Williams v. Smith
| Citation | 465 S.W.3d 150 |
| Decision Date | 06 November 2014 |
| Docket Number | No. M2013-02606-COA-R3-CV,M2013-02606-COA-R3-CV |
| Parties | David Michael WILLIAMS, et al., v. Timothy Wayne SMITH. |
| Court | Tennessee Court of Appeals |
Andrew R. Binkley and Patrick Shea Callahan, Cookeville, Tennessee, for the appellants, David Michael Williams and Summer Elizabeth Williams.
Jeremy Ross Hutchison and Joshua Gerald Offutt, Nashville, Tennessee, for the appellee, Geico General Insurance Company.
This appeal arises from an underinsured motorist coverage claim that hinges on the validity of a choice of law provision in the insurance policy. Plaintiffs were involved in a car wreck in Tennessee while driving a vehicle they borrowed from North Carolina residents. Although the borrowed vehicle was owned by North Carolina residents, the car owners had elected an insurance policy with a Missouri choice of law provision because their daughter principally used the car in Missouri where she attended college. At issue in this appeal is whether the law of Missouri or North Carolina controls. If Missouri law controls, there is no underinsured motorist coverage; if North Carolina law controls, there is coverage. The trial court found that the Missouri choice of law provision was valid and enforceable because the choice of law provision was not contrary to a fundamental policy of North Carolina. We affirm.
On July 17, 2010, David and Summer Williams and their young child, Elle, (“Plaintiffs”), were involved in an automobile accident in Tennessee. At the time of the accident, Plaintiffs were moving from North Carolina to Missouri and were driving a borrowed vehicle owned by North Carolina residents, Joseph and Amy Rieg. While traveling through Putnam County, Tennessee, Plaintiffs were hit head-on by Timothy Wayne Smith (“Defendant”), who was traveling east in the westbound lanes of Interstate 40.
At the time of the accident, Defendant was insured with the minimum policy limits required under Tennessee law, which provided liability coverage of $25,000 per person and $50,000 per accident. The Riegs' vehicle was registered in North Carolina and insured by a Missouri insurance policy through Government Employees Insurance Company (“GEICO”). Mrs. Rieg purchased the policy after seeking advice from her GEICO representative, who advised her that she needed a “Missouri Policy” so her daughter, Joanna, could use the vehicle while attending college in Missouri. The insurance policy included a Missouri choice of law provision and provided $50,000 per person, and $100,000 per accident in uninsured motorist coverage. However, the policy did not provide underinsured motorist coverage, and such coverage was not required under Missouri law.
Plaintiffs filed this action and served GEICO as an alleged uninsured/underinsured motorist carrier.1 Plaintiffs alleged the Missouri choice of law provision was invalid and that North Carolina law controls, which mandates underinsured motorist coverage. North Carolina requires minimum automobile insurance liability limits of $30,000 per person and $60,000 per accident.2 Moreover, a driver with an automobile liability insurance policy with less than the minimum limits as required by North Carolina law is considered an “uninsured motorist.”3 Because Defendant's liability policy provides only $25,000 per person and $50,000 per accident, Defendant would be considered an “uninsured motorist” under North Carolina law. Thus, if the choice of law provision is unenforceable, then North Carolina law controls, and GEICO is required to provide underinsured motorist coverage in excess of the coverage provided by Defendant's policy; if the choice of law provision is enforceable, then Missouri law controls, and there is no underinsured motorist coverage.
Plaintiffs and GEICO filed competing motions for summary judgment, and the trial court heard oral arguments on September 20, 2013. The trial court granted GEICO's motion for summary judgment and denied Plaintiffs' motion, finding the choice of law provision in the insurance policy to be valid and enforceable. Plaintiffs appeal.
This appeal arises from the grant of summary judgment, which is appropriate when a party establishes that there is no genuine issue as to any material fact and that a judgment may be rendered as a matter of law. Tenn. R. Civ. P. 56.04 ; Stovall v. Clarke, 113 S.W.3d 715, 721 (Tenn.2003). The material facts with respect to the issue raised on this appeal are not in dispute; accordingly, our review is de novo on the record with no presumption of correctness as to the trial court's conclusions of law. See Tenn. R.App. P. 13(d) ; BellSouth Adver. & Publ'g Co. v. Johnson, 100 S.W.3d 202, 205 (Tenn.2003).
At issue on appeal is whether the substantive law of Missouri or North Carolina will govern the construction of the insurance policy at issue. When determining which state's law to apply to a particular dispute, a choice of law analysis is appropriate using the rules applicable in the forum court's state. Gov't Emp. Ins. Co. v. Bloodworth, No. M2003–02986–COA–R10–CV, 2007 WL 1966022, at *26 (Tenn.Ct.App. June 29, 2007).
Tennessee's conflict of law doctrine applicable to contractual claims is as follows:
Messer Griesheim Indus., Inc. v. Cryotech of Kingsport, Inc., 131 S.W.3d 457, 474–75 (Tenn.Ct.App.2003) (quoting Vantage Tech., LLC v. Cross, 17 S.W.3d 637, 650 (Tenn.Ct.App.1999) ).
The trial court held that the choice of law provision was executed in good faith, that Missouri law bears a material connection to the transaction, and that the basis for the choice of Missouri law was reasonable and not merely a sham or subterfuge. Relying on Government Employees Insurance Company v. Bloodworth , the trial court found that “the law of the state where the insured risk is located will frequently be applied as controlling (when the parties have not effectively chosen the law applicable to their contract) because that jurisdiction has an important and material connection to the transaction between the parties and the nature of the risk insured.” As this court explained in Bloodworth:
The object that is the subject of the insurance has its principal location in the state where it will be used a majority of time during the insurance period. Restatement (Second) of Conflicts § 193, (cmt.b). In the case of an automobile, the parties to the insurance contract will generally know where it will be kept and operated the majority of the time. Id. There is good reason for using the law of the principal location of the insured risk. “This location has an intimate bearing upon the risk's nature and extent and is a factor upon which the terms and conditions of the policy will frequently depend.” Restatement (Second) of Conflicts § 193 (cmt. c). Accordingly, the location of the risk is of concern to the parties to the insurance contract. Id. See , e.g., Dunn v. Meridian Mut. Ins. Co., 836 N.E.2d at 251 ().
Bloodworth, 2007 WL 1966022, at *27. The trial court applied this reasoning to the facts of this case to determine that Missouri had a material connection to the transaction and that a reasonable basis existed for using Missouri law.
The trial court ultimately held that the choice of law provision was valid and enforceable because the parties' choice of Missouri law was not contrary to a fundamental policy of North Carolina. In determining what constitutes a “fundamental public policy,” the trial court relied upon a North Carolina Supreme Court case that observed:
[T]he mere fact that the law of the forum differs from that of the other jurisdiction does not mean that the foreign statute is contrary to the public policy of the forum. Bradford Electric Light Co. v. Clapper, 286 U.S. 145, [52 S.Ct. 571, 76 L.Ed. 1026] (1932). To render foreign law unenforceable as contrary to public policy, it must violate some prevalent conception of good morals or fundamental principle of natural justice or involve injustice to the people of the forum state. Ellison v. Hunsinger, 75 S.E.2d 884 ([]1953) ; Howard v. Howard, 158 S.E. 101 ([]1931). This public policy exception has generally been applied in cases such as those involving prohibited marriages, wagers, lotteries, racing, gaming, and the sale of liquor. Howard v. Howard, 158 S.E. 101.
Boudreau v. Baughman, 322 N.C. 331, 368 S.E.2d 849, 857–58 (1988) (); accord Mosqueda v. Mosqueda, 218 N.C.App. 142, 721 S.E.2d 755, 760 (2012) (). The trial court held that:
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