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

• Decision Date: 21 July 2006
• Docket Number: 1041960.
• Citation: 952 So.2d 342
• Parties: Dustin Scott SMITH, Gail Smith, and Larry Smith v. STATE FARM MUTUAL AUTOMOTIVE INSURANCE COMPANY.
• Court: Alabama Supreme Court

952 So.2d 342

Dustin Scott SMITH, Gail Smith, and Larry Smith v. STATE FARM MUTUAL AUTOMOTIVE INSURANCE COMPANY.

1041960.

Supreme Court of Alabama.

July 21, 2006.

Patrick M. Lavette of Davenport & Lavette, P.C., Birmingham, for appellants.

Ronald G. Davenport of Rushton, Stakely, Johnston & Garret, P.A., Montgomery, for appellee.

SEE, Justice.

This is an underinsured-motorist case. Dustin Scott Smith, Gail Smith, and Larry Smith appeal from a summary judgment in favor of State Farm Mutual Automotive Insurance Company ("State Farm"). We reverse and remand.

I. Facts and Procedural History

On May 30, 2002, 18-year-old Dustin Smith was severely injured in an automobile accident in Chilton County. James Arant was driving the automobile, and Dustin was a passenger.¹ The parties agree that Arant is liable for the accident; Arant is an underinsured motorist. Dustin's spine was fractured in the accident. Because of his brittle-bone disease, the injury has not healed well, and he continues to suffer physically.

On September 4, 2002, Dustin sued Arant and State Farm, asserting tort claims against Arant² and claims for underinsured-motorist benefits against State Farm. At the time of the accident, Dustin's parents, Gail Smith and Larry Smith, owned seven cars, each insured with State Farm under separate policies. Each policy provided for underinsured-motorist coverage. Six of the policies were issued by a State Farm office in Pelham, Alabama ("the Alabama policies"). However, the insurance policy covering Gail's Jaguar automobile was issued by a State Farm office in Destin, Florida ("the Florida policy"). Dustin claimed underinsured-motorist benefits under the Alabama policies and the Florida policy. State Farm counterclaimed against Dustin, seeking a judgment declaring that the Alabama policies could not be stacked with the Florida policy. State Farm added Gail Smith and Larry Smith as counterclaim defendants.

The parties do not dispute that each Alabama policy contained underinsured-motorist coverage of $20,000 for a single injury and that the six policies can be "stacked" for a total of $120,000 in underinsured-motorist benefits. The Florida policy provides underinsured-motorist benefits of $500,000. However, the Florida policy contains a provision prohibiting it from being "stacked" with other insurance.

The Smiths reside in Chilton County, Alabama. In 2000, the Smiths bought a second house in Destin, Florida ("the Florida house"), to use on weekends and vacations. After they purchased the Florida house, the property tax on the Florida house increased. The Smiths learned that the property tax would decrease if one of the Smiths were to establish his or her domicile in Florida and take advantage of the homestead exemption on the Florida house. In an effort to establish domicile in Florida, Gail decided to obtain a Florida driver's license and to register her Jaguar in Florida.

In August 2001, Gail surrendered her Alabama driver's license and obtained a Florida driver's license. Because Gail needed to insure her car in Florida before she registered it in Florida, she visited a State Farm office in Destin, Florida, to switch the insurance coverage for her Jaguar from insurance issued in Alabama to insurance issued in Florida. Gail states that she explained to the State Farm representative that she was trying to lower the property tax on the Florida house and that her primary residence was in Alabama. Gail gave the agent the address for the Florida house, but she says that she asked that State Farm mail her policy, premium notices, and other correspondence to her primary mailing address in Thorsby, Alabama.

Evidence indicates that the State Farm representative communicated with Gail's State Farm agent in Pelham, Alabama, and learned about the Smiths' insurance policies on their house in Alabama and on their six other cars. Based on that information, the Florida State Farm office determined that Gail's insurance policy on the Jaguar qualified for "multi-vehicle" and "multi-line" discounts.³

State Farm sent a renewal notice on the Florida policy for the period of January 16, 2002, to July 16, 2002, to Gail's mailing address in Alabama.⁴ On or about December 31, 2001, Gail paid the premiums to renew the Florida policy for that period.

On January 4, 2002, approximately five months before Dustin's accident, Gail sued Larry for a divorce. It appears that Gail stayed at the Florida house for two weeks immediately after serving the divorce papers; however, she resided primarily at the couple's Alabama house from mid-January 2002 until late 2003. Gail's Jaguar was principally garaged in Alabama during that time. Gail testified at her deposition that she continued her residence at the Smiths' Alabama house (1) to attempt to reconcile with Larry, (2) to devote attention to Dustin's drug-related problems, and (3) to continue her work, which was in Alabama. Both Larry and Gail testified at their depositions that, at the time of Dustin's accident in May 2002, Gail had been living primarily in Alabama and that her Jaguar was primarily garaged in Alabama.

In the trial court, State Farm and the Smiths did not dispute that Arant was liable for the accident and that the amount necessary to cover the injuries Dustin sustained in the accident exceeded $645,000. State Farm contended, however, that Dustin could receive either the underinsured-motorist benefits under the Florida policy, i.e., $500,000, or the underinsured-motorist benefits under the Alabama policies, stacked, i.e., $120,000. The parties agreed that, if Dustin could not stack the Alabama policies with the Florida policy, then Dustin would choose to receive the underinsured-motorist benefits under the Florida policy. Thus, the parties stipulated (1) that State Farm would pay Dustin $500,000, and (2) that the parties would litigate whether Dustin could also receive underinsured-motorist benefits of $120,000 under the Alabama policies. The parties filed cross-motions for a summary judgment on the stacking issue.

The trial court initially entered a summary judgment in State Farm's favor without explicitly ruling on the Smiths' motion. The Smiths moved the trial court to alter, amend, or vacate its summary judgment in favor of State Farm pursuant to Rule 59, Ala. R. Civ. P. After a hearing, the trial court entered an order again granting State Farm's summary-judgment motion and explicitly denying the Smiths' motion for a summary judgment. The Smiths appeal.

II. Standard of Review

We review the trial court's grant or denial of a summary-judgment motion de novo, and we use the same standard used by the trial court to determine whether the evidence presented to the trial court presents a genuine issue of material fact. Bockman v. WCH, L.L.C., 943 So.2d 789 (Ala.2006). Once the summary-judgment movant shows there is no genuine issue of material fact, the nonmovant must then present substantial evidence creating a genuine issue of material fact. Id. "We view the evidence in the light most favorable to the nonmovant." 943 So.2d at 795. We review questions of law de novo. Davis v. Hanson Aggregates Southeast, Inc., 952 So.2d 330 (Ala.2006).

III. Analysis

The Smiths argue that § 32-7-23, Ala. Code 1975, a part of the Alabama Motor Vehicle Safety-Responsibility Act, is applicable to the Florida policy and, therefore, that the underinsured-motorist coverage provided by the Florida policy can be "stacked" with the underinsured-motorist coverage in the Alabama policies. Viewing the facts most favorably to the Smiths, we agree with the Smiths' argument, and we reverse the summary judgment in favor of State Farm.

State Farm would have us apply Florida's conflict-of-laws rules. However, State Farm offers no Alabama authority indicating that an Alabama court must apply Florida's conflict-of-laws rules to a case filed in Alabama that involves insurance coverage for an accident that occurred in Alabama. We apply our own conflict-of-laws rules to determine whether, substantively, the Alabama Motor Vehicle Safety-Responsibility Act applies to the Florida policy. See Taylor v. Tennessee Farmer's Mut. Ins. Co., 659 So.2d 30 (Ala.1995) (reviewing the facts of the case to determine that Alabama law, not Tennessee law, applies in determining the available underinsured-motorist benefits without reviewing whether Tennessee conflicts law applies); Best v. Auto-Owners Ins. Co., 540 So.2d 1381, 1381-83 (Ala.1989)(stating that the conflict-of-laws issue was presented in underinsured-motorist-coverage case, and, without reference to South Carolina's conflicts law, holding that Alabama substantive law did not apply); Cotton v. State Farm Mut. Auto. Ins. Co., 540 So.2d 1387 (Ala.1989)(reviewing the facts of the case to determine that Tennessee law, not Alabama law, applies in determining the underinsured-motorist benefits, without referring to Tennessee conflict-of-laws rules).

Generally, we apply the substantive rule of the state in which the insurance contract is formed. See Cotton, 540 So.2d at 1388 (citing Davis v. Hartford Ins. Co. of Illinois, Inc., 456 So.2d 302 (Ala.1984), and American Interstate Ins. Co. of Georgia v. Holliday, 376 So.2d 701 (Ala.1979), in which insurance contracts were formed in Illinois and Georgia, respectively, and this Court applied the substantive laws of those states to interpret the insurance contract to determine whether a party was covered under the insurance contract and whether the insurer had the duty to defend). However, that rule does not apply when the case involves a mandatory statute, such as the Alabama uninsured/underinsured-motorist statute, § 32-7-23, Ala. Code 1975.⁵ See Cotton, 540 So.2d at 1388 (stating that because the cited cases dealt with insurance contracts in general and did not involve a mandatory statute such as Alabama's uninsured/underinsured-motorist statute, this Court had to determine whether, because the insurance contract...