Ryals v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 11 May 2000
• Docket Number: No. 24656.,24656.
• Citation: 1 P.3d 803,134 Idaho 302
• Parties: Vanessa RYALS and Rasheed Ryals, By and Through Vanessa Ryals as natural mother and Guardian ad Litem, Plaintiffs-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation licensed and authorized to do business in the State of Idaho, Defendant-Respondent.
• Court: Idaho Supreme Court

1 P.3d 803

134 Idaho 302

Vanessa RYALS and Rasheed Ryals, By and Through Vanessa Ryals as natural mother and Guardian ad Litem, Plaintiffs-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation licensed and authorized to do business in the State of Idaho, Defendant-Respondent.

No. 24656.

Supreme Court of Idaho, Boise, December 1999 Term.

May 11, 2000.

Harris Law Offices, Boise, for appellants. Jim C. Harris argued.

Anderson, Julian & Hull, LLP, Boise, for respondent. Robert A. Anderson argued. TROUT, Chief Justice.

This is a breach of insurance contract case involving an appeal taken by Vanessa Ryals (Ryals) from a decision of the district judge. The district judge denied Ryals' uninsured motorist claim against Ryals' insurer, State Farm Mutual Automobile Insurance Company (State Farm), finding that there was no coverage under the uninsured motorist provisions of Ryals' policy. We affirm the district judge.

I.

BACKGROUND

Ryals was involved in an automobile accident with New York resident Ismet Djurkovic (Djurkovic) in New York City on October 1, 1995. At the time of the accident, Ryals was an Idaho resident and had an automobile insurance contract with State Farm which included an uninsured and underinsured motor vehicle provision. State Farm paid Ryals' medical bills pursuant to the medical payments provision of Ryals' policy. State Farm also paid personal injury protection benefits to Ryals in accordance with New York law.

Djurkovic was insured by Allstate Insurance Company (Allstate) at the time of the accident. Djurkovic's Allstate policy provided liability coverage of $100,000 per person and $300,000 per occurrence. Ryals submitted a claim to Allstate on February 3, 1997, and asserted various injuries. Allstate informed Ryals that no settlement would be offered because Ryals' claim for out-of-pocket expenses was precluded by New York's no-fault law and Ryals' claim for pain and suffering was not cognizable because Ryals did not seek immediate medical attention and missed only one week of work. Ryals then sought uninsured motorist benefits from State Farm. State Farm determined that the uninsured motorist provision in Ryals' policy was inapplicable because Ryals was not legally entitled to recover from Djurkovic under New York's no-fault law.

Ryals filed a declaratory judgment action on June 11, 1997, requesting a determination of her entitlement to uninsured motorist benefits from State Farm. The district judge entered a Final Judgment on April 2, 1998, finding that New York law applied to the interpretation of the State Farm policy and, because New York law prohibits recovery on claims for "non-serious injuries," Ryals was not entitled to recover. Ryals filed a Notice of Appeal on April 22, 1998.

II.

STANDARD OF REVIEW

The determination and application of the appropriate choice of law analysis is a question of law over which the Court exercises free review. See Seubert Excavators, Inc. v. Anderson Logging Co., 126 Idaho 648, 651, 889 P.2d 82, 85 (1995). The Court's standard of review concerning a lower court's interpretation of an insurance contract depends on whether the contract was ambiguous. DeLancey v. DeLancey, 110 Idaho 63, 65, 714 P.2d 32, 34 (1986). Here, Ryals' State Farm insurance contract is not reasonably subject to conflicting interpretations and is therefore unambiguous. Interpretation of an unambiguous insurance contract is a question of law subject to free review. DeLancey, 110 Idaho at 65, 714 P.2d at 34.

III.

THE DISTRICT JUDGE DID NOT ERR IN DENYING RYALS' UNINSURED MOTORIST CLAIM.

A. Doctrine of Reasonable Expectations

Ryals invites this Court to overrule precedent and adopt the doctrine of reasonable expectations. This result would preclude any further contract analysis as Ryals certainly expected to be covered while driving in New York. We decline the invitation. We have previously rejected the reasonable expectations doctrine in favor of traditional rules of contract construction. Casey v. Highlands Ins. Co., 100 Idaho 505, 508-09, 600 P.2d 1387, 1390-91 (1979). The traditional rules of contract construction avoid the danger of a court creating a new contract between the parties by relying on the notion of reasonable expectations. Casey, 100 Idaho at 509, 600 P.2d at 1391. We find no reason to revisit that holding.

B. Choice of Laws

At the outset, we must address the question of which state's laws apply in interpreting Ryals' State Farm insurance contract. State Farm argues the choice of law question is actually a question of "legal entitlement" under the uninsured motorist provision in Ryals' policy and New York tort law controls this question. This case is not an action in tort, but rather a declaratory judgment action involving interpretation of an insurance contract to determine the scope of coverage provided under Ryals' uninsured motorist policy provision. The "most significant relationship" test is applied to choice of law questions involving the interpretation and construction of contracts. Unigard Ins. Group v. Royal Globe Ins. Co., 100 Idaho 123, 126, 594 P.2d 633, 636 (1979). Applying this test to the case at bar, the following factors and policy considerations support the conclusion that Idaho has the most significant relationship with the transaction and parties involved: (1) Ryals' State Farm insurance contract was negotiated and entered into in Idaho; (2) the contract has been predominantly performed in Idaho; (3) the location of Ryals' vehicle, the subject matter of the contract, is in Idaho; and (4) Ryals is an Idaho resident and domiciled in Idaho. The aggregation of factors supports the conclusion that Idaho has the most significant relationship with the transaction and the parties involved here. Idaho law will therefore be applied to interpret Ryals' State Farm insurance policy.

C. Djurkovic was not an uninsured motorist.

The uninsured motorist provision in Ryals' State Farm policy provides in part:

We will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle. The bodily injury must be caused by accident arising out of the operation, maintenance or use of an uninsured motor vehicle.

Uninsured Motor Vehicle means:

1. a land motor vehicle, the ownership, maintenance or use of which is:

a. not insured or bonded for bodily injury liability at the time of the accident; or

b. insured or bonded for bodily injury liability at the time of the accident; but

(1) the limits of liability are less than required by the financial responsibility act of the state where your car is mainly garaged;

or

(2) the insuring company denies coverage or is or becomes insolvent . . .

Ryals first argues that New York's no-fault law, which precludes recovery for nonserious injuries, effectively rendered Djurkovic uninsured. Idaho courts have not had occasion to examine whether a foreign state's no-fault law renders a tortfeasor uninsured for purposes of uninsured motorist coverage and the question has been resolved differently among other jurisdictions.

A majority of courts have determined that the no-fault statutory framework in a foreign jurisdiction does not render a foreign tortfeasor uninsured under a claimant's uninsured motorist provision. The New Mexico Supreme Court, for example, determined that a foreign state's no-fault system does not cause a properly insured tortfeasor to become an uninsured motorist. See State Farm Automobile Ins. Co., v. Ovitz, 117 N.M. 547, 873 P.2d 979 (1994). In Ovitz, an insured resident of New Mexico, with uninsured motorist coverage, was injured in Hawaii in an accident with a vehicle owned by Thrifty Rent-A-Car. Hawaii's no-fault statute precluded Ovitz from bringing a negligence action for non-economic damages against Thrifty or Thrifty's employee who was driving the Thrifty vehicle at the time of the accident. Ovitz consequently made an uninsured motorist claim under his State Farm automobile liability insurance policy, arguing that because Hawaii law prohibited Ovitz' cause of action for pain and suffering, the Thrifty employee was uninsured. The New Mexico Supreme Court declined to adopt this view and held that because Thrifty's insurance met the minimum bodily injury insurance coverage requirements under New Mexico law and because uninsured motorist coverage is "not intended to provide coverage in every uncompensated situation," the tortfeasor was not an uninsured motorist by virtue of Hawaii's no-fault law. Ovitz, 873 P.2d at 982 (quoting Kurent v. Farmers Ins., Inc., 62 Ohio St.3d 242, 581 N.E.2d 533, 536 (1991)).

The Nebraska Supreme Court reached a similar conclusion in Crossley v. Pacific Employers Ins. Co., 198 Neb. 26, 251 N.W.2d 383 (1977). In Crossley, an insured resident of Nebraska with uninsured motorist coverage on his vehicle was injured in Colorado. Colorado, like New York, is a no-fault jurisdiction, and the insured's medical and related expenses fell far below the minimum required to file a tort claim in Colorado for general damages. The court concluded that the tortfeasor's automobile was not an uninsured motor vehicle, noting that had the accident occurred in Nebraska, the tortfeasor's automobile would have been deemed an insured vehicle. Crossley, 251 N.W.2d at 385-86.

California has also determined that a foreign state's no-fault system does not cause a properly insured tortfeasor to become an uninsured motorist. See State Farm Mut. Auto. Ins. Co. v. Crockett, 103 Cal.App.3d 652, 163 Cal.Rptr. 206 (Cal.Ct.App.1980). In Crockett, a California resident was involved in a collision in Hawaii and made an uninsured motorist claim in California. The court held that because the Hawaii vehicle was insured in accordance with California minimum coverage requirements, it was not an uninsured vehicle under California law. Crockett, 103 Cal.App. at 658, 284 P. 990.

The minority view was expressed in ...