A TTORNEY S FOR A P PELLEE

Jeffrey D. Claflin Thao T. Nguyen South Bend, Indiana
Gregory M. Gotwald Theresa M. Willard Indianapolis, Indiana

A TTORNEYS FOR A P PELLANT S C HUBB C USTOM I NS

. C O

. AND T RAVEL

ERS I NDEM

. C O

. OF I LL INOIS Charles Browning Jeffrey C. Geri sh Bloomfield Hills, Michigan
Bryce H. Bennett, Jr. Jeffrey B. Fecht Indianapolis, Indiana A TTORNEYS FOR A P PELLANT W ESTCHE S TER F IRE I NS

. C O ., A SSUMING R EINSURER OF F REE MONT I NDEM

. C O

. (S U CCESSOR TO I NDUS

. I NDEM

. C O .) Brian E. Mahoney Chicago, Illin ois
Bruce L. Kamplain Indianapolis, Indiana

A TTORNEYS FOR A P PELLANT C ONT I NENTAL I NS

. C O

. Karen W. Howard Chicago, Illinois

Martha S. Ho l lingsworth Indianapolis, Indiana

A TTORNEY FOR A PPELLANT GAN N ORTH A MERICA N I NS

. C O

. Edward F. Harney, Jr. Indianapol is, Indiana A TTORNEYS FOR A P PELLANT L IBERTY I NS

. U NDER WRITERS , I NC

. Barbara A. Jones Dennis F. Cantrell Indianapolis, Indiana

A TTORNEYS FOR A MICI C URIAE E LI L ILLY & C O ., C ITIZENS E NERGY G ROUP , V ECTREN C ORP ., I NDIANA M FG

. A SS ‟ N , N AT ‟ L S OLID W ASTE M GMT

. A SS ‟ N , AND I NDIANA P ETROLEUM M ARKETERS AND C ONVENIENCE S TORES A SS ‟ N , I NC

. Frank J. Deveau Thomas A. Barnard Indianapolis, Indiana

A TTORNEYS FOR A MIC US C URIAE C OMPLEX I NS

. C LAIMS L ITIG

. A SS ‟ N Michael A. Dorelli Patrick J. Olmstead, Jr. Indianapolis, Indian a

______________________________________________________________________________ 

# In the 

# Indiana Supreme Court

_________________________________ No. 49S04

- 1006

- CV

- 318

N ATIONAL U NION F IRE I N SURANCE C OMPANY OF P ITTSBURGH , PA, ET AL , Appellant s ( Defenda nt s b e low) ,

v.

S TANDARD F USEE C ORP O RATION , Appellee (Plaintiff below)

.2 _________________________________ Appeal from the Marion County Superior Court, No. 49D1 4

- 0512

- PL

- 48895

The Honorable S.K. Re i d , Judge

_________________________________ On Petit ion to Transfer from the Indiana Court of Appeals, No. 49A04

- 0811

- CV

- 665

_________________________________

December 2 9 , 2010
Sullivan, Justice.

Insurance companies question whether they have a d uty to defend an in sured in enviro nmental remediation proce edings under polic ies alleged to cover risks in Indiana and Califo r nia

. Predicate to answering that question is determining whether the law governing the policies‟ i nterpretation is “site

- specific” (whereby Indiana law govern s the policies‟ interpretation with r espect to the Indiana site and California law with respect to the California site) as held by the Court of Appeals or “uniform ” (whereby a single state‟s law govern s ) as argued by both pa r ties. But while agreeing that the interpretation should be u niform, the insurance companies argue that Maryland law a p plies; the insured argues for Indiana law.

The uniform approach has long been Indiana law and we reaffirm it here. Under that a pproach, we find that Maryland is the state with the m ost intimate co ntact s to the facts and that its law should therefore be applied to resolve this disp ute.

Background

Standard Fusee Corporation (“SFC”) , a manufacturer of emergency signal ing flares , is incorporated in Delaware and headquarter ed in Maryland. When it in corpo rated in 1988, SFC owned one facility in Maryland , two in Pennsylvania , one in New Jersey, and one in Ohio. Also in 1988, SFC began leasing facilities in both Indiana and Califor nia from Olin Corpora tion (“Olin”) ; in the same year , it sold its facili ties in both Pennsylvania and Ohio

. In 1992, SFC pu rchased another facility in Pennsyl vania and in 1995, ceased opera tions at its California facility

.3

From 1995 to 2002, SFC owned and operated a facility in Illinois. In 1997, SFC purcha sed the Indiana f acility from Olin. Today, SFC has opera tions in Maryland, Indi ana , and Pennsylv a nia.

SFC purchased the comprehensive general liability (“CGL”) primary, excess, and u mbrella insurance policies at issue in this case through two b rokers, one located in Mary land and one located in Massachu setts. All discussions with respect to the purchase of these policies o ccurred at SFC‟s Maryland headquarters

. T he policies were deli vered to and retained in and all premiums were paid from SFC‟ s Maryland headquarters. Th e policies do not contain any prov isions specifying the law of the state that would govern their i n terpretation.

In 2002, SFC learned that perchlorate, a chemical used in the production of flares, had been discovered in ground water samples at and around i ts former California facility

. Therea f ter , more than 250 lawsuits were filed against SFC in California , but they were ultimately dismissed when it was determined that SFC had never discharged perchlorate there. SFC is not cu rrently subject to present or future remediation orders with respect to its California facility.

In 2004, SFC volunta rily tested its Indiana facility . The test suggested potential perchl orate contamination. SFC applied for, and was granted, inclusion in the Indiana Department of
Env ironmental Manage ment‟s Voluntary Remediation P rogram the fo l lowing year.

SFC requested defense and indemnification from the companies that had issued the insu rance policies discussed above (“ Insurers ”) with respect to the proceedings in California and In d iana. Insurers ei ther disputed that they had obligations to defend and indemnify SFC or otherwise failed to respond to SFC‟s r e quest.

In 2005, SFC filed this action against Insurers seeking a declaratory judgment that Insu rers were required to defend an d indemnify SFC under the CGL policies against enviro n mental liabilities arising in Indiana and California and seeking damages for Insurers‟ failure to defend and indemnify. In 2006, SFC sought partial summary judgment that Indiana law governed the inte r p retation of the policies and that the Insur ers had a duty to defend. The trial court grant ed4

partial summary judg ment on these grounds. Insurers sought , and were granted, an interlocutory appeal of th e trial court‟ s o r der.

The Court of Appeals reversed the trial court‟s determination that Indiana law governed the entire dispute. Instead, the Court of Appeals adopted a “si te

- specific” approach to choice of law, whereby Indi ana law governed the interpretation of the policies with respect to the Ind i ana si te and California law with respect to the California site

. 1 Nat‟l Union Fire Ins. Co. v. Sta n dard Fusee Corp. , 917 N.E.2d 170, 181 (Ind. Ct. App. 2009).

Both SFC and Insur ers sought , and we granted, transfer, Nat ‟l Union Fire Ins

. Co. v. Standard Fusee C orp. , 929 N.E.2d 796 (Ind. 2010) (table), thereby vacating the op inion of the Court of Appeals, Ind. Appellate Rule 58(A).

Discussion

I

This case typifies frequently recurring disputes over insurers‟ obligations to defend and indemnify their insureds in the face of demands to clean up or pay for environmental contamin ation at multiple sites in multiple states. “„ A t the very core of these disputes, which have spawned hundreds of reported cases nationwide, is the interpretation to be accorded certain cont ractual language contained in [CGL] poli cies. ‟ ” Symeon C. Symeonides, Choice of Law in the Amer ican Courts in 1998: Twelfth Annual Survey , 47 Am. J. Comp. L. 327, 361 (1999) (footnote omitted)

. Predicate to that interpretation is determining applicable law. Courts faced with t hese

ca s es have generally addressed choice

- of

- law issues in one of two ways

– either by what is called

a “un i form

- contract

- interpretation” approach or by a “site

- specific” approach. Id. at 36 2. The uniform

- contract

- interpretation approach applies the law of a single state to the whole co n tract

1 The Court of Appeals also held that, under Indiana law, the absolute pollution exclusions in the CGL policies were unenforceable and SF C‟s participation in the Voluntary Remediation P rogram was a “suit” for purposes of de termining Insurers‟ duty to defend. Standard Fusee Corp. , 917 N.E.2d at 185

- 86

. Gi ven our resolution of this case, we express no op inion beyond that set forth in this decision on these or ot her issues addressed by the Court of Appeals.5

even though it co v ers multiple risks in multiple states; the site

- specific approach applies the law of the state or states where the insured risks are located, unless another state has a mor e significant rel a tionship to the particular issue

. Id.

The Indiana Court of Appeals has faced cases similar to the present one at least four times in the recent past and in each case ha s applied the uniform

- contract

- interpretation approach to resolve ch oice

- of

- law issues. Am. Emp‟rs Ins. Co. v. Coachmen Indus., Inc. , 838 N.E.2d 1172, 1181 (Ind. Ct. App. 2005); Hartford A c cident & Indem. Co. v. Dana Corp. , 690 N.E.2d 285, 293

- 94 (Ind. Ct. App. 1997), trans. denied ; s ee also Emp‟rs Ins. of Wausau v. Recti cel Foam Corp. , 716 N.E.2d 1015, 1024

- 25 (Ind. Ct. App. 1999) (determining which state‟s law should apply to a multisite, multistate dispute) , trans. denied ; Travelers Indem. Co. v. Su m mit Corp. of Am. , 715 N.E.2d 926, 931

- 33 (Ind. Ct. App. 1999) (same). But see Pulse Eng'g, Inc. v.
Trave l ers Indem. Co. , 679 F. Supp. 2d 969 (S.D. Ind. 2009) (adopting the site

- specific approach solely on the authority of the decision of the Court of Appeals in this case). Indeed, the Court of Appeals in this case recognize d the prior pract ice of generally following the un i form

- contract

interpretation approach but nevertheless applied the site

- specific approach

. Standard Fusee Corp. , 917 N.E.2d at 178 , 181

.

Both SFC and Insurers urge this Court to conclude that Indiana sho uld continue its adh erence to the un i form

- contract

- interpretation approach. After reviewing our doctrine‟s history, we conclude that the uniform approach is more consistent with Indiana‟s choice

- of

- law jurispr udence, and as such, should apply in cases inv olving multisite, multistate insurance pol i cies.

A

As a preliminary matter , we recognize that the courts of the state in which the lawsuit is pending determine the applicable law. Hubbard M fg. Co. v. Greeson , 515 N.E.2d 1071, 1073 (Ind. 1987). Here, be cause SFC filed suit in India na , Indiana choice

- of

- law rules a p ply . Further, this case presents a choice

- of

- law problem because SFC co n tends that the laws of the State of Maryland and the laws of the State of Indiana differ in their interpretation of insu r ance contracts in general and the pollution exclusion in particular , Allen v. Great Am

. Reserve Ins

. Co. , 7666

N.E.2d 1157, 1162 (I nd. 2002) , although, as noted in footnote 1, supra , we express no op i nion on whether that is the case

.

In the first half of the twentieth century, choice

- of

- law determinations in contract cases

“ followed a rigid territorialist

- rule system . . . . [ that ] mandated the application of the law of the

.

. . place in which the contract was made ( lex loci contractus ) , . . . regardless of any other contacts or factors. ” Symeon C. Symeonides, Oregon ‟ s New Choice

- of

- Law Codification for Tort Conflicts: An Exegesis , 88 Or. L. Rev. 963, 966 (2009) [hereinafter Oregon ‟s New Choice

- of

Law ] (footnote omitted)

. In 1945, Chief Ju stice Ric hman ‟s opinion for our C ourt in W.H. Ba rber Co. v. Hughes led our sister states into the modern age 2 by providing the following choice

of

- law rule in contracts cases : “ T he court will c onsider all acts of the parties touching the tran saction in relation to the several states involved and will apply as the law governin g the transa ction the law of that state with which the facts are in most intimate contact .” 223 Ind. 570, 6 3 N.E.2d 417, 423 (1945) (emphasis added)

. The rule was based on academic synthes e s of d ecided cases that had “„ examine [d] all the circumstances which could be supposed to have infl uenced the actions of the parties , and [found] the most intimate contact at that place which might be characterized as the center of gravity of the circumstances

. ‟ ” Id. (quoting Harper & Taintor, Cases on Conflict of Laws 173 , 175 (1937))

. W.H. Barber Co. held that in choice

- of

- law cases involving contracts, the law of the state in which the transaction is “most closely asso ciated” a pplies

. Id

.

As may be inferr ed from footnote 2, supra , W.H . Barber Co. ‟s “most intimate contact” rule is consistent with the approach that was to be taken by the Restatement (Second) of Conflict of Laws (1971). Restatement (Second) section 188 (the Reporter‟s notes of which cite to W.H

.

2 The pioneering i nfluence of W.H. Barber Co. is discussed in many places. See, e. g. , Herma Hill Kay, Chief Justice Tra y nor and Choice o f Law Theory , 35 Hastings L.J. 747, 755 n.60 (1984) (recounting that when California Chief Justice Traynor wrote two “pathbreaking” choic e

- of

- law opinions in 1953 and 1955, “only one other state court judge, Chief Justice Frank N. Richman of the Indiana Supreme Court, had attempted to deal with „the unsatisfactory state of the decisions‟”); Symeonides, Oregon ‟s New Choice

- of

- Law , supra , at 967 n. 11 ( describing the analysis of W.H. Barber Co. and two later cases from ot h er jurisdictions to be “ generally considered the transitional point between the traditional system and modern approac h es ” ) ; Symeon C. Symeonides, The First Conflicts Restateme nt Through the Eyes of Old: As Bad as Its Reputation? , 32 S. Ill. U. L. J. 39, 79 & n. 196 (2007) ( citing W.H. Barber Co. as a predece ssor to two New York cases that began “ the widely

- hailed American conflicts revolu tion” )

.7

Barber Co. ) looks for the state with the “most significant relationship to the transaction and the parties” and , in determining that relationship , considers certain contacts : (1) the place of co ntracting; ( 2) the place of negotiation of the contract; ( 3 ) the place of performance; (4) the location of the subject matter of the contract ; and (5) the domicil e , residence, nationality, place of inco rpor a tion and place of business of the parties. Indeed, the factors provided in this section have guided our courts in de termining the state in most intimate contact ; Restatement (Second) s ection 193, to which su b section (3) of section 188 defers , has further guided our courts ‟ consideration of the subject matter of the contract

. 3 Coachmen Indus. , 838 N.E.2d at 1176

- 77; Recticel Foam Corp. , 716 N.E.2d at 1024

- 25 ; Summit Corp. , 715 N.E.2d at 931; Dana Corp. , 690 N.E.2d at 291. A c cordingly , t his Court has recognized that “[a]n insurance policy is governed by the law of the principal location of the insured risk du ring the term of the policy.” Dunn v. Me ridian
Mut. Ins

. Co. , 836 N.E.2d 249, 251 (Ind. 2005 ) ( citing Dana Corp. , 690 N.E.2d at 2 91 , and Re statemen t (Second) § 193 ). Thus , when we have considered the state in most intimate contact in insurance contract c ases , we have look ed first to the principal location o f the i n sured risk.

As an aside, our tort choice

- of

- law analysis has not allowed for dépeçage , or “ the process of analyzing differe nt issues within the same case separately under the laws of different states

. ” Simon v. United States , 805 N.E.2d 798, 801 (Ind. 2004) . Specifically, we have stated that “[a]l though Indiana allows different claims to be analyzed separately, it does not allow issues within those counts to be analyzed separately. ” Id. In o ther words, “ an Indiana court might an alyze a co n tract claim and a tort claim independently but would not separately analyze and apply the law of different jurisdi c tion s to issues within each claim.” 4 Id.

B

The general development of Indiana‟s choice

- o f

- law rules leads us to conclude that the
uniform

- contract

- interpretation approach is more consistent with our jurisprudence, as it a p plies

3 Restatement (Second) s ection 19 3 generally provides that in insurance contracts, the applicable law is that of the state “which the parties understood was to be the principal loc a tion of the insured risk during the term of the policy , unless with respect to the particular issue, some ot her state has a more significant relatio n ship.” 4 See , e.g. , Allen , 7 66 N.E.2d at 1162

- 70 (analyzing choice of law for each claim).8

a single state‟s law to the entire contract. In the 65 years since W.H. Barber Co. , we have fo llowed a choice

- of

- la w rule in contracts cases that contemplates contacts in multiple states but applies only the law of the state with the most intimate con tact s

. 5 See W.H. Barber Co. , 63 N.E.2d at 423 (“The court will consider all acts of the parties touching the transactio n in relation to the several states involved and will apply as the law governing the transaction the law of th at state with which the facts are in most intimate contact .” (emphasis added) )

. We see no reason why poll u tion sites in multiple states should be treated any differently than other contacts.

Further, while the Court of Appeals fa vored the site

- specific approach in order to avoid considering the factors listed in Restatement (Second) section 188 , see Standard Fusee Corp

. , 917 N.E.2d at 178, we fi nd that an insufficient justification for rejecting the approach that has been an integral part of our choice

- of

- law analysis in contracts cases for two

- thirds of a ce n tury.

We also think that o ur clear rejection of dépeçage in Simon , 805 N.E.2d at 801

- 03 , supports adherence to the uniform

- contract

- interpretation approach and, in fact, has been ci ted by the Court of Appeals for this very proposition. S ee K y. Nat‟l Ins. Co. v. Empire Fire & Marine
Ins. Co. , 919 N.E.2d 565, 577 ( Ind. Ct. App. 2010) (applyin g “ Kentucky law to every issue raised with respect to the insurance coverage claims ”). As the present case involves a request for

a declaratory judgment based on the insurance contracts at issue, our jurisprudence favors applying a single state‟s law to t he entire dispute.

To be sure , our concern in contracts cases has been determining the state in most int i mate contact with the facts . A single event

– like executing a contract

– has not been determin a tive if that event occurred in a state with insignifi cant contacts. Similarly, where environmental cont amination plagues multiple sites in multiple states, the site of the pollution should not co n trol if it is not located in the state with the most intimate contacts. Thus, in insurance contract cases, we

5 We note that our choice

- of

- law approach has been called the “center of gravity” or the “grouping of

co n tacts” theory. Aut en v. Auten , 308 N.Y. 155, 124 N.E.2d 99, 101 ( 1954). In general, “[a]ny a p proach that searches for a „center‟ is more likely to lead to the centripetal uniform

- contract solution rather than the centrifugal site

- specific solution.” Symeon C. Symeonides, Choice of Law in the American Courts in 2003: Seventeenth Annual Survey , 52 Am. J. Comp. L. 9, 58 (2004) (noting that the Second Ci r cuit in Maryland Cas ualty Co. v. Cont inental Cas ualty Co. , 332 F.3d 145 (2d Cir. 2003) , endorsed the un i form

contract

- inter pretation approach when de ciding a case under New York‟s center

- of

- gravity co n flicts law).9

f irst attempt to determine the principal location of the insured risk. Dunn , 836 N.E.2d at 251. If the principal location of the insured risk can be determined, it is given more weight than other factors. Restatement (Second) § 193 cmt. b

. If no such lo cation e x ists, we continu e our analysis of the most intimate contact s

. See Stonington Ins. Co. v. Williams , 922 N.E.2d 660, 666 (Ind. Ct. App. 2010) (noting that insurance contracts focus on the principal location of the insured risk, but, where there is no set location of that risk, attention turns back to the most intimate contacts factors provided in section 188). The law of the state in most intimate contact is then to be a pplied to the entire dispute

.

II

Having concluded that the uniform

- contract

- i nterpretation approach should be followed in cases like the present one, we now turn our attention to its application in this case. Although both SFC and Insurers petitioned for applica tion of the uniform approach, they disagree as to which state‟s law

– Indiana or Maryland

– should be applied. As discussed in part I, supra , the law of the state with the most intimate contacts applies . In analyzing the respective contacts with Indiana and Maryland , the trial court in this case found that four of the five factors listed in Re statement (Second) section 188 were inconclusive but that one factor, the place of performance, clearly pointed to Ind i ana. We reach a different result.

We start by attempting to determin e the principal location of the insured risk , or in the terms of Restatement (Second) section 188, the location of the s ubject matter of the contract.
Restatement (Second) § 193 cmt. b. Unlike previous cases where the principal location of the
i n sured risk was found to be the state having more insur ed sites than any other, in this case both Maryland and Indiana have one site each

. S ee Coachmen Indus

. , 838 N.E.2d at 1181 (no t ing that the principal location of insured risk in Dana Corp. , Summit Corp. , and Recticel Foam Corp. was the state with the lar gest number of insured sites). In addition, the quantitative data submi tted with respect to each of those sites is relatively comparable

. Nevertheless, SFC is and has a lways been headquartered in Maryland. B y making its headquarters in Maryland, SFC its elf has

reco g nized the principal nature of that location. To the extent the Maryland site and Indiana site10

are otherwise relatively comparable, the fact that the Maryland site is also SFC‟s headqua r ters suggests that it is the principal location of the i n sured risk.

We continue our analysis by considering the other contacts present in this case. The fifth factor considers the domicile, residence, nationality, place of incorporation, and place of bus i ness of the parties. In Dunn , we initially recogniz ed that the law of the principal location of the i nsured risk governs insurance policies. 836 N.E.2d at 251. We then concluded that Tennessee law g o verned because the policyholder was a Tennessee resident when he took out the policy; specifically, “by issu ing a policy to a Tennessee resident, [insurer], which was domiciled in Ind iana, became su b

ject to [Tennessee law].” Id. In this case, SFC is a Delaware corporation with its headquarters in Maryland

. Insurers are incorporated in and have their headquart ers in many

states , but none in Maryland or Indiana . Thus, the fifth factor tends to favor Maryland over Ind iana, as it was home to SFC‟s headquarters when it took out these policies. See Recticel Foam Corp. , 716 N.E.2d at 1025 ( finding as a distinguishi ng factor the insured‟s principal place of
business ); see also Nautilus Ins. Co. v. Reuter , 537 F.3d 733, 740

- 42 (7th Cir. 2008) (focu s ing on the insureds‟ principal places of business when applying Indiana choice

- of

- law rules ).

Further, a l though Insurers and brokers generally operated across state lines using various means of communication, all of SFC‟s written and verbal communication with the brokers orig inated from its Maryland headquarters. SFC‟s insurance procurement, review process , and dec isionmak ing all occurred in Maryland. The policies were retained in and the premiums were paid from Maryland. Although there may be no conclusive evidence of where the contract was formed 6 or the exact location of negotiation, the facts tend to favor Mar y land.

Lastly, we consider th e p lace of performance of the contract , or “„t he location where the insurance funds will be put to use. ‟ ” Coachmen Indus. , 838 N.E.2d at 1180 ( quoting Dana Corp. , 690 N.E.2d at 293). This is the only facto r that the trial court foun d conclusively f a vored either state. I t held that Indiana is the place of performance because it is the location of the “si ngle clean

- up site where the funds would be used.” Appellant‟s App. 68. However, SFC explici t-

6 Under Indiana law, “[a] contract „is deemed to have been made in the state where the last act necessary to make it a binding agreement takes place.‟” W.H. Barber Co. , 63 N.E.2d at 421 (citation omitted).11

ly stated in oral argument before thi s Court that a large amount of its claim arose from SFC su ccessfully defending itself in California, and, after it remediated the site in I n diana, the dollars it received would be put toward the expenses it incurred in California. Thus, t he place of perfo rmance is not exclusively Indiana.

A lthough n one of factors are determinative, “ the overall number and quality of contacts” favor Maryland over Indi ana. Coachmen Indus. , 838 N.E.2d at 1181. As the state in most int imate con tact, we hold that the subst antive law of Mary land applies to the entire dispute.

Conclusion

Because Maryland is the state in most intimate contact, we reverse the trial court and r emand this case for application of Mar y land law to the entire dispute.

Shepard, C.J., and Dickson, Rucker, and David, JJ., concur.