Title: Ohayon v. Safeco Ins. Co. of Illinois

State: ohio

Issuer: Ohio Supreme Court

Document:

[Cite as Ohayon v. Safeco Ins. Co. of Illinois, 91 Ohio St.3d 474, 2001-Ohio-100.] 
 
 
OHAYON ET AL., APPELLANTS, v.  SAFECO INSURANCE COMPANY OF ILLINOIS, 
APPELLEE. 
[Cite as Ohayon v. Safeco Ins. Co. of Illinois (2001), 91 Ohio St.3d 474.] 
Insurance — Motor vehicles — Action by insured against insurance carrier for 
payment of underinsured motorist benefits is a cause of action sounding 
in contract, rather than tort, even though tortious conduct triggers 
applicable contractual provisions — 1 Restatement of the Law 2d, 
Conflict of Law (1997), Section 205, applied. 
(No. 00-262 — Submitted November 29, 2000 — Decided May 30, 2001.) 
APPEAL from the Court of Appeals for Summit County, No. 19617. 
__________________ 
SYLLABUS OF THE COURT 
1.  An action by an insured against his or her insurance carrier for payment of 
underinsured motorist benefits is a cause of action sounding in contract, 
rather than tort, even though it is tortious conduct that triggers applicable 
contractual provisions.  (Landis v. Grange Mut. Ins. Co. [1998], 82 Ohio 
St.3d 339, 341, 695 N.E.2d 1140, 1141, followed.) 
2.  Questions involving the nature and extent of the parties’ rights and duties 
under an insurance contract’s underinsured motorist provisions shall be 
determined by the law of the state selected by applying the rules in 
Sections 187 and 188 of the Restatement of the Law 2d, Conflict of Laws 
(1971).  (1 Restatement of the Law 2d, Conflict of Laws [1971], Section 
205, applied.) 
__________________ 
 
COOK, J.  In their sole proposition of law, appellants ask this court to hold 
that when an insured under an automobile insurance policy issued in Ohio is 
SUPREME COURT OF OHIO 
2 
injured in an automobile accident in another state, coverage under the 
uninsured/underinsured motorist provisions of the policy is determined by the law 
of the state in which the injury occurred.  For the following reasons, we decline to 
adopt this proposition and instead affirm the judgment of the court of appeals. 
I.  Background 
 
In 1996, Safeco Insurance Company of Illinois (“Safeco”) issued an 
automobile insurance policy to Summit County residents Jacob and Brenda 
Ohayon.  The policy covered three vehicles and provided underinsured (“UIM”) 
motorist coverage limited to $100,000 per person and $300,000 per occurrence. 
The policy contained a setoff provision providing that “the limit of liability [for 
UIM coverage] shall be reduced by all sums paid because of bodily injury by or 
on behalf of persons or organizations who may be legally responsible.”  (Boldface 
sic.)  The policy also contained an antistacking clause providing that “[i]n no 
event shall the limit of liability for two or more vehicles or two or more policies 
be added together, combined, or stacked to determine the limit of insurance 
coverage available to injured persons.” 
 
In 1996, Jacob and Brenda’s son Jonathon—who lived at the Ohayons’ 
Ohio residence—visited Pennsylvania, where he was struck by an automobile. 
Jonathon sustained serious leg injuries and eventually settled his claim against the 
tortfeasor for the $100,000 limit of the tortfeasor’s liability coverage. 
 
Jacob, Brenda, and Jonathon Ohayon filed a complaint against Safeco in 
the Summit County Court of Common Pleas, seeking a declaratory judgment that 
they were entitled to recover benefits under the UIM provisions of their Safeco 
policy.  The Ohayons sought a declaration (1) that Pennsylvania tort law applied 
to Jonathon’s UIM claims; (2) that Pennsylvania law entitled Jonathon to stack 
the coverage amounts for each vehicle insured under the Safeco policy, up to 
$300,000 plus interest and costs; (3) that Pennsylvania law precluded Safeco from 
setting off the amount already paid by the tortfeasor’s insurer in settlement; (4) 
January Term, 2001 
3 
that due to the loss of their son’s consortium, Jonathon’s parents could each 
collect the per-person limit of the UIM coverage provided in the policy, stacking 
the policy limits to a combined total of $600,000; and (5) that they were entitled 
to attorney fees and prejudgment interest. 
 
Safeco conceded that Jacob and Brenda Ohayon were named insureds 
under the Safeco policy in effect on the date of the accident and admitted that 
Jonathon Ohayon, if a resident of the Ohayon household, was also an insured. 
Safeco denied, however, that the plaintiffs could recover the UIM benefits that 
they sought under the applicable policy provisions. 
 
Following discovery, the Ohayons moved for partial summary judgment 
on the coverage issues.  In this motion, the Ohayons reiterated their claims that 
under Ohio’s choice-of-law analysis, Pennsylvania law controlled, that therefore 
Safeco was precluded from setting off the funds that Jonathon had already 
received in settlement, and that Pennsylvania law permitted the Ohayons to stack 
their claims.  In its response, Safeco contended that R.C. 3937.18 applied and 
entitled it to judgment as a matter of law. 
 
The common pleas court held that the Ohayons’ claims “are largely based 
upon tort law and thus tort law governs,” and agreed with the Ohayons that 
Pennsylvania law applied.  The court thus concluded that, in spite of the 
antistacking provision in the Safeco policy, Pennsylvania’s Motor Vehicle 
Financial Responsibility Law, 75 Pa.Cons.Stat. 1738, permitted the Ohayons to 
stack the stated limits of UIM coverage.  The trial court also concluded that 
Pennsylvania law precluded Safeco from setting off the amount already paid by 
the tortfeasor’s insurer in settlement.  Safeco appealed the trial court’s order to the 
Summit County Court of Appeals. 
 
The court of appeals unanimously reversed the lower court’s decision, 
concluding that the trial court erred when it applied Pennsylvania law instead of 
Ohio law to determine the UIM coverage issues under the insurance contract. 
SUPREME COURT OF OHIO 
4 
Though the court of appeals determined that Ohio’s UIM law was the proper law 
to apply, it concluded that a material fact remained in dispute regarding which 
version of Ohio’s UIM statute should apply.  Accordingly, the court of appeals 
remanded the cause.  The Ohayons appealed, and the cause is before this court 
upon the allowance of a discretionary appeal. 
II.  Choice of Law 
 
Because the Ohayons seek a declaration that Pennsylvania law should 
apply to resolve the coverage issues in this action, and because the incident 
underlying their cause of action occurred in Pennsylvania, resort to Ohio’s choice-
of-law rules is necessary.  Our state’s choice-of-law rules “do not themselves 
determine the rights and liabilities of the parties, but rather guide decision as to 
which local law rule will be applied to determine these rights and duties.”  1 
Restatement of the Law 2d, Conflict of Laws (1971) 3, Section 2, Comment a(3). 
 
The Restatement’s choice-of-law rules depend on the “classification of a 
given factual situation under the appropriate legal categories and specific rules of 
law.”  Id. at 18, Section 7, Comment b.  We must classify the Ohayons’ cause of 
action before we answer the choice-of-law question raised in their complaint 
because different choice-of-law rules apply depending on whether the cause of 
action sounds in contract or in tort.  Compare Schulke Radio Prod., Ltd. v. 
Midwestern Broadcasting Co. (1983), 6 Ohio St.3d 436, 6 OBR 480, 453 N.E.2d 
683 (contract), with Morgan v. Biro Mfg. Co., Inc. (1984), 15 Ohio St.3d 339, 15 
OBR 463, 474 N.E.2d 286 (tort). 
 
We apply different choice-of-law principles to actions sounding in 
contract than to actions sounding in tort for several reasons.  For one, the parties 
to a contract are largely free to negotiate the law to be applied to disputes arising 
thereunder.  See 1 Restatement of Conflicts at 15, Section 6, Comment g; see, 
also, id. at Section 187.  In the absence of such a choice, the Restatement’s 
January Term, 2001 
5 
contractual choice-of-law rules seek to protect the justified expectations of the 
contracting parties.  See id. at 576, Section 188, Comment b. 
 
Unlike a contracting party, on the other hand, a negligent tortfeasor acts 
without a conscious regard for the legal consequences of his or her conduct—let 
alone the particular law to be applied to that conduct—and the parties contesting 
liability and/or the appropriate measure of damages for the conduct thus “have no 
justified expectations to protect.”  Restatement at 15, Section 6, Comment g.  
Accordingly, the Restatement and courts emphasize different factors when 
resolving choice-of-law issues in these contextually distinct legal fields. 
III.  Choosing the Applicable Law in Causes of Action Sounding in Contract 
 
In Schulke, supra, this court adopted Section 187 of the Restatement of 
Conflicts.  Schulke, 6 Ohio St.3d at 438-439, 6 OBR at 482, 453 N.E.2d at 686.  
Section 187 provides that, subject to very limited exceptions, the law of the state 
chosen by the parties to a contract will govern their contractual rights and duties. 
The very next section of the Restatement, Section 188, enumerates factors that 
courts should consider in the absence of such a choice, and soon after Schulke this 
court expressly adopted Section 188 in Gries Sports Ent., Inc. v. Modell (1984), 
15 Ohio St.3d 284, 15 OBR 417, 473 N.E.2d 807, syllabus. 
 
In Gries, minority shareholders in Cleveland Browns, Inc., a Delaware 
corporation, filed an action in Ohio seeking specific performance of a voting 
agreement that they had executed over fifteen years earlier with Arthur Modell, 
the majority shareholder.  The parties to the voting agreement had not chosen a 
particular forum’s law to be applied to any controversies arising thereunder.  If 
Delaware law applied to the minority shareholders’ cause of action, the voting 
agreement would have statutorily lapsed by the time the minority shareholders 
brought their action and thus could not have been specifically performed.  
Accordingly, this court had to determine which forum’s law applied before 
assessing the merits of the minority shareholders’ complaint. 
SUPREME COURT OF OHIO 
6 
 
To resolve the choice-of-law issue, the Gries court examined the factors in 
Section 188 of the Restatement.  Section 188 provides that, in the absence of an 
effective choice of law by the parties, their rights and duties under the contract are 
determined by the law of the state that, with respect to that issue, has “the most 
significant relationship to the transaction and the parties.”  Restatement at 575, 
Section 188(1).  To assist in making this determination, Section 188(2)(a) through 
(d) more specifically provides that courts should consider the place of contracting, 
the place of negotiation, the place of performance, the location of the subject 
matter, and the domicile, residence, nationality, place of incorporation, and place 
of business of the parties. 
 
Applying the foregoing principles to the voting agreement executed by the 
shareholders in Gries, this court determined: 
 
“[T]he place of contracting was Ohio, the place of negotiation was Ohio, 
the place of performance was Ohio, the location of the subject matter of [the] 
contract was Ohio, the place of incorporation was Delaware, and the place of 
business of the parties was Ohio.  The conclusion is inescapable that Ohio ‘bears 
the most significant relationship to the contract.’ ” Gries, 15 Ohio St.3d at 287, 15 
OBR at 420, 473 N.E.2d at 810, quoting Schulke, 6 Ohio St.3d at 438, 6 OBR at 
482, 453 N.E.2d at 685-686. 
 
Accordingly, this court reversed the court of appeals’ decision to apply 
Delaware law. 
IV.  The Application of Gries and Section 188 to Insurance Coverage Disputes:  
Nationwide Mut. Ins. Co. v. Ferrin 
 
Just over a year after Gries, this court applied Section 188 to resolve a 
choice-of-law issue that arose in a dispute over insurance coverage.  Nationwide 
Mut. Ins. Co. v. Ferrin (1986), 21 Ohio St.3d 43, 44-45, 21 OBR 328, 330, 487 
N.E.2d 568, 569 (citing Gries and Section 188 as “controlling law”).  The 
application of Ohio’s contractual choice-of-law analysis to such a dispute was not 
January Term, 2001 
7 
a surprising development, considering that this court has long held that an 
insurance policy is a contract between the insurer and the insured.  Ohio Farmers 
Ins. Co. v. Cochran (1922), 104 Ohio St. 427, 135 N.E. 537, syllabus. 
 
In Ferrin, an employee of a trucking company headquartered in Florida 
drove a tractor and attached trailer from Florida on his way to Michigan on 
company business.  One weekend during this trip, the driver separated the trailer 
from the tractor in Dayton, Ohio, and drove the tractor to his parents’ residence in 
Orient for a personal visit.  On his way to his parents’ home, the driver had an 
accident.  His employer’s insurer filed a complaint in Ohio seeking a declaration 
that the driver was not covered by the insurance policy that it had issued to the 
driver’s employer.  The employer’s insurance policy covered employees using 
covered vehicles “with [the employer’s] permission,” but an employee handbook 
indicated that the driver should not have been operating the company tractor for 
his personal use. 
 
Because the applicable insurance policy was issued to the driver’s Florida 
employer, but the insurer’s complaint was filed here in Ohio, it was necessary for 
the trial court to determine which state’s law would apply to resolve the 
controversy about coverage.  The trial court determined that Florida law applied 
and that under Florida law the driver was indeed covered by the policy issued to 
his employer.  Both the court of appeals and this court agreed.  Applying the 
factors enumerated in Section 188 of the Restatement, this court noted in Ferrin 
that the insurance contract had been issued to the driver’s Florida employer at the 
employer’s Florida address.  Id. at 45, 21 OBR at 330, 487 N.E.2d at 570.  Thus 
Florida law controlled the question of whether the policy covered the employee 
during his personal trip to see his parents.  Id. 
 
After summarizing Ohio choice-of-law precedent in contract cases, the 
Ferrin court proceeded to apply Florida law to the merits of the case.  The Ferrin 
court observed that, at the time, Florida courts apparently adhered to the “initial 
SUPREME COURT OF OHIO 
8 
permission rule.”  Id. at 45, 21 OBR at 330, 487 N.E.2d at 570.  Under that rule, 
once an owner gave express or implied consent to another to operate the owner’s 
automobile, the owner became liable for its negligent operation no matter where 
the driver went.  Id., citing Boggs v. Butler (1937), 129 Fla. 324, 326, 176 So. 
174, 176.  Florida courts had applied the Boggs rule both with respect to the 
vehicle owner’s liability and with respect to the scope of the owner’s insurance 
coverage.  Ferrin at 46, 21 OBR at 331, 487 N.E.2d at 571.  For these reasons, 
this court affirmed the lower courts’ decision in favor of coverage.  Id. 
 
In Ferrin, the application of Florida law ultimately resulted in an outcome 
favorable to the driver-insured.  If, however, the insurance policy had been issued 
in a state that did not adhere to the “initial permission rule,” and if a consideration 
of Section 188’s factors had resulted in applying that state’s law, the final 
outcome of the insurer’s declaratory judgment action may have been different.  
We note this possibility simply to underscore the fact that Section 188’s choice-
of-law methodology does not, in and of itself, favor either insureds or insurers in 
disputes over insurance coverage.  As noted above, the choice-of-law rules 
contained in Section 188 do not themselves determine the actual rights and 
liabilities of the parties to a contract; they simply decide which forum’s local law 
should apply in determining those rights and liabilities.  See Restatement at 3, 
Section 2, Comment a(3).  The factors enumerated in Section 188 are keyed to the 
justifiable expectations of the parties to the contract, not to the ultimate benefit of 
one party over another.  See id. at 15, Section 6, Comment g. 
 
Section 188’s choice-of-law methodology focuses on the place of 
contracting, the place of negotiation, the place of performance, the location of the 
subject matter, and the domicile of the contracting parties.  In insurance cases, this 
focus will often correspond with the Restatement’s view that the rights created by 
an insurance contract should be determined “by the local law of the state which 
the parties understood was to be the principal location of the insured risk during 
January Term, 2001 
9 
the term of the policy, unless with respect to the particular issue, some other state 
has a more significant relationship * * * to the transaction and the parties.”  
(Emphasis added.)  Restatement at 610, Section 193.  “[I]n the case of an 
automobile liability policy, the parties will usually know beforehand where the 
automobile will be garaged at least during most of the period in question.”  Id. at 
611, Comment b.  The principal location of the insured risk described in Section 
193 neatly corresponds with one of Section 188’s enumerated factors—the 
location of the subject matter of the contract. 
V.  The Application of Section 188, Gries, and Ferrin to Choice-of-Law Issues 
Arising in Disputes Over UIM Coverage 
 
After Ferrin, application of the Restatement’s contractual choice-of-law 
provisions to liability insurance cases is no longer a subject of dispute in Ohio.  
See Babcock & Wilcox Co. v. Arkwright-Boston Mfg. Mut. Ins. Co. (N.D.Ohio 
1992), 867 F.Supp. 573, 577 (deciding, in a diversity action regarding liability 
coverage, that “the determinative Ohio choice of law rules” are set forth in Ferrin 
and Gries).  Similarly, resort to the Restatement’s contractual choice-of-law 
provisions in declaratory judgment actions seeking UIM coverage should no 
longer be a subject of dispute.  This court has determined that an action by an 
insured against his or her insurance carrier for payment of UIM benefits is a cause 
of action sounding in contract, rather than tort, even though it is tortious conduct 
that triggers applicable contractual provisions.  Landis v. Grange Mut. Ins. Co. 
(1998), 82 Ohio St.3d 339, 341, 695 N.E.2d 1140, 1141;  see, also, Miller v. 
Progressive Cas. Ins. Co. (1994), 69 Ohio St.3d 619, 624, 635 N.E.2d 317, 321 
(“We recognize that an action by an insured against an insurance carrier for 
payment of uninsured or underinsured motorist benefits is a cause of action 
sounding in contract”); Kurent v. Farmers Ins. of Columbus, Inc. (1991), 62 Ohio 
St.3d 242, 245, 581 N.E.2d 533, 536 (“The Kurents’ claim for uninsured motorist 
coverage is determined by their contractual relationship with Farmers”); Motorists 
SUPREME COURT OF OHIO 
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Mut. Ins. Co. v. Tomanski (1971), 27 Ohio St.2d 222, 223, 56 O.O.2d 133, 134, 
271 N.E.2d 924, 925 (“The right to recover under an uninsured motorist insurance 
policy is on the contract, not in tort”). 
 
The Sixth Circuit Court of Appeals, in diversity actions concerning claims 
for UIM coverage, has likewise concluded that Ohio’s choice-of-law rules derive 
from Gries, Ferrin, and Section 188.  Natl. Union Fire Ins. Co. v. Watts (C.A.6, 
1992), 963 F.2d 148, 150; see, also, Miller v. State Farm Mut. Auto. Ins. Co. 
(C.A.6, 1996), 87 F.3d 822, 824-825. 
 
There are several reasons to apply the same choice-of-law principles to 
disputes over UIM coverage that we have already applied to disputes over liability 
insurance coverage and other contractual disputes.  For one, although our state 
requires insurers to offer UIM  coverage, R.C. 3937.18(A)(1), and although a 
minimum level of coverage will arise by operation of law in the absence of such 
an offer, Abate v. Pioneer Mut. Cas. Co. (1970), 22 Ohio St.2d 161, 51 O.O.2d 
229, 258 N.E.2d 429, R.C. 3937.18 does not impose upper limits on the amount 
of UIM coverage that may be negotiated between the parties to an insurance 
agreement.  The limits of UIM coverage under a particular policy are subject to 
negotiation and modification by the contracting parties just as other terms of the 
contract are.  Insureds can receive higher limits when they agree to pay higher 
premiums.  The Restatement’s contractual choice-of-law rules will protect the 
justified expectations of the parties who bargain for those terms.  See Restatement 
at 15, Section 6, Comment g. 
 
Finally, R.C. 3937.18, unlike some Ohio statutes that apply to contractual 
relationships, imposes no choice of law on the parties if a dispute arises 
concerning the existence or extent of coverage.  Compare R.C. 3937.18 with 
1302.43(C)(2) (imposing the “law of the state where the goods are situated” to 
determine whether a fraudulent transfer or voidable preference has occurred).  
Courts need a predictable methodology, such as the one embodied in Restatement 
January Term, 2001 
11 
Section 188, to choose the applicable law if neither the parties nor the statutory 
scheme make that choice for them. 
VI.  Application of the Foregoing Principles to the Case at Bar 
 
When addressing the parties’ competing motions for summary judgment 
in this case, the trial court erroneously applied the Restatement’s tort choice-of-
law methodology.  In doing so, the trial court relied not on the authority discussed 
above, but rather on an unreported case from the Erie County Court of Appeals, 
Mayse v. Watson (Sept. 27, 1985), Erie App. No. E-85-8, unreported, 1985 WL 
7613.  In Mayse, which was decided before this court had even applied Section 
188 of the Restatement to the insurance context in Ferrin, the plaintiffs had an 
accident in Florida with an uninsured motorist.  At the time, Florida’s no-fault 
laws limited a plaintiff’s potential recovery for pain, suffering, mental anguish, 
and inconvenience.  For this reason, in their complaint against their insurer, the 
Mayses sought a declaration that Florida law did not control the parties’ rights 
and duties under the insurance contract. 
 
The trial court awarded damages to the Mayses, ordered their insurer to 
proceed to arbitration, and determined that Florida’s no-fault laws should apply—
effectively limiting the Mayses’ potential recovery.  The Erie County Court of 
Appeals reversed, applying a tort choice-of-law analysis to conclude that Ohio 
law should control.  In reaching this conclusion, the Mayse panel reasoned that 
the crucial issue in the case concerned the measure of damages recoverable from 
the tortfeasor:  “[I]f tort law controls the factors which establish how the injury 
occurred and who was at fault, then tort law should also control the measure of 
damages which are recoverable.”  (Emphasis added.) 
 
Relying on this language from Mayse, the trial court in this case applied a 
tort choice-of-law analysis to determine which state’s law applies.  The trial court 
thus applied the Restatement’s presumption that the law of the place of injury 
controls unless another jurisdiction has a more significant relationship. See 
SUPREME COURT OF OHIO 
12 
Morgan v. Biro Mfg., 15 Ohio St.3d at 341-342, 15 OBR at 465, 474 N.E.2d at 
289, citing 1 Restatement of Conflicts at 430, Section 146.  Because Jonathon was 
injured in Pennsylvania, the trial court determined that Pennsylvania law should 
control. 
 
The trial court’s choice-of-law analysis, however, was flawed.  If the 
Ohayons had filed a civil action for damages against the Pennsylvania tortfeasor 
in an Ohio court, the measure of damages—if any—recoverable from the 
tortfeasor would have been the essential issue before the court, and our state’s tort 
choice-of-law analysis, as expressed in Mayse, would indeed determine which 
local law to apply.  See id. 
 
In the case at bar, however, the measure of damages recoverable from the 
Pennsylvania tortfeasor is not the critical issue.  Jonathon Ohayon has already 
settled with the Pennsylvania tortfeasor for the $100,000 limit of the tortfeasor’s 
liability insurance.  Instead of seeking damages from the tortfeasor for liability in 
tort, the Ohayons now seek a declaration that they may stack the stated per-person 
limits of UIM coverage contained in their insurance contract with Safeco, and that 
Safeco is not entitled to set off the amounts Jonathon has already received in 
settlement.  The resolution of these stacking and setoff issues is a coverage issue, 
separate and independent from the measure of damages assessed to the tortfeasor.  
The resolution of these coverage issues depends on (1) the applicable UIM 
provisions of the insurance contract executed by the parties, contained in Part C of 
that contract; and (2) the enforceability of those contractual provisions under state 
law.  These are issues to be resolved under the law of contracts, to which the court 
of appeals correctly applied the Restatement’s contract choice-of-law analysis. 
 
The Sixth Circuit Court of Appeals agrees that Mayse’s tort choice-of-law 
analysis does not apply in a suit for UIM benefits.  Miller v. State Farm Mut. 
Auto. Ins. Co., 87 F.3d at 826.  In Miller, the executor of a Pennsylvania insured 
exhausted the limits of the Ohio tortfeasor’s insurance policy, then instituted a 
January Term, 2001 
13 
declaratory judgment action against her decedent’s insurer to recover UIM 
benefits.  The Sixth Circuit, while noting that Mayse’s tort choice-of-law analysis 
would indeed apply if the measure of damages due the executor had been at issue, 
upheld the district court’s application of Ohio’s contract choice-of-law analysis.  
Id. at 826.  As the Sixth Circuit unanimously determined, “The question before us 
* * * does not concern the measure of damages from the underlying accident; 
rather, it concerns the limits on the amount of coverage which State Farm must 
provide under the policy it issued to [the decedent].”  Id.  The Miller court 
concluded, “[W]e view the instant case as one that sounds in contract and not in 
tort. * * * [T]he true heart of the matter—i.e., whether to apply the ‘per person’ or 
‘per accident’ limit stated in the policy—involves the interpretation of an 
insurance contract executed in Pennsylvania by a Pennsylvania resident, with a 
company licensed to do business in Pennsylvania.”  Id. at 826-827, citing Ferrin, 
21 Ohio St.3d 43, 21 OBR 328, 487 N.E.2d 568. 
 
Like the cause of action in Miller, the Ohayons’ declaratory judgment 
action against Safeco here concerns the nature and extent of the rights and duties 
created by the UIM provisions of their contract of insurance.  Questions involving 
the nature and extent of the parties’ rights and duties under an insurance 
contract’s underinsured motorist provisions shall be determined by the law of the 
state selected by applying the rules of Sections 187 and 188 of the Restatement.  
Id. at 660, Section 205. 
 
For the foregoing reasons, the court of appeals correctly applied Section 
188 of the Restatement to resolve the choice-of-law issue.  The insurance contract 
was executed and delivered in Ohio by Ohio residents and an Ohio-licensed 
insurance agent.  The policy insured vehicles principally garaged in Ohio.  Under 
Section 188’s contractual choice-of-law analysis, Ohio law should apply to 
determine the parties’ rights and duties under that contract, including those rights 
and duties created by the contract terms providing UIM coverage. 
SUPREME COURT OF OHIO 
14 
VII.  The Ohayons’ Alternative Arguments 
A. Csulik v. Nationwide Mut. Ins. Co. 
 
The Ohayons contend that the foregoing choice-of-law analysis is not 
necessary and that the decision of the court of appeals should be reversed on the 
authority of this court’s recent decision in Csulik v. Nationwide Mut. Ins. Co. 
(2000), 88 Ohio St.3d 17, 723 N.E.2d 90.  We disagree. 
 
As a threshold matter, we note that only three justices of this court joined 
the lead opinion in Csulik.  See id., 88 Ohio St.3d at 20-22, 723 N.E.2d at 93-94 
(Douglas, J., concurring separately with the judgment of the majority “but only on 
a very limited basis”; Lundberg Stratton, J., dissenting, joined by Moyer, C.J., and 
Cook, J.).  Moreover, the case at bar differs substantively from Csulik.  In Csulik, 
the insurer agreed to pay “compensatory damages, including derivative claims, 
which are due by law to you or a relative.”  (Emphasis added.)  Id. at 17, 723 
N.E.2d at 91.  The justices joining the lead opinion in Csulik deemed the phrase 
“due by law” ambiguous and interpreted that phrase in favor of the insured under 
Ohio’s law for resolving contractual ambiguities.  The Ohayons contend that “the 
same ambiguous provision exists in the policy in the present case,” but this 
assertion is incorrect. 
 
The Safeco policy, in an amendatory endorsement specifically written for 
policies issued in Ohio, provides that the insurer “will pay damages which an 
insured is legally entitled to recover from the owner or operator of an uninsured 
motor vehicle or underinsured motor vehicle because of bodily injury.”  
(Emphasis added; boldface sic.)  This provision differs on its face from the one 
addressed in Csulik and is not ambiguous. 
 
As this court has already noted, “the phrase ‘legally entitled to recover’ 
means the insured must be able to prove the elements of his or her claim” against 
the tortfeasor.  Kurent v. Farmers Ins. of Columbus, 62 Ohio St.3d at 245, 581 
N.E.2d at 536; see, also, State Farm Auto. Ins. Co. v. Webb (1990), 54 Ohio St.3d 
January Term, 2001 
15 
61, 62, 562 N.E.2d 132, 133 (noting that the very same phrase appears in R.C. 
3937.18[A]).  Here, Jonathon’s ability to prove the elements of his claim and 
recover damages from the Pennsylvania tortfeasor is not at issue—he has already 
received $100,000 in settlement with the tortfeasor’s insurer.  As the Sixth Circuit 
explained in Miller, “there is no question that Miller is ‘legally entitled to recover’ 
underinsured motorist benefits under the policy * * *.  Miller has already 
exhausted the tortfeasor’s insurance.”  Id., 87 F.3d at 825.  Instead, the issue in 
the Ohayons’ declaratory judgment action is the amount of coverage, if any, that 
Safeco must provide under the contract it executed with the Ohayons—an issue 
itself dependent on the enforceability and application of the policy’s stacking and 
setoff provisions.  These are issues sounding in contract law, and Csulik did not 
displace this court’s traditional contract choice-of-law principles.  See Csulik, 88 
Ohio St.3d at 20-21, 723 N.E.2d at 93 (Douglas, J., concurring separately in 
judgment).  For these reasons, the Ohayons’ reliance on Csulik is misplaced. 
B.  Kurent v. Farmers Ins. of Columbus 
 
The Ohayons also contend in their brief that in Kurent, 62 Ohio St.3d 242, 
581 N.E.2d 533, “this Court established the basic principle, using a tort conflict-
of-law analysis, that there is a strong presumption in favor of applying the law of 
the state where the injury occurred in determining uninsured/underinsured 
motorist claims.”  Though the Ohayons are correct that this court applied a tort 
choice-of-law analysis in Kurent, we did so for reasons not applicable to the case 
at bar.  Accord Miller, 87 F.3d 822 (distinguishing Kurent). 
 
In Kurent, a Michigan driver injured Ohio residents in Michigan.  At the 
time, Michigan law denied noneconomic damages to plaintiffs unless such 
damages surpassed a certain threshold.  The Ohio plaintiffs, who could not meet 
that threshold, sued their insurer in Ohio for uninsured motorist benefits, 
contending that Ohio law should control the determination of coverage.  This 
court held: 
SUPREME COURT OF OHIO 
16 
 
“[W]hen an Ohio resident is injured in an automobile accident in a no-
fault insurance state, by a resident of that state who is insured under that state’s 
no-fault insurance laws, the Ohio resident’s legal right to recover from the 
tortfeasor-motorist must be determined with reference to the no-fault state’s laws.  
Where the no-fault state does not recognize a claim against the tortfeasor-
motorist, the Ohio insured is not entitled to collect uninsured motorist benefits 
from his own insurer.”  Id. at syllabus. 
 
The Ohayons misinterpret Kurent’s holding as a statement that a tort 
choice-of-law analysis will always control UM and UIM claims.  But the 
Ohayons overlook the fact that in Kurent, this court applied Michigan tort law to 
the underlying accident, explicitly recognized that “[t]he Kurents’ claim for 
uninsured motorist coverage is determined by their contractual relationship with 
Farmers,” and interpreted the terms of that contract “[a]ccording to Ohio law.”  
(Emphasis added.)  Id. at 246 and 245, 581 N.E.2d at 536.  As the Sixth Circuit 
explained in Miller, the substantive tort question of whether the insured was 
“legally entitled to recover” benefits at all from the tortfeasor was the central 
issue in Kurent—a question that Michigan’s no-fault laws answered in the 
negative.  Id., 87 F.3d at 825.  Accord Hooker v. Nationwide Mut. Ins. Co. (June 
19, 1997), Cuyahoga App. No. 71472, unreported, 1997 WL 337623.  Here, the 
substantive tort question regarding the damages Jonathon is entitled to recover 
from the tortfeasor is not before us.  Instead, the Ohayons seek a declaration 
regarding the stacking and setoff provisions of their insurance agreement with 
Safeco—contract issues to which a contract choice-of-law analysis applies. 
C.  An Alleged Choice-of-Law Provision 
 
Finally, the Ohayons contend that resort to Section 188 is unnecessary 
because the Safeco policy already contains a choice-of-law provision.  To support 
this contention, the Ohayons point to the following policy language: 
 
“OUT OF STATE COVERAGE 
January Term, 2001 
17 
 
“If an auto accident to which this policy applies occurs in any state or 
province other than the one in which your covered auto is principally garaged, 
we will interpret your policy for that accident as follows: 
 
“A.  If the state or province has: 
 
“1.  A financial responsibility or similar law specifying limits of liability 
for bodily injury or property damage higher than the limit shown in the 
Declarations, your policy will provide the higher specified limit. 
 
“2.  A compulsory insurance or similar law requiring a nonresident to 
maintain insurance whenever the nonresident uses a vehicle in that state or 
province, your policy will provide at least the required minimum amounts and 
types of coverage.”  (Boldface sic.) 
 
This provision of the Safeco policy assures the policyholder that he or she 
may drive an insured vehicle into states that may require higher levels of liability 
insurance without violating those states’ financial responsibility laws.  It appears 
in a section of the Safeco policy titled “PART A—LIABILITY COVERAGE.”  
Without this provision, an insured would be required to check the financial 
responsibility statutes of every jurisdiction into which he or she happened to drive 
in order to ensure that his or her policy included sufficient liability insurance to 
comply with each jurisdiction’s laws. 
 
This provision, however, does not represent an express choice of law to be 
applied by courts in an action for UIM benefits under those independent 
provisions of the Safeco policy that appear in Part C.  We do not invoke 
Restatement Section 187 to apply the law of the state chosen by the parties unless 
we are satisfied that the parties have actually made an express choice of law 
regarding the issue before the court.  See Restatement at 561-562, Section 187, 
Comment a (“the rule of this Section is inapplicable unless it can be established 
that the parties have chosen the state of the applicable law.  It does not suffice to 
demonstrate that the parties, if they had thought about the matter, would have 
SUPREME COURT OF OHIO 
18 
wished to have the law of a particular state applied”).  We do not agree with the 
Ohayons that the policy’s provision for minimum out-of-state liability coverage 
dispenses with the need for a choice-of-law analysis regarding UIM coverage. 
VIII.  Conclusion 
 
Our holding today does not determine the respective rights and liabilities 
of the parties in this case.  Rather, we decide only that the trial court must employ 
Ohio law to make this determination.  And as the court of appeals noted, in order 
for the trial court to resolve this case, it must also determine which version of R.C. 
3937.18 (and related authority from this court) would apply to these facts.  The 
parties have not briefed this issue here, and we express no opinion as to its 
resolution.1 
                                                          
 
1. 
The author of the dissent states, “Having determined that this case presents issues in 
contract, and since appellants concede that ‘under contract law analysis, Ohio law prevails,’ our 
inquiry should end here.  The only remaining issue is whether Ohio law in effect at the time of 
contracting upheld or prohibited setoff and antistacking provisions in a UM/UIM policy, * * * and 
this issue should be remanded to the trial court for determination.” 
 
This is precisely the disposition adopted by the majority herein.  By affirming the court of 
appeals’ judgment, which reversed the trial court’s decision granting summary judgment in favor 
of Safeco, we likewise adopt the court of appeals’ disposition remanding the cause to the trial 
court for further proceedings.  As noted supra, these proceedings will address the very issue 
correctly identified by the dissent as “[t]he only remaining issue”—the application of Ohio law to 
the stacking and setoff questions contained in the Ohayons’ declaratory judgment action.  Given 
that the dissent agrees that “our inquiry should end” precisely where the majority’s does, and 
given that the dissent also agrees that the appellants have conceded that Ohio law would apply 
“under contract law analysis,” the dissent’s criticism of the majority’s analysis as “myopic and 
mechanical” is puzzling. 
 
Equally puzzling is the fact that, after deciding that “our inquiry should end” with a 
determination that the lower court should apply Ohio law on remand, the dissent then embarks on 
a lengthy analysis of what it concedes is a rare exception to the contract choice-of-law analysis in 
the Restatement of the Law 2d, Conflict of Laws.  At the conclusion of this analysis, the dissent 
declares that, in fact, Pennsylvania law should apply.  This conclusion directly contradicts the 
dissent’s prior statement that “our inquiry should end” (as it already does) with the appellants’ 
concession that Ohio law prevails. 
 
The dissent also decides that the majority’s stated reasons for rejecting the Ohayons’ 
reliance on Csulik, 88 Ohio St.3d 17, 723 N.E.2d 90, “make no sense other than to artificially limit 
its holding.”  This is a flawed contention, given that both the majority and the dissent find the 
Ohayons’ reliance on Csulik “misplaced” on the very same basis—that the contractual language at 
issue here, unlike the contractual language at issue in Csulik, is simply not ambiguous.  Compare 
the majority’s statement, “this provision differs on its face from the one addressed in Csulik and is 
January Term, 2001 
19 
 
For the foregoing reasons, the judgment of the court of appeals is 
affirmed. 
Judgment affirmed. 
 
MOYER, C.J., PFEIFER and LUNDBERG STRATTON, JJ., concur. 
 
DOUGLAS, RESNICK and F.E. SWEENEY, JJ., dissent. 
__________________ 
 
ALICE ROBIE RESNICK, J., dissenting.  Plaintiff-appellant Jonathon 
Ohayon is the son of plaintiffs-appellants Jacob and Brenda Ohayon.  On August 
6, 1996, Jonathon, a minor at the time, was seriously injured when he was struck 
by an underinsured motorist while standing on a sidewalk at a shopping center in 
Sharon, Pennsylvania.  It is undisputed that Jonathon’s claim against the 
tortfeasor, Mary Welch, an Ohio resident, was settled for $100,000, which was 
the full per-person liability limits of Welch’s insurance coverage. 
 
At the time of the accident, the Ohayons were insured under an Ohio 
Personal Automobile Policy issued by defendant-appellee, Safeco Insurance 
Company of Illinois (“Safeco”).  The policy covered three vehicles and provided 
the Ohayon family uninsured/underinsured motorist (“UM/UIM”) coverage in the 
amount of $100,000 per person and $300,000 per occurrence.  Appellants applied 
for UIM coverage, but Safeco denied their claims on the basis of the policy’s 
setoff and antistacking provisions. 
 
There are three issues that ultimately need to be resolved in this case:  (1) 
whether a tort or a contract choice-of-law analysis is to be followed in 
determining choice-of-law questions involving coverage under a UM/UIM 
insurance policy; (2) whether the selected choice-of-law analysis favors the 
application of Ohio or Pennsylvania substantive law; and (3) whether the law of 
the chosen state enforces setoff and antistacking clauses in a UM/UIM policy. 
                                                                                                                                                              
 
not ambiguous” with the dissent’s statement, “the Safeco policy in this case contains no such 
ambiguity.” 
SUPREME COURT OF OHIO 
20 
 
The trial court addressed all three issues and held that, under a tort choice-
of-law analysis, Pennsylvania law applied to invalidate the setoff and antistacking 
clauses in the Safeco policy.  The court of appeals addressed only the first two 
issues, holding that, under a contract choice-of-law analysis, Ohio law applies to 
determine whether the setoff and antistacking provisions are enforceable.  As to 
the third issue, the court of appeals remanded the cause to the trial court for a 
determination of whether, at the time of contracting, Ohio law treated these 
provisions as valid. 
 
On appeal to this court, however, appellants identify “[t]he essential issue 
in this action [as] whether the governing law is to be determined by tort conflict-
of-law analysis, or by contract conflict-of-law analysis,” while conceding that 
“under contract law analysis, Ohio law prevails.”  Thus, only the first issue is 
properly before this court. 
 
Accordingly, the court should characterize or classify the conflicts 
question in this case, and no more.  In order to determine which choice-of-law 
rules apply in this case, we need only to assign the present factual situation to its 
appropriate legal category and the body of law that governs it.  1 Restatement of 
the Law 2d, Conflict of Laws (1971) 18, Section 7, Comment b.  In other words, 
the only issue before this court is “whether the problem presented to [the trial 
court] for solution relates to torts, contracts, property, or some other field.”  16 
American Jurisprudence 2d (1998) 12, Conflict of Laws, Section 3. 
 
This issue can be, and should be, resolved quite simply.  Since a contract 
of insurance is just that, a contract, this court did not hesitate in applying a 
contract choice-of-law analysis to a question involving liability insurance 
coverage in Nationwide Mut. Ins. Co. v. Ferrin (1986), 21 Ohio St.3d 43, 21 OBR 
328, 487 N.E.2d 568.  This court has not yet specifically applied a contract 
choice-of-law analysis to a coverage question arising under a UM/UIM provision 
in an automobile insurance policy.  However, this should also be accomplished 
January Term, 2001 
21 
with little difficulty, since “[t]he right to recover under an uninsured motorist 
insurance policy is on the contract, not in tort.”  Motorists Mut. Ins. Co. v. 
Tomanski (1971), 27 Ohio St.2d 222, 223, 56 O.O.2d 133, 134, 271 N.E.2d 924, 
925.  See, also, Landis v. Grange Mut. Ins. Co. (1998), 82 Ohio St.3d 339, 341, 
695 N.E.2d 1140, 1141; Kraly v. Vannewkirk (1994), 69 Ohio St.3d 627, 632, 635 
N.E.2d 323, 327; Miller v. Progressive Cas. Ins. Co. (1994), 69 Ohio St.3d 619, 
624, 635 N.E.2d 317, 321.  Thus, a contract choice-of-law analysis applies to 
determine which state’s law will govern an issue of insurance coverage. 
 
Appellants’ reliance on Kurent v. Farmers Ins. of Columbus, Inc. (1991), 
62 Ohio St.3d 242, 581 N.E.2d 533, and Mayse v. Watson (Sept. 27, 1985), Erie 
App. No. E-85-8, unreported, 1985 WL 7613, is misplaced.  In both cases, an 
Ohio insured was injured in an automobile accident that occurred in a state with 
no-fault insurance laws.  Both courts employed a tort choice-of-law analysis to 
determine which state’s law would apply to the underlying issue of whether the 
insured has a right to recover noneconomic damages.  In so doing, both courts 
characterized this issue as sounding in tort because it involves the insured’s right 
to recover against the tortfeasor.  Thus, contrary to appellants’ assertions, Kurent 
and Mayse do not stand for the proposition that tort principles govern the 
respective rights and liabilities of the parties to a UM/UIM claim.  Instead, they 
stand for the proposition that tort principles govern the respective rights and 
liabilities of the parties to the accident. 
 
In contrast, the underlying issues in this case—whether setoff and 
antistacking provisions in a UM/UIM policy are valid and enforceable—have 
nothing to do with the insured’s right to recover against the tortfeasor.  Instead, 
these issues relate solely to the respective rights and liabilities of the parties to the 
insurance contract.  Thus, a contract choice-of-law analysis applies. 
 
Appellants’ alternative reliance on Csulik v. Nationwide Ins. Co. (2000), 
88 Ohio St.3d 17, 723 N.E.2d 90, is also misplaced.  In Csulik, we found that the 
SUPREME COURT OF OHIO 
22 
substantive law of Pennsylvania, where the accident occurred, rather than the law 
of Ohio, where the accident victims’ insurance contract was executed, applied to 
determine the validity of a UM/UIM setoff provision.  In so doing, however, we 
declined to “employ a choice-of-law analysis to determine whether Pennsylvania 
or Ohio law applies in this case.”  Id. at 20, 723 N.E.2d at 92.  Instead, we 
employed the law governing ambiguous contract language to make this 
determination because several provisions in the Nationwide policy had actually 
specified that the laws of the accident state will govern the time limit for filing a 
legal action to recover UM/UIM benefits. 
 
Despite appellants’ assertions to the contrary, the Safeco policy in this 
case contains no such ambiguity.  Nothing in the Safeco policy suggests that any 
issue of UM/UIM coverage is to be determined under the substantive law of the 
accident state.  Thus, unlike the parties in Csulik, the parties in this case are bound 
not by the law for construing ambiguous policy language but by those contract 
choice-of-law principles that apply in the absence of a choice-of-law provision. 
 
Having determined that this case presents issues in contract, and since 
appellants concede that “under contract law analysis, Ohio law prevails,” our 
inquiry should end here.  The only remaining issue is whether Ohio law in effect 
at the time of contracting upheld or prohibited setoff and antistacking provisions 
in a UM/UIM policy, Ross v. Farmers Ins. Group of Cos. (1998), 82 Ohio St.3d 
281, 695 N.E.2d 732, and this issue should be remanded to the trial court for 
determination. 
 
Nevertheless, the majority has chosen to go beyond the process of 
characterization to determine whether the Restatement’s contract choice-of-law 
principles actually favor the application of Ohio law over that of Pennsylvania in 
the present factual situation.  In so doing, the majority relies exclusively on the 
factors listed in Restatement of Conflicts Section 188(2).  Thus, the majority 
concludes that Ohio law should apply to determine the underlying issues in this 
January Term, 2001 
23 
case because “[t]he insurance contract was executed and delivered in Ohio by 
Ohio residents and an Ohio-licensed insurance agent [and] insured vehicles 
principally garaged in Ohio.” 
 
The majority’s myopic and mechanical approach fails to consider other 
relevant contacts and state interests that, given their appropriate weight, favor the 
application of Pennsylvania law in this case.  For these and the following reasons, 
and because the majority has chosen to vitiate rather than distinguish our decision 
in Csulik, I must respectfully dissent.2 
 
In determining choice-of-law questions involving contracts, this court has 
abandoned the outmoded traditional lex loci rules in favor of the more factor-
                                                          
 
2. 
In addressing appellants’ alternative argument, the majority appears more concerned with 
devaluing our decision in Csulik than with legitimately distinguishing it from the matter before us.  
The majority notes, “[a]s a threshold matter,” that “only three justices of this court joined the lead 
opinion in Csulik.”  However, as relevant here, the viability of our decision in Csulik is not 
diminished by the fact that one of the four justices comprising the majority concurred “only on a 
very limited basis.”  Id., 88 Ohio St.3d at 20, 723 N.E.2d at 93 (Douglas, J., concurring).  Justice 
Douglas’s obvious concern in Csulik was that certain portions of the lead opinion may have given 
the impression that the Nationwide policy was ambiguous merely because it failed to include a 
particular choice-of-law clause.  However, all four members of the majority in Csulik agreed that 
the policy was in fact ambiguous with respect to choice of law and, therefore, should be construed 
most strongly against the insurer.  Thus, Csulik stands solidly for the proposition that when an 
insurance policy is ambiguous as to choice of law, as opposed to merely lacking a choice-of-law 
directive, the insurer will be bound by the rules for construing ambiguous policy language rather 
than by those choice-of-law principles that govern in the absence of an effective choice-of-law 
provision.  Simply put, an insurer may not escape its own contractual ambiguity by resorting to 
choice-of-law rules. 
 
The majority’s remaining stated reasons for rejecting appellants’ reliance on Csulik make 
no sense other than to artificially limit its holding.  As in this case, the plaintiffs in Csulik brought 
their declaratory judgment action after they had been paid the limits of the tortfeasor’s insurance.  
Thus, as here, the Csuliks’ ability to prove the elements of their claim and recover damages 
against the tortfeasor was not at issue.  Instead, just as in this case, the issue in the Csuliks’ 
declaratory judgment action was the amount of coverage, if any, that the insurer must provide 
under the contract it executed with the insureds.  Moreover, it can hardly be said that “Csulik did 
not displace this court’s traditional contract choice-of-law principles,” considering that it 
substituted the rules for resolving contractual ambiguity for those principles.  Perhaps what the 
majority means is that Csulik did not displace choice-of-law principles beyond the context of an 
ambiguous insurance contract.  But in any event, it is inconceivable that the majority would 
actually find Csulik to be distinguishable from this case on the basis that the very circumstances 
presented in Csulik are now repeated in this case. 
SUPREME COURT OF OHIO 
24 
driven “significant relationship” approach set forth at Sections 187 and 188 of the 
Restatement of Conflicts.  Ferrin, 21 Ohio St.3d 43, 21 OBR 328, 487 N.E.2d 
568; Gries Sports Ent., Inc. v. Modell (1984), 15 Ohio St.3d 284, 15 OBR 417, 
473 N.E.2d 807; Schulke Radio Prod., Ltd. v. Midwestern Broadcasting Co. 
(1983), 6 Ohio St.3d 436, 6 OBR 480, 453 N.E.2d 683. 
 
Section 188 provides: 
 
“(1) The rights and duties of the parties with respect to an issue in contract 
are determined by the local law of the state which, with respect to that issue, has 
the most significant relationship to the transaction and the parties under the 
principles stated in § 6. 
 
“(2) In the absence of an effective choice of law by the parties (see § 187), 
the contacts to be taken into account in applying the principles of § 6 to determine 
the law applicable to an issue include: 
 
“(a) the place of contracting, 
 
“(b) the place of negotiation of the contract, 
 
“(c) the place of performance, 
 
“(d) the location of the subject matter of the contract, and 
 
“(e) the domicile, residence, nationality, place of incorporation and place 
of business of the parties. 
 
“These contacts are to be evaluated according to their relative importance 
with respect to the particular issue. 
 
“(3) If the place of negotiating the contract and the place of performance 
are in the same state, the local law of this state will usually be applied, except as 
otherwise provided in §§ 189-199 and 203.”  Id. at 575. 
 
In many, and perhaps even in a majority of cases involving contracts, the 
evaluating court would be justified in relying exclusively on the contacts listed in 
Section 188(2) to choose the applicable rule of law.  Oftentimes, the presence of 
one or more of these contacts will reveal the state with the most significant 
January Term, 2001 
25 
relationship to the transaction and the parties.  In these cases, it is unnecessary to 
give independent significance to the general principles that underlie all fields of 
choice-of-law rules because those principles are already given expression through 
the relevant contacts listed in Section 188(2). 
 
But this is not true in all cases, and Section 188(2) was never intended to 
be the exclusive determinant in all cases involving contracts.  The drafters of the 
Restatement of Conflicts recognized that “[c]ontracts is one of the most complex 
and most confused areas of choice of law,” id. at 557, Contracts, Introductory 
Note 1, and that “the difficulties and complexities involved have as yet prevented 
the courts from formulating a precise rule, or series of rules, which provide a 
satisfactory accommodation of the underlying factors in all of the situations which 
may arise.”  Id. at 13, Section 6, Comment c.  Hence, the contacts listed in Section 
188(2) are intended to identify only those “states which are most likely to be 
interested” in deciding a particular issue of contracts.  (Emphasis added.)  Id. at 
579, Section 188, Comment e. 
 
As the majority correctly observes, “the Restatement’s contractual choice-
of-law rules seek to protect the justified expectations of the contracting parties.”  
This is because “[p]rotection of the justified expectations of the parties is the 
basic policy underlying the field of contracts.”  Id. at 577, Section 188, Comment 
b.  But there are some relatively rare cases in which a local invalidating rule 
applies despite the expectations of the contracting parties.  In these cases, it 
becomes necessary for the evaluating court to look beyond Section 188(2) and 
consider other relevant contacts and state interests.  Otherwise, Section 188(2) 
would possess a false economy, for its continued application in these cases would 
result in subordinating important substantive interests to an unrealistic notion of 
“justified expectations.” 
 
The situation that is now before us is a prime example of this kind of case.  
As explained in Comment b to Section 188: 
SUPREME COURT OF OHIO 
26 
 
“Protection of the justified expectations of the parties is a factor which 
varies somewhat in importance from issue to issue. * * * Parties entering a 
contract will expect at the very least, subject perhaps to rare exceptions, that the 
provisions of the contract will be binding upon them.  Their expectations should 
not be disappointed by application of the local rule of a state which would strike 
down the contract or a provision thereof unless the value of protecting the 
expectations of the parties is substantially outweighed in the particular case by 
the interest of the state with the invalidating rule in having this rule applied.  The 
extent of the interest of a state in having its rule applied should be determined in 
the light of the purpose sought to be achieved by the rule and by the relation of 
the transaction and the parties to that state (see Comment c).”  (Emphasis added.)  
Id. at 577. 
 
Comment c explains: 
 
“Whether an invalidating rule should be applied will depend, among other 
things, upon whether the interest of the state in having its rule applied to strike 
down the contract outweighs in the particular case the value of protecting the 
justified expectations of the parties and upon whether some other state has a 
greater interest in the application of its own rule.”  Id. at 578. 
 
Thus, even if the place of negotiation and the place of performance are in 
the same state, the local law of this state will not be applied “when the principles 
stated in § 6 require application of some other law.  As stated in Comment c, the 
extent of a state’s interest in having its contract rule applied will depend upon the 
purpose sought to be achieved by that rule.”  (Emphasis added.)  Id. at 583, 
Section 188, Comment f. 
 
In addition, Section 205, Comment c states: 
 
“The situation is essentially the same in those relatively rare situations 
which involve the applicability of a local law rule which requires that the contract 
give rise to certain rights and duties or which provides that the parties may not 
January Term, 2001 
27 
limit the extent of their obligations by a certain provision.  Application of such a 
rule may defeat the expectations of the parties.  On the other hand, the rule is 
likely to represent a strongly-felt policy which the forum would be hesitant to 
override if the state with the rule involved was the state with the dominant interest 
in the issue to be decided.”  (Emphasis added.)  Id. at 662. 
 
This view also carries over to Section 193, which provides: 
 
“The validity of a contract of fire, surety or casualty insurance and the 
rights created thereby are determined by the local law of the state which the 
parties understood was to be the principal location of the insured risk during the 
term of the policy, unless with respect to the particular issue, some other state has 
a more significant relationship under the principles stated in § 6 to the transaction 
and the parties, in which event the local law of the other state will be applied.”  
(Emphasis added.) 
 
In quoting Section 193, the majority carefully omits the foregoing 
italicized language, but this language reveals that the factors upon which the 
majority relies will not necessarily determine every choice-of-law issue involving 
insurance contracts.  Indeed, Comment c to Section 193 provides: 
 
“Whether there is such another state should be determined in the light of 
the choice-of-law principles stated in § 6.  For a general discussion of the 
application of these principles to the contracts area and of the principle favoring 
application of a law that would sustain the validity of the contract, see § 188, 
Comments b-d.  What is said in those Comments is applicable here.”  (Emphasis 
added.)  Id. at 612. 
 
More important, it is questionable whether the principal location of the 
insured risk under Section 193, or the location of the subject matter of the contract 
in Section 188(2)(d), enjoys any determinative significance in the case of an 
ambulatory insurance policy.  For the most part, these factors are important where 
the insurance covers a static physical thing, an immovable object, or a localized 
SUPREME COURT OF OHIO 
28 
risk.  See Section 188, at 580-581, Comment e; Section 193, at 611, Comment b.  
However, in most cases “ ‘[i]nsurance companies * * * do not confine their 
contractual activities and obligations within state boundaries.  They sell to 
customers who are promised protection in States far away from the place where 
the contract is made.’ ”  Clay v. Sun Ins. Office, Ltd. (1964), 377 U.S. 179, 182, 
84 S.Ct. 1197, 1199, 12 L.Ed.2d 229, 232, quoting Clay v. Sun Ins. Office, Ltd. 
(1960), 363 U.S. 207, 221, 80 S.Ct. 1222, 1230, 4 L.Ed.2d 1170, 1181 (Black, J., 
dissenting).  Thus, an insurance contract issued and delivered in Massachusetts, 
for example, can be held subject to Louisiana’s “legitimate interest in 
safeguarding the rights of persons injured there.”  Watson v. Employers Liab. 
Assur. Corp., Ltd. (1954), 348 U.S. 66, 73, 75 S.Ct. 166, 170, 99 L.Ed. 74, 82.  As 
the high court explained: 
 
“Some contracts made locally, affecting nothing but local affairs, may 
well justify a denial to other states of power to alter those contracts.  But, as this 
case illustrates, a vast part of the business affairs of this Nation does not present 
such simple local situations.  Although this insurance contract was issued in 
Massachusetts, it was to protect * * * against damages on account of personal 
injuries that might be suffered * * * anywhere in the United States.”  Id. at 71, 75 
S.Ct. at 169, 99 L.Ed. at 81. 
 
These principles apply with even greater force in cases involving policies 
for automobile insurance.  Interstate travel by automobile is simply too 
foreseeable and too common a phenomenon to be ignored.  Moreover, as 
evidenced by the extensive regulation in this area, an automobile insurance 
contract is for the benefit of the public as well as for the benefit of the named or 
additional insured.  Thus, when the issue presented involves the validity or 
enforceability of a provision that purports to limit coverage, the interest of the 
state where damage occurred may, along with other factors, play a more 
January Term, 2001 
29 
significant role in choice of law than the parties’ presumed expectations or where 
the vehicle is principally garaged. 
 
This is especially true in cases involving exclusions or limitations on 
UM/UIM coverage, as this kind of coverage is not only ambulatory in nature, but 
portable as well.  As explained by the Supreme Court of Connecticut: 
 
“ ‘[Uninsured motorist] coverage is portable:  The insured and family 
members * * * are insured no matter where they are injured.  They are insured 
when injured in an owned vehicle named in the policy, in an owned vehicle not 
named in the policy, in an unowned vehicle, on a motorcycle, on a bicycle, 
whether afoot or on horseback or even on a pogo stick’; Bradley v. Mid-Century 
Ins. Co., 409 Mich. 1, 24, 38, 294 N.W.2d 141 [145, 152] (1980); or in a ‘rocking 
chair on [one’s] front porch.’  Motorists Mutual Ins. Co. v. Bittler, 14 Ohio Misc. 
23, 33 [43 O.O.2d 64, 69], 235 N.E.2d 745 [751] (1968).”  Harvey v. Travelers 
Indemn. Co. (1982), 188 Conn. 245, 250, 449 A.2d 157, 160. 
 
Or, for that matter, while standing on a sidewalk at a shopping center in 
Sharon, Pennsylvania. 
 
Accordingly, courts have relied upon factors not listed in Sections 188(2) 
and 193 in choosing the state whose local substantive law should determine the 
validity or enforceability of provisions that seek to limit or exclude liability or 
UM/UIM coverage in an automobile insurance policy, including provisions that 
prohibit stacking. 
 
In Hime v. State Farm Fire & Cas. Co. (Minn.1979), 284 N.W.2d 829, the 
Minnesota Supreme Court was asked to determine whether Florida or Minnesota 
law should govern the enforceability of a household immunity clause in an 
automobile liability policy.  The clause was valid in Florida but unenforceable in 
Minnesota.  The contract was issued in Florida to a Florida resident on a vehicle 
principally garaged in Florida, and the court presumed that the insurance 
premiums were paid in Florida.  Nevertheless, the court concluded that 
SUPREME COURT OF OHIO 
30 
“Minnesota law should govern resolution of this controversy.”  Id., 284 N.W.2d at 
834. 
 
In reaching its conclusion, the court explained: 
 
“[T]he unplanned nature of automobile accidents lessens the importance 
of predictability of results in automobile insurance cases.  Nevertheless, we note 
that the insured’s protection has no geographical boundaries, at least not under the 
policy before us, and it is foreseeable that the insured may meet his misfortune 
out of the state of issuance.  It was neither unusual nor unpredictable that the 
insured in this case, a former Minnesota resident, returned to visit his former 
home and that his vehicle was involved in an accident there. * * * The transaction 
was not planned to have predictable results, and the insurer is not now justified in 
expecting Florida law to govern absolutely in light of the extra-territorial effect 
and unique nature of the automobile insurance contract.”  Id., 284 N.W.2d at 833. 
 
The court also recognized that “[p]roviding recovery to those injured and 
treated within our borders is a legitimate state interest,” and that the application of 
Florida law to deny recovery in this case “offends our idea of fairness and defies 
our concern for the welfare of visitors to this state.”  Id., 284 N.W.2d at 833-834.  
At the same time, the court noted that the sanctity of a contractual relationship 
between insured and insurer “is already diminished by the relative absence of free 
negotiation, perhaps approaching the nature of a contract of adhesion.”  Id. at 834.  
See, also, Restatement Section 187, at 562, Comment b (“Common examples [of 
adhesion contracts] are tickets of various kinds and insurance policies”). 
 
In Abramson v. Aetna Cas. & Sur. Co. (C.A.9, 1996), 76 F.3d 304, the 
Ninth Circuit Court of Appeals was asked to determine whether New Jersey or 
Hawaii law should govern the validity and enforceability of an antistacking 
provision in a UIM policy.  The provision was apparently valid in New Jersey but 
unenforceable in Hawaii.  The insurance contract was executed in New Jersey and 
insured a New Jersey resident, but the insured was killed by an underinsured 
January Term, 2001 
31 
motorist while bicycling in Hawaii.  The court concluded that “the district court 
correctly applied Hawaii law [and] that under such law anti-stacking provisions 
are invalid as to persons injured on Hawaii streets and highways, regardless of 
whether the insured owns and insures a vehicle licensed in Hawaii.”  Id. at 306.  
In so doing, the Ninth Circuit agreed with the district court: 
 
“New Jersey’s interests in the insurance contract did not control the 
choice-of-law analysis because of the lack of any negotiation over the terms of the 
contract and [because of] the parties’ expectations that the contract would cover 
the insured as he travelled throughout the United States and Canada.”  Id. at 305. 
 
In Natl. Union Fire Ins. Co. v. Watts (C.A.6, 1992), 963 F.2d 148, the 
Sixth Circuit Court of Appeals was asked to determine whether, under Ohio 
choice-of-law rules, the district court correctly held that Florida law, rather than 
Indiana or Texas law, governed the insured’s right to recover UM benefits for 
injuries resulting from being forced off a Florida road by an unidentified vehicle, 
without physical contact.  Indiana and Texas law would have denied coverage in 
this situation, while Florida law favored coverage.  The insurance contract was 
issued through an Indiana broker to an Indiana corporation.  At the time of the 
accident, the insured, a truck driver, was transporting property pursuant to a 
hauling contact with the Indiana corporation.  The insured was a resident of Texas 
at the time of contracting with the Indiana corporation, a resident of Florida at the 
time of the accident, and a resident of Ohio at the time suit was filed. 
 
The majority cites this case for the proposition that “Ohio’s choice-of-law 
rules derive from Gries, Ferrin, and Section 188,” citing Watts, 963 F.2d at 150.  
However, on the very next page of its opinion, the court in Watts specifically 
rejected the insurer’s argument that Ohio’s contract choice-of-law analysis is 
limited to the factors listed in Restatement of Conflicts Section 188, and found 
that the district court properly considered the principles stated in Section 6 as 
well.  Id. at 151.  Accordingly, the court found that Florida, as the situs of the 
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truck driver’s accident with the unknown vehicle, had the most significant 
relationship to the insurance contract, reasoning as follows: 
 
“In its detailed opinion, the district court concluded [that] the interest of 
Florida, to provide compensation for its residents injured by hit-and-run drivers, 
and the interest of the insured, to be compensated by the insurance policy, appear 
to provide the most significant relationship to the contract.  Further, Florida’s 
public policy interest in the outcome seems to outweigh the less substantive 
relationships of Texas and Indiana as places of business for the truck driver and 
corporation.  In addition, the court noted in its opinion that though the insurance 
coverage extended to the corporation’s agents and employees anywhere in the 
United States, the policy failed to provide that any particular state’s law must be 
applied.  The district court interpreted this omission to mean that the insurer 
intended its coverage to be governed by the state in which the claimant was using 
his vehicle.  We find this is bolstered by the general Ohio choice of law rule that 
the law of the state where the contract will be performed should govern.  Gries 
[supra], 15 Ohio St.3d at [286, 15 OBR at 419], 473 N.E.2d at 810, quoting 
Schulke [supra], 6 Ohio St.3d [at] 438 [6 OBR at 481], 453 N.E.2d [at 685].  
Thus, we conclude that Ohio choice of law rules mandate that the law of Florida 
governs the instant dispute.”  Id., 963 F.2d at 152. 
 
In other cases presenting choice-of-law questions involving insurance 
coverage, but where the interpretation or enforceability of a particular contractual 
provision between insurer and insured is not directly at issue, the courts have at 
least recognized the relevance of certain non-Section 188(2) contacts and 
accompanying state interests.  See Cox v. Nichols (Ind.App.1998), 690 N.E.2d 
750, 752 (“The contract examination reveals [that] * * * the plaintiffs are 
residents of Michigan [and that] the place where Allstate and the plaintiffs’ 
relationship is centered is Michigan.  However, the collision [in Indiana] is not 
insignificant, and the alleged tortfeasor, Nichols, is a resident of Indiana.  The 
January Term, 2001 
33 
factors weigh in favor of employing Indiana law.”); First City Acceptance Corp. 
v. Gulf Ins. Co. (1997), 245 A.D.2d 649, 650, 665 N.Y.S.2d 114, 115 (agreeing 
with the trial court that “New York law was the applicable law since First City not 
only instituted its action in New York but the accident occurred in New York,” 
while rejecting First City’s argument that Massachusetts should apply because it 
“purchased the policy in Massachusetts, the agent who sold the policy and First 
City maintain their principal places of business in that state, and the policy was 
also delivered there”); Nationwide Mut. Ins. Co. v. Perlman (1983), 187 
N.J.Super. 499, 504, 455 A.2d 527, 529-530 (Although insurance policy was 
issued in New York, the court applied the law of New Jersey, where the accident 
occurred, to determine the question of interspousal immunity, reasoning in part 
that “since an automobile is by self-definition mobile, an insurer might reasonably 
expect that it will be taken to another state, especially a neighboring one, * * * 
that does not provide interspousal immunity”); Fed. Ins. Co. v. Nationwide Mut. 
Ins. Co. (W.D.Va.1978), 448 F.Supp. 723, 726 (law of Virginia, where accident 
occurred, chosen over law of Tennessee, where contract was made, in part 
because Virginia “has manifested a legitimate interest in safeguarding the rights 
of persons injured within her boundaries”); Clough v. Liberty Mut. Ins. Co. 
(E.D.Wis.1968), 282 F.Supp. 553, 554 (Wisconsin rather than Indiana law held 
applicable to household exclusion clause, partially on the basis that while 
“Indiana might well desire that automobile insurance contracts entered into 
between its residents and insurance companies licensed to do business in that state 
will be honored, regardless of where an accident occurs[,] * * * Wisconsin is 
likewise interested in preserving its policy of providing compensation to the 
injured, irrespective of their residence”). 
 
The purpose of the foregoing is not to establish a choice-of-law rule under 
which questions of insurance coverage are to be determined by the law of the state 
that affords the most coverage.  Nor is it my intent to persuade anyone that any of 
SUPREME COURT OF OHIO 
34 
the foregoing cases present situations that are precisely equivalent to the situation 
presented by the record in the present case.  Instead, the foregoing analysis is 
meant only to illustrate that in cases involving the validity or enforceability of 
automobile insurance provisions that seek to exclude or limit coverage, the forum 
court must look to other contacts besides those listed in Section 188 of the 
Restatement.  These other contacts include the place of injury, the place of 
medical treatment, the proximity of the insured’s residence to the accident state, 
and the foreseeability of his or her presence there, while bearing in mind the 
adhesory, ambulatory, and portable nature of automobile insurance contracts and 
coverage.  The court must also consider whether the interests of the state with the 
invalidating rule in having its rule applied outweigh the insurer’s expectation that 
the contractual provision at issue will be binding upon the parties.  Thus, the court 
must focus some of its attention on the purposes, policies, aims, and objectives 
that underlie the invalidating state’s rule.  Only then can a full determination be 
made as to which state “has the most significant relationship to the transaction 
and the parties under the principles stated in § 6.”  Restatement Section 188(1). 
 
In determining whether Ohio or Pennsylvania has the most significant 
relation in this case, the following facts are relevant.  The Ohayons live in Akron, 
Ohio, and have family in Pittsburgh, Pennsylvania.  Jacob Ohayon testified at 
deposition that he visits his Pittsburgh relatives “[t]hree [or] four times a year, 
maybe five times a year.”  This court can take judicial notice that eastern Ohio, 
where Akron is located, borders western Pennsylvania, where both Pittsburgh and 
Sharon are located.  On the day of the accident, Jonathon was in Pennsylvania for 
the purpose of meeting his relatives. 
 
Following the accident, Jonathon was taken to the Sharon Regional 
Hospital and from there taken by helicopter to Allegheny General Hospital in 
Pittsburgh.  Jonathon remained at Allegheny General for over a month, where he 
underwent numerous surgical and other procedures to repair the significant 
January Term, 2001 
35 
damage to his right leg.  Since then, Jonathon has received all of his medical care 
in Pennsylvania, requiring frequent trips to Pennsylvania, and within ten months 
of the accident had incurred in excess of $250,000 in medical bills. 
 
In “PART F—GENERAL PROVISIONS,” the instant Safeco insurance 
policy provides that coverage will be afforded for accidents and losses that occur 
in: 
 
“1.  The United States of America, its territories or possessions; 
 
“2.  Puerto Rico; or 
 
“3.  Canada.” 
 
Yet there is no specific or general provision in the policy or any of the 
amendatory endorsements that purports to define or identify the substantive law 
of Ohio as being determinative of any matter of coverage under “PART C—
UNINSURED/UNDERINSURED MOTORISTS COVERAGE.” 
 
In addition, Pennsylvania courts, as well as other courts applying 
Pennsylvania law, have recognized Pennsylvania’s uncommonly strong interest in 
protecting innocent victims of uninsured or underinsured motorists from insurers 
who attempt to limit their recovery by setoff and antistacking provisions.  Indeed, 
these cases provide that any attempt by the insurer to circumscribe the availability 
of coverage in derogation of Pennsylvania’s statutory scheme will be considered 
void and contrary to public policy.  In invalidating these kinds of provisions, the 
courts invariably observe that Pennsylvania has a firm public policy to afford the 
maximum amount of protection to those innocent victims who suffer loss at the 
hands of irresponsible drivers.  See New Jersey Mfrs. Ins. Co. v. MacVicar 
(1998), 307 N.J.Super. 507, 513-515, 704 A.2d 1343, 1347; N. River Ins. Co. v. 
Tabor (C.A.3, 1991), 934 F.2d 461; Erie Indemn. Co. v. McGaughey (1991), 409 
Pa.Super. 177, 597 A.2d 718; Nationwide Mut. Ins. Co. v. Swisher (E.D.Pa.1989), 
731 F.Supp. 691; State Farm Mut. Auto. Ins. Co. v. Williams (1978), 481 Pa. 130, 
392 A.2d 281; Sands v. Granite Mut. Ins. Co. (1974), 232 Pa.Super. 70, 80-82, 
SUPREME COURT OF OHIO 
36 
331 A.2d 711, 716-717; Harleysville Mut. Cas. Co. v. Blumling (1968), 429 Pa. 
389, 241 A.2d 112. 
 
With these considerations in mind, it is readily apparent that Pennsylvania 
has the most significant relationship to the transaction and the parties in this case, 
and that Pennsylvania’s strong interest in striking down setoff and antistacking 
provision in UM/UIM insurance policies substantially outweighs the value of 
protecting Safeco’s expectations that these provisions, which were not negotiated 
for, would be binding upon the Ohayons.  Accordingly, under a contract choice-
of-law analysis, Pennsylvania law should apply to determine the substantive 
issues in this particular case and that the provisions in the Safeco policy that 
provide for setoff and prohibit stacking are invalid and unenforceable under 
Pennsylvania law. 
 
Therefore, I dissent. 
 
DOUGLAS and F.E. SWEENEY, JJ., concur in the foregoing dissenting 
opinion. 
__________________ 
 
Nicholas Swyrydenko, for appellants. 
 
James A.  Sennett and Adam E. Carr, for appellee. 
__________________