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Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PROGRESSIVE GULF INSURANCE 

COMPANY, an Ohio corporation,

Plaintiff-Appellant, No. 09-16487

v. D.C. No.

RANDALL K. FAEHNRICH, CV-05-1067-BES

individually and as natural parent ORDER and/or legal guardian of RANDY  CERTIFYING A FAEHNRICH and CHRISTIAN QUESTION TO FAEHNRICH, minors; TONI A. THE SUPREME FAEHNRICH, individually and as COURT OF natural parent and/or legal NEVADA guardian of RANDY FAEHNRICH and

CHRISTIAN FAEHNRICH, minors,

Defendants-Appellees. 

Filed December 7, 2010

Before: Robert R. Beezer, Andrew J. Kleinfeld, and

Susan P. Graber, Circuit Judges.

Order;

Dissent by Judge Kleinfeld

COUNSEL

Dennis M. Prince, Prince & Keating LLP, Las Vegas,

Nevada, for the plaintiff-appellant.

Brett A. Carter, Benson Bertoldo Baker & Carter, Chtd., Las

Vegas, Nevada, for the defendants-appellees.

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ORDER

Pursuant to Rule 5 of the Nevada Rules of Appellate Procedure, we respectfully certify to the Supreme Court of Nevada

the question of law set forth in Section III of this order. That

question will determine an issue pending before this court. No

precedent in the decisions of the Supreme Court of Nevada

controls that issue.

I. Background

The parties stipulated to the relevant facts. Progressive Gulf

Insurance Company issued an automobile insurance policy to

Randall and Toni Faehnrich, who had two minor children. At

the time of contracting, the Faehnrichs resided in Mississippi.

The policy contained a Mississippi choice-of-law provision

and set coverage limits for bodily injury of $100,000 per person and $300,000 per occurrence. The policy expressly did

not cover family members’ bodily injuries. 

The Faehnrichs divorced, and Toni Faehnrich moved from

Mississippi to Nevada with the two children. Shortly thereafter, while the policy remained in effect, Toni had a one-car

accident in the insured vehicle. The accident occurred in Las

Vegas, Nevada. The two minor children, who were riding in

the car at the time of the accident, sustained bodily injuries.

Randall Faehnrich, as the children’s natural father and legal

guardian, presented a claim to the insurer. The insurer denied

coverage because of the family-member exclusion. Thereafter

the insurer brought this diversity action seeking, among other

things, an order declaring that the family-member exclusion

is valid and enforceable in Nevada.

The parties moved for summary judgment. The insurer

argued that the exclusion is enforceable because the Nevada

courts must apply Mississippi law pursuant to the contract’s

choice-of-law provision. The Faehnrichs argued that Nevada

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public policy requires that they receive the statutory minimum

coverage provided in Nevada Revised Statutes section

485.3091. The parties stipulated that, “if Mississippi law is

applicable, there is no coverage under the terms and conditions of the Progressive policy.” On the other hand, they

agreed that, if Nevada law applies, the coverage limits would

be $15,000 per person and $30,000 per occurrence as provided in the statute, the insurer would owe the full $30,000,

and the insurer would owe a duty to defend and indemnify

Toni up to those statutory limits. The insurer waived “any

other coverage defenses that exist now or may previously

have existed.”

The district court granted judgment to the Faehnrichs, holding that Nevada public policy precludes application of the

family-member exclusion to bar all recovery. The insurer

appeals.

II. Discussion

In our judgment, this case presents an important, open

question of Nevada law. We review de novo a district court’s

decision concerning the appropriate choice of law, Abogados

v. AT&T, Inc., 223 F.3d 932, 934 (9th Cir. 2000), and we

apply Nevada’s choice-of-law rules as we think the Supreme

Court of Nevada would apply them, id.; Takahashi v. Loomis

Armored Car Serv., 625 F.2d 314, 316 (9th Cir. 1980).

Because we have doubts about how the Supreme Court of

Nevada would apply those rules here, we seek its guidance.

Nevada uses a multi-factor test to determine whether to

enforce a choice-of-law provision in a contract. Ferdie Sievers & Lake Tahoe Land Co. v. Diversified Mortg. Investors,

603 P.2d 270, 273 (Nev. 1979). The parties must have acted

in good faith, without an intent to evade the law of the state

where the contract was formed; the situs of the chosen law

must have a substantial relationship to the contract; and the

terms of the contract may not contravene Nevada public polPROGRESSIVE GULF INSURANCE v. FAEHNRICH 19561

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icy. Id. So long as the parties satisfy these factors, the contract’s choice-of-law provision must be given effect. Id.

We hold that the parties have satisfied all of the factors but

the last, as to which we are in doubt. There is no evidence that

the parties acted in bad faith or that they attempted to evade

the laws of Mississippi. Mississippi had a substantial relationship to the contract because the Faehnrichs resided there when

the policy was issued and for some time afterward. The one

question that remains is whether the policy’s family-member

exclusion, which would deny any recovery to the Faehnrichs

if we apply Mississippi law, contravenes Nevada’s public policy. 

At least one case, Sotirakis v. United Service Automobile

Ass’n, 787 P.2d 788 (Nev. 1990) (per curiam), suggests that

the exclusion may apply without offending Nevada public

policy. In that case, two California residents with a California

insurance policy had an accident while traveling in Las

Vegas. Id. at 789. The policy contained a family-member

exclusion, which California allowed. Id. The Supreme Court

of Nevada affirmed the application of California law, holding

that the family-member exclusion did not violate Nevada’s

public policy. Id. at 792.

By contrast, at least one other Supreme Court of Nevada

case, Williams v. United Services Automobile Ass’n, 849 P.2d

265 (Nev. 1993) (per curiam), suggests that Nevada public

policy would disallow reliance on the exclusion here. In Williams, another California resident suffered injuries from a car

accident in Nevada. Id. at 265-66. As in Sotirakis, the Court

had to decide which law to apply. Id. at 266. The Court

looked back at its prior cases and interpreted them to mean

that Nevada public policy bars the application of another

state’s law only if it would “preclude all recovery for the

injured insured.” Id. at 267. Because the plaintiff had recovered $300,000 already, the Court held that California law

could be applied to bar additional relief. Id. As noted, in this

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case, application of Mississippi law would “preclude all

recovery for the injured insured.” Id.

We are not persuaded that Sotirakis controls this case.

Sotirakis approved the application of California law to a contract that covered California residents who happened to have

an accident while driving through Nevada. The singular connection between the injured passenger and Nevada was the

location of the accident. 787 P.2d at 791. The court declined

to rely on such a “fortuitous” circumstance, worrying that

“[i]f this were enough to apply a state’s law, then laws would

be applied according to the fortuity of where the accident

occurred rather than by the provisions of the insured’s policy.” Id.

That concern does not apply here. In this case, the injured

parties were Nevada residents, which, under Nevada case law,

creates a more substantial relationship to the insurance contract. In Daniels v. National Home Life Assurance Co., 747

P.2d 897, 899 (Nev. 1987) (per curiam), for example, the

Supreme Court of Nevada emphasized Nevada’s “overriding

concerns of protecting its citizens and [e]nsuring that they are

afforded fair and equitable treatment by insurers.” Those

overriding concerns, together with the absence of the fortuitous circumstance that drove the court’s decision in Sotirakis,

lead us to conclude that we cannot ignore the passage in Williams that clearly suggests that Nevada law might apply here.

On the other hand, we recognize that Williams cited

Sotirakis with approval (at least with respect to the factors

that bear on the analysis), and the key sentence in Williams

may be dictum. Accordingly, we respectfully certify the following question to the Supreme Court of Nevada.

III. The Question Certified

Does Nevada’s public policy preclude giving effect to a

choice-of-law provision in an insurance contract that was

PROGRESSIVE GULF INSURANCE v. FAEHNRICH 19563

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negotiated, executed, and delivered while the parties resided

outside of Nevada, when that effect would deny any recovery

under Nevada Revised Statutes section 485.3091 to Nevada

residents who were injured in Nevada?

IV. Conclusion

This appeal presents an open question of Nevada state law

that will determine the outcome of this case. We respectfully

request that the Supreme Court of Nevada accept and decide

the question certified. We recognize that the Court may, in its

discretion, reword the certified question. We agree to abide by

the Court’s decision as specified by Rule 5(h) of the Nevada

Rules of Appellate Procedure, which states that “[t]he written

opinion of the Supreme Court stating the law governing the

questions certified . . . shall be res judicata as to the parties.”

The clerk of this court shall forward a copy of this order,

under official seal, to the Supreme Court of Nevada, along

with copies of all briefs and excerpts of record that have been

filed with this court. The parties shall notify the clerk of this

court within 14 days of any decision by the Court to accept

or decline certification. If the Court accepts certification, the

parties shall then notify the clerk of this court within 14 days

of the issuance of that court’s opinion.

IT IS SO ORDERED.

____________________________

SUSAN P. GRABER

Circuit Judge, U.S. Court of

Appeals for the Ninth Circuit

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KLEINFELD, Circuit Judge:

I respectfully dissent from the order certifying this case to

the Nevada Supreme Court. I do not think we need to burden

the parties and the Nevada Supreme Court with an additional

round of litigation, because this case is controlled by Sotirakis

v. United Service Automobile Association.

1

The policy was issued to Mr. and Mrs. Faehnrich when

they both lived in Mississippi. Progressive mailed the policy

to the Faehnrichs’ address in Mississippi. The premiums

charged were Mississippi-based, and the policy covered cars

garaged in Mississippi. The policy provides that Mississippi

law controls.

The only connection with Nevada is that after purchasing

the policy in Mississippi, the Faehnrichs divorced and Mrs.

Faehnrich moved to Nevada. Their children flew out to

Nevada the day before Mrs. Faehnrich had her one-car accident. Under Sotirakis, that does not furnish a basis for applying Nevada law.

In Sotirakis, the Nevada Supreme Court held that California law applied to a California insurance contract containing

a family exclusion clause between California parties.2 There,

Sotirakis, a California resident covered by a California insurance policy, got into a car accident in Nevada. Her insurance

policy contained a family exclusion clause, valid in insurance

contracts under California law, but invalid in insurance contracts under Nevada law.3

 Applying Nevada’s choice-of-law

test, the Nevada Supreme Court found that all four factors

weighed in favor of applying California law: “the policy was

issued in California to a California resident who paid premiums in California . . . based on California, rather than another

1

787 P.2d 788 (Nev. 1990). 

2

787 P.2d 788, 792 (Nev. 1990). 

3

Id. at 789. 

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state’s, rates,” and the parties “bargained for an insurance policy which contains a family exclusion clause.”

4

Sotirakis is easily reconciled with the one sentence of dicta

in Williams v. United Services Automobile Association5 and

the holding in Daniels v. National Home Life Assurance6

which provide the sole support for the argument that Nevada

law applies. 

In Daniels, William Daniels, a Nevada resident, applied for

and received life insurance from a Pennsylvania company.7

The policy contained a choice-of-law provision stating that

Missouri law governed. The insurer argued that the policy

was a group policy and the master policy had been delivered

to a Missouri company in Missouri. Daniels failed to pay his

third quarterly premium. The insurance company canceled the

insurance policy, but failed to notify Daniels of the cancellation. Notice was not required under Missouri law. A few

months after his policy was canceled, Daniels was killed in

Las Vegas, Nevada, and his wife brought suit after being

denied the benefits of Daniels’s life insurance policy due to

cancellation for nonpayment.

The Nevada Supreme Court refused to apply Missouri law

because the policy was not a group policy at all, just an individual policy purchased by a Nevadan, in Nevada, delivered

in Nevada, from a Pennsylvania company.8 The purported

Missouri situs was more or less fraudulent. So, the policy was

subject to Nevada’s notice provision.9 Daniels does not hold

that public policy is violated when application of another

4

Id. at 790-91. 

5

849 P.2d 265 (Nev. 1993). 

6

747 P.2d 897 (Nev. 1987). 

7

Id. at 898. 

8

Id. at 899. 

9Nev. Rev. Stat. § 687B.320. 

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state’s law would preclude coverage to an out-of-state resident on an out-of-state policy, merely that an exclusion denying coverage for a Nevada resident under an insurance

contract delivered in Nevada would violate public policy.

Thus, Daniels does not control.

Nor does Williams. There, plaintiff-appellant Williams was

a member of the Air Force stationed in California but was

injured in a car accident during an assignment in Nevada.10 He

sued after he was denied coverage for damages pursuant to his

California underinsured motorist coverage, arguing that the

law of Nevada should apply because applying California law

would violate Nevada’s public policy.11 The Nevada Supreme

Court upheld the application of California law to his California insurance policy.12 Although Williams says in one sentence of dicta that the Court had previously “applied Nevada

public policy only where other states’ laws would preclude all

recovery for the injured insured,”

13 this comment could not

mean that where another state’s law would preclude recovery,

then its law could not apply. If it did mean that, then Sotirakis

(the Nevada Supreme Court’s decision relied on by Williams

as controlling authority) would have come out the other way.

Williams cited Sotirakis with approval,14 and did not purport

to overrule or limit it.

The Nevada Supreme Court explained in Ferdie Sievers

and Lake Tahoe Land Company, Inc. v. Diversified Mortgage

Investors, “[a] crucial function of choice-of-law rules is that

their application should further harmonious relations between

states and facilitate commercial intercourse between them. If

we disregard this important conflicts function here because a

10849 P.2d 265, 265 (Nev. 1993). 

11Id. at 266. 

12Id. at 267. 

13Id.

14Id. at 266-67. 

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contract provision is not in accord with our statutes and thus

violative of a strong forum public policy, we would perhaps

rarely find another state’s laws controlling. Consequently, the

clear intentions of the parties would be defeated.”

15

In this circumstance, I do not believe that Nevada would

impose its public policy regarding insurance contracts and the

family member exclusion on Mississippi any more than Mississippi could impose its public policy on Nevada. That one

of the parties had moved to Nevada shortly before the car

accident does not furnish a basis for imposing Nevada policy

on the contract, because the conduct leading to the contract

(as opposed to the accident) did not take place in Nevada. As

Sotirakis explained, in upholding the out-of-state choice-oflaw provision in the insurance contract at issue, “[t]he contacts with the state where the accident occurred are fortuitous;

the only contact which Nevada had with the insureds was the

mere fact that it was the state in which the insureds happened

to have an accident. If this were enough to apply a state’s law,

then laws would be applied according to the fortuity of where

the accident occurred rather than by the provisions of the

insured’s policy.”

16

Because I think the law is clear and the Nevada Supreme

Court has never held that Nevada public policy is violated by

application of an out-of-state family member exclusion clause

in an insurance policy issued out-of-state to out-of-state residents, I think it is unfortunate that we are imposing this very

considerable burden on the Supreme Court of Nevada, and

imposing considerable additional work, uncertainty, expense,

and delay on the litigants in this case.

15603 P.2d 270, 274 (Nev. 1979). 

16Sotirakis, 787 P.2d at 791. 

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