As one grows older and sometimes wiser, it becomes apparent that the most important legal subjects are the ones that we largely ignored during law school. Such is clearly the case with Conflicts of Law. Apart from allocation, few fields of insurance law have generated so many different analyses: lex loci contractus, “LeFlar factors,” “most significant contacts,” “governmental interest,” “grouping of contacts” and (the author’s personal favorite): renvoi (what can you say about a state like Maryland whose university mascot is a turtle?).
Now comes California to further muddy the waters. Until recently, it had seemed relatively settled that California followed a “governmental interest” approach wherein the law of conflicting jurisdictions would be evaluated in accordance with which state had the more substantive interest in the outcome of the dispute. However, a recent opinion of the California Court of Appeal has suggested an entirely different approach.
In Frontier Oil Corp. v. RLI Ins. Co., B189158, 2007 Cal. App. LEXIS 1298 (2d Dist. August 6, 2007) an oil company and its subsidiary were sued by students and residents near the Beverly Hills High School (an area whose riches apparently include not only Tori Spelling but also significant oil and gas deposits) for respiratory problems and other injuries from exposure to airborne contaminants discharged in the course of the defendants’ oil and gas production operations in the area.. The Superior Court granted summary judgment to RLI holding that, under Texas law, the claims were subject to an absolute pollution exclusion in its policies.
However, the Second District of the California Court of Appeal has since declared that the Superior Court erred in failing to apply the law of California, which takes a broader view of the duty to defend than Texas. Writing for the court, Justice Croskey declared that Civil Code Section 1646, which requires that a contract be interpreted according to the law and usage of the place where the contract is to be performed, compelled the application of California law, as California was the state where RLI would be obligated to perform its defense obligations under the policies and that the contracting parties knew this at the time that the policy was issued as the RLI policy includes several endorsements reflecting the existence of a covered risk located in California. The court then went on to hold that RLI’s duty to defend was triggered under California law.
This focus on the place of performance is not unheard of. For instance, New Jersey courts have applied different choice of law rules in pollution cases depending on the nature of the underlying issue and have adopted the current domicile of the insured as applying to issues involving the obligation to give timely notice since the insured was located in that jurisdiction at the time that the notice obligation arose. See . Unisys Corp. v. INA, 154 N.J. 217, 712 A.2d 649 (1998). On the other hand, the California court’s approach seems more of a fig leaf for adopting a place of the tort approach since construing the “place of performance” as the jurisdiction where the insurer is required to provide a defense necessarily means that the jurisdiction where the underlying litigation is pending will be the state whose law controls. As far as the author knows, this approach is unprecedented (although hardly the first time that California courts have leaped into the abyss).
The opinion is also worthy of note in that it was written by Justice Croskey, whose views on insurance are often viewed as being close to gospel in California. Of late, however, Croskey has authored several opinions that are far from mainstream.
