A Tangled Tale of Choice of Laws Cases
I often receive phone calls from adjusters asking for coverage advice with respect to matters pending in Massachusetts that, in fact, have little to do with Massachusetts insurance coverage principles. While it’s hardly intuitive, the location of the accident giving rise to an insurance coverage dispute often makes little difference with respect to which state’s law should apply. This is because of the crucial role that state “choice of laws” rules play in such cases. Thus, the fact that an Ohio manufacturer has been sued for copyright infringement in Massachusetts rarely means that Massachusetts law will apply to the issue of whether liability insurance is available for the Massachusetts litigation.
The problem with “choice of laws” is how different the rules are from state to state. The traditional rule was lex loci contractus, that is to say, the law of the place of contracting. Generally, this resulted in the selection of the law where the insured was headquartered and the policy issued, although some courts have since refined the doctrine to use out of state laws where the loss involves an insured facility in a state other than that where the insured is headquartered. See, e.g. Diamond International Corp. v. Allstate Ins. Co., 712 F.2d 1498, 1502 (1st Cir. 1983)(applying New Hampshire law to loss arising out of insured facility in New Hampshire even though the policy was issued in New York). Other courts evolved a variation of this approach in the context of environmental claims during the past two decades and held that the “law of the site” should control, even if it was not an insured facility.
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