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

• Decision Date: 14 December 2006
• Docket Number: No. SC04-2313.,SC04-2313.
• Citation: 945 So.2d 1160
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner, v. Margaret ROACH, et al., Respondents.
• Court: Florida Supreme Court

945 So.2d 1160

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner, v. Margaret ROACH, et al., Respondents.

No. SC04-2313.

Supreme Court of Florida.

December 14, 2006.

Elizabeth K. Russo of Russo Appellate Firm, P.A., Miami, FL and Thomas F. Neal and Stephen J. Jacobs of deBeaubien, Knight, Simmons, Mantzaris and Neal, LLP, Orlando, FL, for Petitioner.

Joel D. Eaton of Podhurst Orseck, P.A., Miami, FL and Weldon Earl Brennan of Wagner, Vaughan and McLaughlin, P.A., Tampa, FL, for Respondent.

Charles W. Hall and Mark D. Tinker of Fowler, White, Boggs and Banker, P.A., St. Petersburg, FL, for Amicus Curiae.

CANTERO, J.

This case requires us to decide which state's law applies when an automobile insurance contract is executed in another state, where the insureds permanently reside, but the insureds spend a substantial amount of time in Florida and the accident occurs here. In Roach v. State Farm Mutual Automobile Insurance Co., 892 So.2d 1107, 1112 (Fla. 2d DCA 2004), the district court of appeal held that Florida's public policy prohibited application of the lex loci contractus rule, which would apply the law of the state where the contract was executed. Instead, the court invalidated an exclusion contained in the policy that, although permitted in the state where the policy was executed, is not permissible under Florida law. The court then certified a question of great public importance.¹ We accepted jurisdiction. See art. V, § 3(b)(4), Fla.Const. To clarify the issue presented, we rephrase the question as follows:

WHERE RESIDENTS OF ANOTHER STATE WHO RESIDE IN FLORIDA FOR SEVERAL MONTHS OF THE YEAR EXECUTE AN INSURANCE CONTRACT IN THAT STATE, MAY THEY INVOKE FLORIDA'S PUBLIC POLICY EXCEPTION TO THE RULE OF LEX LOCI CONTRACTUS TO INVALIDATE AN EXCLUSIONARY CLAUSE IN THE POLICY?

As explained below, we answer the question "no" because the public policy exception to the lex loci rule may only be invoked to protect permanent Florida residents. We quash the district court's decision, which unduly expanded the exception to protect temporary residents.

We begin our opinion by examining the pertinent facts of the case. We then discuss the governing choice-of-law rule and the factors used in determining when the exception applies. Finally, we explain why the exception does not apply in this case.

I. THE FACTS OF THE CASE

The insureds, Ivan and Betty Hodges, lived in their homesteaded residence in Indiana, where they purchased from their local State Farm agent an automobile policy covering their cars. In 1993, the couple purchased a second home in Lake Wales, Florida, and began spending several months there each year, from late November through April. The Roaches, the respondents here, were winter neighbors of the Hodges in Florida. On January 26, 2001, they were passengers in the Hodges' car when it crashed with another car, killing Mrs. Hodges. The Roaches sued Mr. Hodges and the other car's driver. They later settled the personal injury liability claims with Mr. Hodges and with the other driver for their respective policy limits. The Roaches, however, sought underinsured motorist benefits under Mr. Hodges's policy, and so the lawsuit continued against State Farm.

The trial court granted State Farm's motion for summary judgment based on the terms of the policy and Florida's lex loci contractus rule of comity. That rule provides that the law of the place where the contract was executed governs the insurance contract.

On review, the Second District Court of Appeal acknowledged that, under the lex loci rule, Indiana law would apply to the Indiana automobile insurance contract. The court invoked the public policy exception, however, to nullify the policy term that would have prohibited recovery on the underinsured benefits claim and thus apply Florida law allowing recovery. Id. at 1112.²

The Second District held that the exception applies Florida law to insurance contracts when Florida has a "significant connection to the insurance coverage and when the insurance company has reasonable notice that the persons and risks covered by the insurance policy are centered in Florida." Id. at 1110 (footnote omitted). The court concluded that the Roaches could invoke the public policy exception based on "Florida's connection to the [Hodges'] insurance coverage." Id. at 1111. Examining this connection, the district court described the Hodges as winter residents or "snow birds," which the court defined as "those who spend substantially less time in Florida than year-round residents but who reside in our state with a significant degree of permanence." Id. at 1111, 1108. Based on the Hodges' ownership of a Florida home, their residence here for "approximately five and one-half months every year" since 1993, and their garaging one of their cars here at the time of the accident, the court found the Hodges had "established a significant degree of permanency" in Florida. Id. at 1112. The court remanded the case for consideration of disputed issues of fact, such as whether the insurer had "reasonable notice of Florida's connection" to the Hodges' vehicle. Id. at 1111-13. The court also certified the question we address here. Id. at 1113.

II. LEX LOCI CONTRACTUS AND THE PUBLIC POLICY EXCEPTION

Before we answer the certified question, we must first review the rule of lex loci contractus, the parameters of its public policy exception, and how the exception has been applied.

A. The Rule of Lex Loci Contractus

For reasons we have previously explained, we apply different choice of law rules to different areas of the law. For example, with respect to torts and statutes of limitation, we have abandoned the rule that the applicable substantive law is the law of the state where the injury occurred—i.e., lex loci delicti—in favor of a flexible test to determine which state has the most significant relationships to the cause of action. See Bishop v. Fla. Specialty Paint Co., 389 So.2d 999, 1001 (Fla. 1980) ("[W]e now adopt the `significant relationships test' as set forth in the Restatement (Second) of Conflict of Laws §§ 145-146 (1971)."); Bates v. Cook, Inc., 509 So.2d 1112, 1114-15 (Fla.1987) ("We are now convinced that just as in the case of other issues of substantive law, the significant relationships test should be used to decide conflicts of law questions concerning the statute of limitations.").

In contrast, in determining which state's law applies to contracts, we have long adhered to the rule of lex loci contractus. That rule, as applied to insurance contracts, provides that the law of the jurisdiction where the contract was executed governs the rights and liabilities of the parties in determining an issue of insurance coverage. Sturiano v. Brooks, 523 So.2d 1126, 1129 (Fla.1988). In Sturiano, we considered—and rejected—the significant relationships test. Id. at 1128-29. In that case, we answered a certified question asking whether the lex loci rule governed the "rights and liabilities of the parties in determining the applicable law on an issue of insurance coverage." Id. We discussed the significant relationships test, which requires consideration of various contacts between the contract and the states involved—such as the place of contracting and the place of performance—and weighing them to determine the state with the "most significant relationship to the transaction and the parties." Id. at 1129 (quoting Restatement (Second) of Conflict of Laws § 188 (1971)).³ We acknowledged that "lex loci contractus is an inflexible rule," but concluded that "this inflexibility is necessary to ensure stability in contract arrangements." Id. We reasoned that "[w]hen parties come to terms in an agreement, they do so with the implied acknowledgment that the laws of that jurisdiction will control absent some provision to the contrary." Id. We concluded that to abandon this principle and permit a party to change or modify contract terms by moving to another state would unnecessarily disrupt the stability of contracts. Id. We explained the purpose behind the rule as follows:

In the case of an insurance contract, the parties enter into that contract with the acknowledgment that the laws of that jurisdiction control their actions. In essence, that jurisdiction's laws are incorporated by implication into the agreement. The parties to this contract did not bargain for Florida or any other state's laws to control. We must presume that the parties did bargain for, or at least expected, New York law to apply.

Id. at 1130; see also Lumbermens Mut. Cas. Co. v. August, 530 So.2d 293, 295 (Fla.1988) ("[T]he lex loci contractus rule determines the choice of law for interpretation of provisions of uninsured motorists clauses in automobile insurance policies just as it applies to other issues of automobile insurance coverage."). We have never retreated from our adherence to this rule in determining which state's law applies in interpreting contracts.

B. The Public Policy Exception

Florida courts have carved out a narrow exception to the lex loci rule. We long ago held "that the rules of comity may not be departed from, unless in certain cases for the purpose of necessary protection of our own citizens, or of enforcing some paramount rule of public policy." Herron v. Passailaigue, 92 Fla. 818, 110 So. 539, 542 (1926) (emphasis added); see also In re Estate of Nicole Santos, 648 So.2d 277, 281 (Fla. 4th DCA 1995) ("We agree that Florida courts may depart from the rule of comity where necessary to protect its citizens or to enforce some paramount rules of public policy. However, it has also been held that just because the law differs between Florida and another jurisdiction does not in itself bar application of foreign law."); Lincoln Nat'l Health & Cas. Ins. Co. v. Mitsubishi Motor Sales of Am., Inc., 666 So.2d 159, 161 (Fla. 5th DCA 1995) ("Under these choice of law rules, the laws of the place in which a contract was made govern matters...