Peterson v. Warren

• Decision Date: 01 July 1966
• Citation: 143 N.W.2d 560,31 Wis.2d 547
• Parties: Vernon LeRoy PETERSON, Respondent, v. Harold Edwin WARREN, Defendant, The Home Insurance Co., Appellant.
• Court: Wisconsin Supreme Court

Page 560

143 N.W.2d 560

31 Wis.2d 547

Vernon LeRoy PETERSON, Respondent, v. Harold Edwin WARREN, Defendant The Home Insurance Co., Appellant.

Supreme Court of Wisconsin.

July 1, 1966.

William F. Nelson, Stafford, Rosenbaum, Rieser & Hanson, Madison, for appellant.

Robert I. Perina, Jasper, Winner, Perina & Rouse, Madison, Donald F. Rumpf, Cambridge, for respondent.

WILKIE, Justice.

Minnesota Law Applies.

The first issue presented on this appeal is whether Minnesota law applied in determining the rights of the parties under the Minnesota insurance policy.

Appellant Home Insurance Company asserted, among others, the policy defense of lack of notice of accident by the insured. ¹ The trial court concluded that Minnesota contract law should govern and construed Minnesota law as (1) imposing absolute liability to the amount of $10,000 upon the insurer upon the filing of an SR--22, and (2) requiring the insurer to assume the burden of proof on the notice defense in regard to the damages in excess of the $10,000. Appellant contends that the trial court erred first, in applying Minnesota as opposed to Wisconsin law, and second, in its interpretation of the Minnesota contract rules.

As to the applicable law governing the legality of a contract and a determination of rights under that contract, this court acknowledged, in Estate of Knippel, that the choice of governing law is 'basically a question of the intention of the parties * * * (and that) in the absence of evidence to the contrary, the law of the place of making the contract is presumed to be intended unless the place of performance be different.' ² It was also recognized there ³ that this traditional test had recently fallen into disfavor, yielding to the 'grouping of contacts' or 'center of gravity' theory. Although Knippel alluded to both of these countervailing theories, it was not necessary actually to make a choice between the two for the reason that, under the facts, Wisconsin law would have been applicable in either event.

Similarly, in the instant case Minnesota law would govern under either rule. Turning first to the 'intention' doctrine, it is clear that Hogenson and appellant, through its agent, did not specifically agree to be bound by the law of any particular jurisdiction. This being the case, the law of the place of contracting is presumed to be intended unless the place of performance is different. Hogenson did not testify at the trial. Anderson, appellant's agent, understood that the vehicles insured would be used in either Minnesota, Iowa, or Wisconsin, but added that none of the vehicles would be used exclusively in any particular state. The policy itself contemplated performance in those three states, but there was no indication of what proportion of total performance was to be attributed to each. The truck involved was not confined to Wisconsin. While it is undisputed that some activity was to occur outside of Minnesota, the evidence adduced was insufficient to establish, with any definiteness or certainty, a place of performance, for conflicts purposes, other than that state. The mere possibility of operations in another state without proof of their extent, scope, or complexity should not operate to defeat the application of the law of Minnesota, the place of contracting. This conclusion is in accord with a statement by this court in Ritterbusch v. Sexmith that:

'No case has been cited to us from the decisions of this court or any other which holds that the obligation of an automobile liability policy is to be interpreted by any law other than that of the state where the contract was made. Considering the great volume of litigation growing out of automobile accidents this dearth of authority is significant and not to be explained except by acknowledging the principle that the law of the state where the contract is made determines the obligations of the contract, not the law of the state where performance happens to be required.' ⁴

Other than Knippel, this court has not addressed itself at length to the so-called 'grouping of contacts' or 'center of gravity' theory in regard to contract law. ⁵ This court has, however, recently made this the ground rule in the tort arena, ⁶ and likewise the Restatement has now adopted the rule that rights under a contract are to be 'determined by the local law of the state with which the contract has its most significant relationship.' ⁷ In general, if the parties have not chosen the desired law and 'if performance is to occur wholly or in substantial part in a state other than that of contracting, or if the place of performance is uncertain' certain factors are to be considered to ascertain which state has the most significant relationship. ⁸ These factors are: (1) place of contracting; (2) place of performance; (3) place of the subject matter of the contract; (4) domicile, nationality, place of incorporation and place of business of the parties; (5) law under which contract will be most effective; and (6) other contacts presented in the given case. ⁹ A special rule governs insurance policies:

'(1) Except as stated in Subsection (2), the validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined, except as to minute details of performance, by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy.

'(2) If the contacts which the contract has with another state are sufficient to establish a more significant relationship between the contract and the other state, the local law of the other state will govern.' ¹⁰

The vehicles used in Hogenson's construction business were ordinarily based in Minnesota, or at least it can be said that they were not principally located in Wisconsin. Thus, under sec. 346i(1), Minnesota law should apply. Even assuming that the vehicles are to be considered as constantly on the move from state to state so as to preclude an automatic application of sub. (1), Minnesota still prevails on the significant contacts test. This is because Minnesota was (1) the residence of Hogenson, the insured; (2) the place where negotiations for the policy were carried on; ¹¹ (3) the place where the insurance policy was issued and delivered; (4) the place where premiums were paid and claims filed; (5) the place where the vehicles covered were generally quartered; and (6) the state issuing licenses on the vehicles. The only Wisconsin connections, besides the fact that the accident occurred here, are that defendant Warren and respondent Peterson are Badger residents. Not only are these factors quantitatively offset by those attendant to Minnesota, but they have less qualitative bearing 'in light of policy considerations.' ¹² There is no Wisconsin equivalent to the Minnesota 'absolute liability' statute. This statute represents a policy determination by the Minnesota legislature that the public should be protected regardless of the conduct of certain insureds--those whose driving violations indicate their potential menace on the highways--after the accident. There is no indication that application of this provision is limited to accidents occurring in Minnesota. As stated by the trial court:

'The application of the Minnesota Statute to an accident occurring in Wisconsin in no way offends against the public policy of Wisconsin, but it does nurture the integrity of the Minnesota law.'

Appellant contends that the Restatement supports its position that Wisconsin and not Minnesota law is controlling in determining rights of the parties. Appellant argues that the following illustration in the Restatement supports its position:

'7. Same facts as in Illustration 2 except that the policy insures A against liability arising from the operation of his automobile. The automobile is garaged in state X but it is understood that the automobile will be in state Y for about one-third of the term of the policy. A has an accident while driving the automobile in state Y and the question is whether the B insurance company must defend the suit and hold A harmless for any damages that may be recovered against him. This question will be determined by the local law of Y.' ¹³

However, the facts in the illustration are distinguishable from those in the present case in two respects: First, it was not shown that the truck owned by Hogenson would actually be in Wisconsin for one-third of the time. Second, Illustration 2 discloses that for purposes of Illustration 7, the insurance was solicited and delivered, and the premium paid in state Y (or Wisconsin, its equivalent in the present case). Thus, Illustration 2 is as follows:

'2. Same facts as in Illustration 1 except that the insurance is solicited, the premium paid and the policy delivered while A is on a visit to state Y, the state of the insurance company's incorporation. X is the state whose local law governs the validity of the contract and the rights created thereby.' ¹⁴

Illustration 1, also referred to, is as follows:

'1. In state X, A is solicited by the agent of the B insurance company to purchase fire insurance on A's house in X. A is domiciled in X while B is incorporated in state Y. A agrees to purchase the insurance and, upon payment by him of the premium, the agent countersigns a prepared policy form and delivers it to A. X is the state whose local law governs the validity of the contract and the rights created thereby.' ¹⁵

Thus, under either the 'intention' of the parties theory or the 'grouping of contacts' theory, the correct law to apply in determining the substantive rights of the parties under the insurance contract was that of Minnesota.

Burden of Proof on Notice of Accident.

The second issue on this appeal is whether the trial court's interpretation of applicable Minnesota law was correct in placing on the insurer the burden of proof as to the failure of notice of the accident.

In interpreting what the...