Presenting a live 90-minute webinar with interactive Q&A Choice of Law in Insurance Coverage Disputes Strategies and Perspectives From Policyholder and Insurer Counsel WEDNESDAY , JUNE 26, 2019 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Stephanie V. Corrao, Counsel, Crowell & Moring , Washington, D.C. Harry J. Moren, Attorney, Orrick Herrington & Sutcliffe , San Francisco Derrick R. Ward, Attorney, Carrington Coleman , Dallas The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 1 .
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Choice of Law in Insurance Coverage Disputes Strategies and Perspectives from Policyholder and Insurer Counsel Strafford Webinars: June 26, 2019 1:00 EDT • Stephanie Corrao, Crowell & Moring LLP • Harry J. Moren, Orrick • Derrick Ward, Carrington Coleman Orrick; Carrington Coleman; Crowell & Moring | 5
Overview Choice of Law Matters • Significance of Choice of Law in Insurance Dispute • Basic Fact Pattern: • Injury takes place outside the policyholder’s home state • Analytical challenges • Complex • Time consuming • Uncertain • Uniformity vs. Flexibility/Uncertainty Orrick; Carrington Coleman; Crowell & Moring | 6
Contractual Choice of Law Provisions The Challenge of Choice • In the absence of a choice-of-law provision, the process for determining the applicable law for a given insurance dispute can be complicated, time consuming and expensive. • It requires the parties to research insurance law of all the potentially applicable jurisdictions to determine if there is a difference among the states regarding the insurance issues in question. • If there is a difference among state laws (and there usually is) then the conflict of law rules of the forum state must be researched and the relevant factors under those rules analyzed. • Typically this analysis is necessary before coverage litigation is filed for the parties to determine the preferred state in which to litigate. • Once litigation is pending, it is likely the parties will disagree as to applicable law, which must be submitted to the court for determination. • This process is time-consuming and expensive, with an unpredictable outcome. Orrick; Carrington Coleman; Crowell & Moring | 7
Overview Focus Questions for Today’s Discussion • What are the various choice-of-law tests employed in different jurisdictions? • What are the best practices for including choice-of-law provisions? • What strategic and practical considerations should be taken into account? • What are the current choice of law doctrines and possible future developments? • What is the current state of play for choice of law provisions in insurance policies? Orrick; Carrington Coleman; Crowell & Moring | 8
Steps in Approaching Choice of Law What states are potentially implicated? Does the substantive law on the specific issue differ? • If not, then no conflict; use the forum state’s law. If so, do you have a choice of forum to file suit? • If you can choose forum, what choice-of-law rules does (each potential) forum state apply? Federal court in diversity cases must apply the choice-of-law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941). Orrick; Carrington Coleman; Crowell & Moring | 9
Steps in Approaching Choice of Law Does the insurance contract specify governing law? Most policies do not include a choice-of-law provision. Courts are inclined to honor such provisions. See Restatement (Second) of Conflict of Laws § 187 (1971); Ratajczak v. Beazley Sols. Ltd. , 870 F.3d 650 (7th Cir. 2017); H.J. Heinz Co. v. Starr Surplus Lines Ins. Co. , 675 F. App’x 122 (3d Cir. 2017). Not enforceable if unreasonable or violates “fundamental policy” of state with “materially greater interest.” Restatement § 187; Hendricks v. Novae Corp. Underwriting, Ltd. , 868 F.3d 542 (7th Cir. 2017). Are there other reasons to disregard it? Arnone v. Aetna Life Ins. Co. , 860 F.3d 97 (2d Cir. 2017)(court not required to “construe” policy); Selective Ins. Co. of S. Carolina v. Target Corp. , 845 F.3d 263 (7th Cir. 2017) (parties and court disregarded contract’s choice of law). Orrick; Carrington Coleman; Crowell & Moring | 10
Steps in Approaching Choice of Law Does a forum-state statute apply? 1. Second Restatement § 6(1): “A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.” 2. Would it resolve the specific issue presented? • Examples: • Montana: Mont. Code § 28-3-102 (general choice-of-law rule); Tidyman’s Mgmt. Servs. Inc. v. Davis , 330 P.3d 1139 (Mont. 2014) • Texas: Tex. Ins. Code § 21.42 mandates application of Texas law to an insurance policy when: “(1) the insurance proceeds are payable to a Texas citizen or inhabitant; (2) the policy is issued by an insurer doing business in Texas; and (3) the policy is issued in the course of the insurer’s business in Texas.” Reddy Ice Corp. v. Travelers Lloyds Ins. Co ., 145 S.W.3d 337 (Tex. App. 2004). Orrick; Carrington Coleman; Crowell & Moring | 11
Steps in Approaching Choice of Law Does a forum-state statute apply? 2. Would it resolve the specific issue presented? • Additional Examples: • Arizona: A.R.S. § 20-1101 provides Arizona “statutes governing insurance contracts . . . do not apply to ‘Policies or contracts not issued for delivery . . . nor delivered in [Arizona].’” Gomez-Silva v. Jackson Nat’l Life Ins. Co ., 2011 WL 1656507 (D. Ariz. 2011). • New York: Carlson v. AIG, Inc ., 89 N.E.2d 100 (N.Y. 2017), held a policy was “issued or delivered” in New York, and therefore subject to New York law, “where both insureds and risks are located in this state.” 3. Is it enforceable? Such provisions must be narrowly construed to avoid giving them “extraterritorial effect.” Austin Bldg. Co. v. Nat’l Union Fire Ins. Co ., 432 S.W.2d 697 (Tex. 1968). Orrick; Carrington Coleman; Crowell & Moring | 12
Choice of Law Tests First Restatement Lex Loci Contractus Orrick; Carrington Coleman; Crowell & Moring | 13
Choice of Law Tests: First Restatement L ex Loci Contractus • Historical Landscape “[T]he law of the place of • US Supreme Court: Comity Constitutional Limitations execution governs questions • Art. IV Full Faith & Credit Clause regarding the formation of Due Process Clause of 14 th Amendment • the contract, while the law • of the place of performance “Vested rights” Theory governs issues relating to the • Traditional justifications: “1) It is relatively easy to apply; 2) It performance of the improves predictability of outcome; 3) It discourages forum shopping; contract.” Wood Bros. and 4) It is symmetrical.” Ingersoll v. Klein , 262 N.E.2d 593 (Ill. 1970). Homes v. Walker Adjustment • First Restatement of Conflicts of Laws (1934) Bureau , 601 P.2d 1369 (Colo. • Advocated mechanical application of lex loci contractus 1979).. • Territorialist Aproach: Controlling law is the state of contracting • Academic criticism & judicial abandonment Orrick; Carrington Coleman; Crowell & Moring | 14
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