own will ordinarily be adequately addressed by application of the significant relationship conflict of laws test enunciated in Syllabus Point 2 of Lee v. Saliga, 179 W.Va. 762, 373 S.E.2d 345 (1988).

Monty L. Preiser, Preiser, Tabor, Lindsay & Coltelli, Charleston, for plaintiffs.

J. Peter Richardson, Richardson, Kemper, Hancock & Davis, Bluefield, for defendant.

MILLER, Justice:

This case involves a question certified to us by the United States Court of Appeals for the Fourth Circuit pursuant to W.Va.Code, 51-1A-1, et seq. ¹ We are asked to decide whether the substantive law of Ohio or the substantive law of West Virginia is to be applied to determine the rights of the parties under a contract for underinsured motorist coverage.

I.

This dispute arose out of an automobile accident which occurred on March 27, 1988, on U.S. Route 60 in Greenbrier County when a tractor-trailer owned by Benjamin Thomas, Sr., d/b/a Thomas Trucking Company, and operated by Benjamin Thomas, Jr., crossed the center line and collided with a vehicle owned and operated by James A. Schoettker of West Chester Ohio. Mr. Schoettker's wife, Sylvia, and their six children were passengers in the Schoettker vehicle at the time of the accident. Mr. Schoettker and his daughter, Sara, were killed. Mrs. Schoettker and the other children suffered serious bodily injury. In addition, Mrs. Schoettker lost an unborn child as a result of the accident.

Both vehicles were insured by Liberty Mutual Fire Insurance Company (Liberty Mutual). The Thomas policy, which was issued in West Virginia, provided liability insurance with a single accident limit of $325,000. This amount was paid to the plaintiffs. ²

The Schoettker policy was issued in Ohio, where the plaintiffs lived and where the vehicle was registered. The policy provided underinsured motorist coverage on two vehicles, including the vehicle involved in the accident, in the amount of $300,000. The policy also contained provisions, however, which expressly denied coverage when the amount of liability insurance available from another source was equal to or greater than the amount of underinsured motorist coverage available under the policy and provided for a set-off for any liability insurance received by the insured. ³

When the plaintiffs attempted to recover underinsured motorist benefits under the Schoettker policy, Liberty Mutual denied coverage. The plaintiffs subsequently brought a declaratory judgment action in the United States District Court for the Southern District of West Virginia to adjudicate the parties' rights and responsibilities under the contract of insurance. The complaint alleged that the plaintiffs were entitled to underinsured motorist benefits under the policy in reliance on West Virginia law. Liberty Mutual responded that the plaintiffs were not entitled to benefits because the amount of the liability insurance paid under the Thomas policy exceeded the per accident limitation of the underinsured motorist coverage under the Schoettker policy in reliance on Ohio law. The parties agreed that there were no material issues of fact and submitted the case for decision on cross-motions for summary judgment.

The District Court determined that the substantive law of Ohio, rather than the law of West Virginia, governs the interpretation of the insurance policy and granted Liberty Mutual's motion for summary judgment. See Nadler v. Liberty Mut. Fire Ins. Co., 770 F.Supp. 294 (S.D.W.Va.1990). The plaintiffs' motion to alter judgment was denied, and the plaintiffs appealed to the Court of Appeals for the Fourth Circuit. By order dated February 25, 1992, the Court of Appeals certified to this Court the question of whether the application of Ohio law to interpret the terms of the Schoettker insurance policy violates the public policy of this State.

II.

The parties agree that under Ohio law, the plaintiffs are not entitled to recover any underinsured motorist benefits under the Schoettker policy. By statute, Ohio requires insurers to offer optional underinsured motorist coverage, but specifies the limits of the insurer's liability therefor as "the limits of such coverage, less those amounts actually recovered under all applicable bodily injury liability bonds and insurance policies covering persons liable to the insured." Ohio Rev.Code § 3937.18(A)(2) (1988). The Ohio courts have interpreted this provision as allowing insurers to deny coverage where the amount of the tortfeasor's liability insurance is equal to or greater than the amount of the injured party's underinsured motorist coverage and to take a set-off for the amount of liability insurance paid. See James v. Michigan Mut. Ins. Co., 18 Ohio St.3d 386, 18 O.B.R. 440, 481 N.E.2d 272 (1985); Ohio Casualty Ins. Co. v. Yoby, 23 Ohio App.3d 51, 23 O.B.R. 96, 491 N.E.2d 360 (1985).

It is equally clear that application of West Virginia law leads to a different result. In State Automobile Mutual Insurance Co. v. Youler, 183 W.Va. 556, 564, 396 S.E.2d 737, 745 (1990), we concluded that by enacting our uninsured/underinsured motorist coverage statute, W.Va.Code, 33-6-31(b) (1982), our legislature had "articulated a public policy ... that the injured person be fully compensated for his or her damages not compensated by a negligent tortfeasor, up to the limits of the uninsured or underinsured motorist coverage." (Emphasis in original). In Youler, we held that set-off provisions, such as those contained in the Schoettker policy, which allow the insurer to reduce the amount of the insured's underinsured motorist benefits by any amounts paid under the tortfeasor's liability coverage, violate this public policy and are void. ⁴ See also Bell v. State Farm Mut. Auto. Ins. Co., 157 W.Va. 623, 207 S.E.2d 147 (1974).

Later, in Pristavec v. Westfield Insurance Co., 184 W.Va. 331, 400 S.E.2d 575 (1990), we held that in furtherance of this public policy of full compensation for the victims of underinsured drivers, our statute requires the insurer to pay underinsured motorist benefits even when the amount of the plaintiff's underinsured motorist coverage is equal to or less than the amount available to the plaintiff under the tortfeasor's liability insurance coverage. ⁵ Thus, under West Virginia law, the plaintiffs in this case would be entitled to underinsured motorist benefits under the Schoettker policy so long as the liability insurance available to them under the Thomas policy was inadequate to compensate them for their injuries. ⁶

III.

In determining which law applies, we must first consider the type of issue involved. In Lee v. Saliga, 179 W.Va. 762, 766, 373 S.E.2d 345, 349 (1988), we recognized that cases involving uninsured motorist coverage "may raise questions of both tort and contract law. Where such a question involves an aspect of policy coverage, rather than liability, it is treated as a contract question for purposes of conflicts analysis. 1 A. Widiss, Uninsured and Underinsured Motorist Insurance § 7.15 (1985)." (Emphasis in original). In Syllabus Point 1 of Lee, we stated:

"Where in a suit for the recovery of uninsured motorist insurance benefits an issue arises which involves insurance coverage, that issue is to be resolved under conflict of laws principles applicable to contracts."

Accord Liberty Mut. Ins. Co. v. Triangle Indus., Inc., 182 W.Va. 580, 390 S.E.2d 562 (1990). In Lee, we noted that "questions of coverage" include issues relating to enforceability of exclusions in the policy, the availability of stacking, and the applicable limits of coverage. The parties apparently admit that the issues raised in the declaratory judgment action are questions of coverage warranting application of contracts principles of conflict of laws.

The general rule with regard to choice of law in contracts cases was stated in Syllabus Point 2 of General Electric Co. v. Keyser, 166 W.Va. 456, 275 S.E.2d 289 (1981):

" 'The law of the state in which a contract is made and to be performed governs the construction of a contract when it is involved in litigation in the courts of this state'. Syl. pt. 1 (in part) Michigan National Bank v. Mattingly, 158 W.Va. 621, 212 S.E.2d 754 (1975)."

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