State Farm Mut. Auto. Ins. Co. v. Simmons' Estate

• Decision Date: 25 July 1980
• Parties: , 20 A.L.R.4th 713 STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation authorized to do business in New Jersey, Plaintiff-Respondent, v. ESTATE of Darrell Jerome SIMMONS and Estate of Darrell Richardson, Defendants, and Estate of Michael Blanche Davis, Estate of Henry Michael, and Estate of Ralph Curtis Robinson, Defendants-Appellants.
• Court: New Jersey Supreme Court

Page 28

84 N.J. 28

417 A.2d 488, 20 A.L.R.4th 713

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a

corporation authorized to do business in New

Jersey, Plaintiff-Respondent, v. ESTATE of Darrell Jerome SIMMONS and Estate of Darrell

Richardson, Defendants,

and

Estate of Michael Blanche Davis, Estate of Henry Michael,

and Estate of Ralph Curtis Robinson, Defendants-Appellants.

Supreme Court of New Jersey.

Argued Feb. 20, 1980.

Decided July 25, 1980.

George R. Hardin, Newark, for defendant-appellant Estate of Ralph Curtis Robinson (Conway, Reiseman, Bumgardner, Hurley & Kleinfeld, Newark, attorneys).

Dennis A. Drazin, Red Bank, for defendant-appellant Estate of Michael Blanche Davis (Drazin & Warshaw, Red Bank, attorneys; Thomas J. DiChiara, Red Bank, on brief).

Michele Donato, Oakhurst, for defendant-appellant Estate of Henry Michael (Anschelewitz, Barr, Ansell & Bonello, Oakhurst, attorneys).

Michael J. Cernigliaro, Asbury Park, for plaintiff-respondent (Campbell, Foley, Lee, Murphy & Cernigliaro, Asbury Park, attorneys).

The opinion of the court was delivered by

HANDLER, J.

This is an appeal from a declaratory judgment that an automobile liability insurance policy, issued in Alabama by an Alabama insurance carrier to an Alabama domiciliary who was then serving in the armed forces and stationed temporarily in New Jersey, did not cover five of the insured's fellow servicemen who were killed in New Jersey while riding in the insured's automobile. The case requires this Court to decide whether the law of Alabama or that of New Jersey should resolve the questions necessary to determine coverage. This entails a reconsideration of the choice-of-law principles articulated in Buzzone v. Hartford Accident & Indemnity Co., 23 N.J. 447, 129 A.2d 561 (1957).

I

The essential facts are not in dispute. David Allen Hays, a domiciliary of Montgomery, Alabama, had in September 1974 enlisted in the United States Marine Corps and had been assigned in February 1975 to the Earle Naval Ammunition Depot ("Earle") in Colts Neck, New Jersey. Hays, who was single, maintained his Alabama home with his mother and spent leaves at home in Alabama. He intended to return to Alabama after his military service. In the Spring of 1974, while still in high school, Hays had purchased a 1964 Chevrolet Impala in Alabama and had obtained in Alabama an automobile liability policy with State Farm Mutual Insurance Company ("State Farm" or "insuror"). He paid the insurance premium in full, although his mother "signed for it." He apparently renewed the policy by mail in April 1975. When he first came to Earle, he did not bring his car with him to New Jersey. Later, however, he went to Alabama on a four-day pass and returned to the base with his car, which he kept in the parking lot of his barrack.

On May 20, 1975, at about 11:00 a. m., Darrell Simmons, a fellow Marine whom Hays knew fairly well, asked Hays if he could borrow Hays' car to drive to a nearby bank to cash his paycheck. Although he had never loaned his car previously to Simmons, Hays agreed. Simmons told Hays that he would be using the car "just long enough to get his check cashed and he'd be right back," to which Hays responded that he planned to use the car later when he completed his duty. Simmons understood that he was to come "straight back . . . and give (Hays) the keys back." Simmons, however, had not returned with the automobile by noon, at which time Hays had to begin a four-hour "phone watch" duty. Simmons failed to return the automobile or its keys during Hays' four-hour watch, so when Hays completed his watch at 4:00 p. m., he went to each parking lot on the base looking for his car and inquired unsuccessfully as to whether anyone had seen Simmons. Hays eventually returned to his quarters where he slept until about the time for his next scheduled watch. That evening from midnight until 4:00 a. m., Hays again had duty, this time, "fire watch." While patrolling on duty, Hays discovered his car was parked "across from headquarters in front of the Powder Keg," a nightclub which catered to enlisted men. He observed the club's patrons, including Simmons, exiting the nightclub and, although leaving his post was a court martial offense, Hays walked toward his parked car. Simmons and five other Marines, among them the four named decedents, however, reached the car before Hays did. Simmons, in fact, was already in the driver's seat when Hays approached the vehicle.

Hays no less than three times directed Simmons to return the car keys to him; Simmons, refused, telling Hays "he wasn't going to give them back." Ralph Robinson, one of the Marines, also asked Simmons to return the car keys to Hays and Simmons again refused. When Hays explained that he had promised to drive Robinson to visit Robinson's wife the next morning, Simmons continued to refuse to surrender possession of the car and replied that he, not Hays, would drive Robinson. Another Marine in the group threatened Hays, warning him that if Hays were not standing in the open next to the car, "he'd whip (Hays)." Hays did not consider this an idle threat and "was not going to test (the marine)." At this time several women were also in the parking lot and the Marines unmistakably expressed a group wish to "see (those) girls . . . over in Red Bank." Hays, armed only with a nightstick, considered the number of and intoxicated condition of the Marines and decided that he could neither overpower them singlehandedly nor prevent them from taking his vehicle. The women then departed and the Marines followed them in Hays' car. Hays returned to his post. Hays was "pretty much upset"; he apparently believed that his car had been wrongfully withheld from him since he had then decided to report the theft of the car if it were not returned in the morning.

At 4:00 a. m., Hays finished his watch, returned to his barrack, and went to sleep. Within an hour, however, he was awakened by the corporal of the guard who informed him that his car had been wrecked. At 3:40 that morning, on Sycamore Avenue in Tinton Falls, New Jersey, Hays' car with Darrell Simmons driving crashed into a tree. All five occupants Simmons, Robinson, Michael Davis, Henry Michael, and Darrell Richardson were killed in the accident.

Claims under the State Farm insurance policy were made on behalf of the decedents. State Farm subsequently sought a declaratory judgment in New Jersey that, under the circumstances surrounding the use of the car at the time of the fatal crash, the policy issued to Hays did not extend coverage to Simmons and his four passengers. Hays was the only person to testify at trial. Applying the substantive law of Alabama, the trial judge found for State Farm on the issue of coverage. An appeal was taken by several of the defendant-claimants and the Appellate Division, also applying Alabama law, affirmed the holding of the trial court. 169 N.J.Super. 133, 140, 404 A.2d 349 (App.Div.1979). The appellate court further noted, however, that even if New Jersey law were to be applied, the result as to coverage would be the same. Id. at 138, 404 A.2d 349. This Court granted appellants' petition for certification. 81 N.J. 348, 407 A.2d 1222 (1979).

II

The Appellate Division agreed with the trial court that the substantive law of Alabama governed the dispute and that, under Alabama law, Simmons had neither express nor implied consent from Hays to use the car at the time of the accident. 169 N.J.Super. at 138, 404 A.2d 349. Our analysis thus begins with the threshold determination of the choice of law to be applied in resolving the controversy presented in this case.

The leading case in New Jersey dealing with choice-of-law principles in insurance policy controversies is Buzzone v. Hartford Accident & Indemnity Co., 23 N.J. 447, 129 A.2d 561 (1957). Plaintiffs in that case had been in an automobile accident in New Jersey and sought to collect an unsatisfied judgment obtained in New Jersey from the driver's insuror, a Connecticut insurance corporation. Id. at 450, 129 A.2d 561. The driver, a New York resident, had obtained the Connecticut policy in New York by giving a false name and presenting a phony New York driver's license bearing that name; his actual New York license in his true name had previously been revoked. Ibid. The policy contained a standard conforming clause which provided that the insurance contract would be deemed to be in compliance with the motor vehicle financial responsibility law of any state with respect to any liability arising from the operation of the vehicle in that state. Id. at 450-451, 129 A.2d 561.

The Court in Buzzone commenced its analysis by stating the basic principle that, in the interpretation of a contract, the law of the place where the contractual obligation was made ordinarily governs, as distinguished from tort cases, in which the law of the place of the wrong usually controls the determination of the rights and liabilities of the parties. Id. at 452, 129 A.2d 561. The Court characterized the case before it as involving the determination of obligations under a contract and thus ruled that, in light of all of the circumstances, the basic rule governing the choice of law in contract actions should be followed. Ibid. Applying that rule, the Court concluded that the law of New York should be applied and that under New York law the insurance company was entitled to plead the defense of fraud to avoid coverage. Id. at 457, 129 A.2d 561.

Petitioner in the instant case contends that this Court's analysis in Buzzone with respect to the appropriate principles governing conflicts of law is outmoded in light of current developments. Modern approaches follow the "most significant relationship" standard of the Restatement (Second) of Conflict of Laws § 188 (1971)(hereinafter Restatement ) and the "governmental interest" test utilized in several recent New Jersey tort cases. It is argued that under these approaches the...