Nodak Mut. Ins. v. American Family Mut., No. C3-98-1792.

• Decision Date: 13 January 2000
• Docket Number: No. C3-98-1792.
• Citation: 604 N.W.2d 91
• Parties: NODAK MUTUAL INSURANCE COMPANY, petitioner, Appellant, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Respondent.
• Court: Minnesota Supreme Court

604 N.W.2d 91

NODAK MUTUAL INSURANCE COMPANY, petitioner, Appellant, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Respondent.

No. C3-98-1792.

Supreme Court of Minnesota.

January 13, 2000.

William P. Harrie, Niles, Hansen & Davies, Ltd., Fargo, ND, for appellant.

Paul R. Aamodt, Aamodt & Lamb, Fargo, ND, for respondent.

Heard, considered, and decided by the court en banc.

OPINION

BLATZ, Chief Justice.

This case raises the question of whether Minnesota's or North Dakota's no-fault law applies when a Minnesota resident covered by a Minnesota automobile insurance policy is injured in an automobile accident in North Dakota by a North Dakota resident covered by a North Dakota policy. We hold that when all other relevant choice-of-law factors favor neither state's law, the state where the accident occurred has the strongest governmental interest, and that state's law should therefore be applied.

On November 23, 1993, David Blumer of Fargo, North Dakota, and Gracy Morey of Moorhead, Minnesota, were involved in an automobile accident on a bridge approximately one-quarter of a mile into Fargo. Morey, whose car was registered in Minnesota and covered by a Minnesota insurance policy issued by respondent American Family Mutual Insurance Company, was seriously injured in the accident. Blumer's car was registered in North Dakota and covered by a North Dakota insurance policy issued by appellant Nodak Mutual Insurance Company.

American Family paid Morey $6,201.64 in no-fault benefits. Nodak settled with Morey for $25,000, and Morey signed a release stating that "this Release does not release my no-fault carrier, American Family Insurance Group from further obligation to pay no-fault benefits." American Family then requested equitable allocation from Nodak in the amount of $6,201.64 pursuant to the North Dakota no-fault statute, which permits equitable allocation among insurers. The statute states in pertinent part that:

A basic no-fault insurer may recover no-fault benefits paid to or for the benefit of an injured person from the motor vehicle liability insurer of a secured person if * * * [t]he injured person has sustained a serious injury[.] * * * The right of recovery and the amount thereof must be determined on the basis of tort law * * * by agreement between the insurers involved, or, if they fail to agree, by binding intercompany arbitration under procedures approved by the commissioner.

N.D. Cent.Code § 26.1-41-17 (1995). Nodak does not dispute that if North Dakota law applies, American Family has a right to seek recovery of the no-fault benefits it paid Morey.

In response, Nodak commenced this action seeking a declaratory judgment that Minnesota's no-fault law applies. The Minnesota No-Fault Act gives Minnesota insurers limited subrogation rights for injuries caused to their insureds by the negligence of out-of-state drivers. See Minn. Stat. § 65B.53, subd. 2 (1998). One of these limitations is that there can be no subrogation unless the insured receives or is entitled to receive a double recovery. See id. The relevant statutory provision states that:

A reparation obligor paying or obligated to pay basic or optional economic loss benefits is subrogated to the claim for the recovery of damages for economic loss that the person to whom the basic or optional economic loss benefits were paid or payable has against another person whose negligence in another state was the direct and proximate cause of the injury for which the basic economic loss benefits were paid or payable. This right of subrogation exists only to the extent that basic economic loss benefits are paid or payable and only to the extent that recovery on the claim absent subrogation would produce a duplication of benefits or reimbursement of the same loss.

Id. (emphasis added). American Family does not dispute that its insured has not received and will not receive a double recovery, and thus that subrogation is not available under Minnesota's no-fault law.

In determining whether North Dakota's or Minnesota's no-fault law applied, the district court performed a choice-of-law analysis and concluded that Minnesota's law should govern. Therefore, American Family could not recover its no-fault benefits from Nodak. After performing its own choice-of-law analysis, the court of appeals reversed, holding that North Dakota's no-fault law governed, and therefore that equitable allocation was available to American Family. See Nodak Mut. Ins. Co. v. American Family Mut. Ins. Co., 590 N.W.2d 670, 674 (Minn.App.1999)

. We affirm the court of appeals and hold that American Family may seek equitable allocation from Nodak under North Dakota's no-fault law.

I.

Before a choice-of-law analysis can be applied,¹ a court must determine that a conflict exists between the laws of two forums.²See Myers v. Government Employees Ins. Co., 302 Minn. 359, 363, 225 N.W.2d 238, 241 (1974)

. A conflict exists if the choice of one forum's law over the other will determine the outcome of the case. See id. at 363, 225 N.W.2d at 241. Here, it is undisputed that under Minnesota law an insurer may not recover no-fault benefits paid to its insured due to an out-of-state accident unless the insured received or will receive a double recovery. Similarly, it is undisputed that on the present facts North Dakota law allows insurers to seek recovery of no-fault benefits payments through equitable allocation. Therefore, as North Dakota law would allow American Family to attempt to recoup its no-fault payments and Minnesota law would not, there is a conflict and a choice-of-law analysis must be applied.

Both Minnesota and North Dakota have adopted the significant contacts test for choice-of-law analyses. See Jepson, 513 N.W.2d at 470; Apollo Sprinkler Co., Inc. v. Fire Sprinkler Suppliers & Design, Inc., 382 N.W.2d 386, 389 (N.D.1986). The significant contacts test consists of the following choice-influencing factors:

(1) Predictability of results;

(2) Maintenance of interstate and international order;

(3) Simplification of the judicial task;

(4) Advancement of the forum's governmental interest; and

(5) Application of the better rule of law.

See Jepson, 513 N.W.2d at 470; Apollo, 382 N.W.2d at 389. We will now consider the facts of this case in light of these factors.

The first factor, predictability of results, represents the ideal that litigation on the same facts, regardless of where the litigation occurs, should be decided the same to avoid forum shopping. See Robert A. Leflar, Choice-Influencing Considerations in Conflicts Law, 41 N.Y.U. L.Rev. 267, 282-83 (1966). In addition, this factor acts to preserve the parties' justified contractual expectations. See Jepson, 513 N.W.2d at 470. However, "[p]redictability of results applies primarily to consensual transactions where the parties desire advance notice of which state law will govern in future disputes." Myers, 302 Minn. at 365, 225 N.W.2d at 242. "[T]he unplanned nature of automobile accidents lessens the importance of predictability of results in automobile insurance cases." Hime v. State Farm Fire & Cas. Co., 284 N.W.2d 829, 833 (Minn. 1979).

Nodak argues that because Minnesota insurers write their policies and calculate their premiums in accordance with the Minnesota No-Fault Act, their subrogation rights should be governed by that Act. This argument is unpersuasive as it would effectively eliminate choice-of-law analysis by simply applying the law of the state where the policy was written; and as two policies are involved, the decision would turn on which party sued first.

The court of appeals determined that predictability favors neither state. See Nodak, 590 N.W.2d at 673

. The court based this determination on its view that this is a statutory subrogation case and not an action on an insurance policy, and therefore the interests of the insureds are not affected because the outcome will not effect the certainty of their contractual expectations. See id. We agree with the court of appeals: automobile accidents are not consensual transactions, nor is this a contract case, and therefore predictability favors neither forum.

The second factor, maintenance of interstate and international order, is

primarily concerned with whether the application of Minnesota law would manifest disrespect for North Dakota's sovereignty [or vice versa] or impede the interstate movement of people and goods. An aspect of this concern is to maintain a coherent legal system in which the courts of different states strive to sustain, rather than subvert, each other's interests in areas where their own interests are less strong.

Jepson, 513 N.W.2d at 471. The court of appeals concluded that North Dakota has the stronger governmental interest because the accident occurred there, and that interest would be subverted if Minnesota law governed. We conclude, however, that both states have an equal interest as evidenced by the fact that both have laws directly pertaining to no-fault benefits recovery on the present facts. This factor, therefore, favors neither state's law.

The third factor, simplification of the judicial task, has not been given much weight in this court's precedent. See, e.g., Jepson, 513 N.W.2d at 472 (stating that this "is not a significant factor in this case because the law of either state could be applied without difficulty"); Hime, 284 N.W.2d at 833 (stating that "[e]ither [state's] law could be applied without practical difficulty" and thus "this consideration is not significant in this case"). These cases imply that this factor is primarily concerned with the clarity of the conflicting laws. As the conflicting laws at issue are relatively clear in that there is no dispute that recovery is allowed under one but not the other, this factor favors neither state's law.

The fourth factor is concerned with "which choice of law most advances a significant interest of the forum." Jepson, 513 N.W.2d at 472. Nodak argues, and the district...