Opinion ID: 1819614
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Heading: lex loci contractus and the public policy exception

Text: Before we answer the certified question, we must first review the rule of lex loci contractus, the parameters of its public policy exception, and how the exception has been applied.
For reasons we have previously explained, we apply different choice of law rules to different areas of the law. For example, with respect to torts and statutes of limitation, we have abandoned the rule that the applicable substantive law is the law of the state where the injury occurred i.e., lex loci delictiin favor of a flexible test to determine which state has the most significant relationships to the cause of action. See Bishop v. Fla. Specialty Paint Co., 389 So.2d 999, 1001 (Fla. 1980) ([W]e now adopt the `significant relationships test' as set forth in the Restatement (Second) of Conflict of Laws §§ 145-146 (1971).); Bates v. Cook, Inc., 509 So.2d 1112, 1114-15 (Fla.1987) (We are now convinced that just as in the case of other issues of substantive law, the significant relationships test should be used to decide conflicts of law questions concerning the statute of limitations.). In contrast, in determining which state's law applies to contracts, we have long adhered to the rule of lex loci contractus. That rule, as applied to insurance contracts, provides that the law of the jurisdiction where the contract was executed governs the rights and liabilities of the parties in determining an issue of insurance coverage. Sturiano v. Brooks, 523 So.2d 1126, 1129 (Fla.1988). In Sturiano, we consideredand rejectedthe significant relationships test. Id. at 1128-29. In that case, we answered a certified question asking whether the lex loci rule governed the rights and liabilities of the parties in determining the applicable law on an issue of insurance coverage. Id. We discussed the significant relationships test, which requires consideration of various contacts between the contract and the states involvedsuch as the place of contracting and the place of performanceand weighing them to determine the state with the most significant relationship to the transaction and the parties. Id. at 1129 (quoting Restatement (Second) of Conflict of Laws § 188 (1971)). [3] We acknowledged that lex loci contractus is an inflexible rule, but concluded that this inflexibility is necessary to ensure stability in contract arrangements. Id. We reasoned that [w]hen parties come to terms in an agreement, they do so with the implied acknowledgment that the laws of that jurisdiction will control absent some provision to the contrary. Id. We concluded that to abandon this principle and permit a party to change or modify contract terms by moving to another state would unnecessarily disrupt the stability of contracts. Id. We explained the purpose behind the rule as follows: In the case of an insurance contract, the parties enter into that contract with the acknowledgment that the laws of that jurisdiction control their actions. In essence, that jurisdiction's laws are incorporated by implication into the agreement. The parties to this contract did not bargain for Florida or any other state's laws to control. We must presume that the parties did bargain for, or at least expected, New York law to apply. Id. at 1130; see also Lumbermens Mut. Cas. Co. v. August, 530 So.2d 293, 295 (Fla.1988) ([T]he lex loci contractus rule determines the choice of law for interpretation of provisions of uninsured motorists clauses in automobile insurance policies just as it applies to other issues of automobile insurance coverage.). We have never retreated from our adherence to this rule in determining which state's law applies in interpreting contracts.
Florida courts have carved out a narrow exception to the lex loci rule. We long ago held that the rules of comity may not be departed from, unless in certain cases for the purpose of necessary protection of our own citizens, or of enforcing some paramount rule of public policy. Herron v. Passailaigue, 92 Fla. 818, 110 So. 539, 542 (1926) (emphasis added); see also In re Estate of Nicole Santos, 648 So.2d 277, 281 (Fla. 4th DCA 1995) (We agree that Florida courts may depart from the rule of comity where necessary to protect its citizens or to enforce some paramount rules of public policy. However, it has also been held that just because the law differs between Florida and another jurisdiction does not in itself bar application of foreign law.); Lincoln Nat'l Health & Cas. Ins. Co. v. Mitsubishi Motor Sales of Am., Inc., 666 So.2d 159, 161 (Fla. 5th DCA 1995) (Under these choice of law rules, the laws of the place in which a contract was made govern matters concerning its execution, interpretation and validity, unless public policy requires the assertion of Florida's paramount interest in protecting its citizens from inequitable insurance contracts.); Aetna Cas. & Sur. Co. v. Enright, 258 So.2d 472, 475 (Fla.3d DCA 1972) ([A] court may not depart from the rules of comity, except in certain cases, for the purpose of protection of Florida citizens or for the purpose of enforcing some paramount rule of public policy.). This has become known as the public policy exception. It requires both a Florida citizen in need of protection and a paramount Florida public policy. In the context of insurance contracts, at least, one more requirement also must be met: the insurer must be on reasonable notice that the insured is a Florida citizen. An insurer may only issue policies in a state in which it is licensed and in accordance with that state's law. The requirement of notice informs the insurer of which state's law will govern the policy. Accordingly, in applying the exception, courts consider whether the insured notified the insurer of a permanent change of residence and whether the insured risk is or will be primarily located in Florida. See New Jersey Mfrs. Ins. Co. v. Woodward, 456 So.2d 552 (Fla.3d DCA 1984) (holding that Florida law did not apply to a New Jersey policy because the insurer had notice only of the insured's changed mailing address, not that the insured changed its permanent address to Florida and principally garaged vehicles in Florida); State Farm Mut. Auto. Ins. Co. v. Davella, 450 So.2d 1202, 1204 (Fla. 3d DCA 1984) (holding Florida law inapplicable to an out-of-state policy where the insured specifically rejected a Florida policy and informed the insurer that the Florida residence was temporary). Such notice allows an insurer to decline to issue a policy, to withdraw from one, orif it is licensed in Floridato issue a policy in Florida and charge the appropriate premium. See Michael S. Finch, Choice-of-Law Problems in Florida Courts: A Retrospective on the Restatement (Second), 24 Stetson L.Rev. 653, 716 (1995) ([T]he insurer is entitled to notice of the relocation so that it can renegotiate applicable premiums or, if it so chooses, withdraw from the insurance relationship.); cf. Tenn. Farmers Mut. Ins. Co. v. Meador, 467 So.2d 471, 472 (Fla. 5th DCA 1985) (noting that upon receiving notice of the insured's move to a state where the insurer did not operate, the insurer sent notice of its intent not to renew the policy).
We have had three prior opportunities to interpret the lex loci contractus rule and its public policy exception as it applies to insurance policies. Fourteen years before our decision in Sturiano, we applied the public policy exception in Gillen v. United Services Automobile Ass'n, 300 So.2d 3 (1974). In that case, as in this one, we considered conflicting automobile insurance coverage. The insureds, while residents of New Hampshire, obtained from a New Hampshire insurer separate automobile insurance policies on their two cars. They later moved to Florida and notified the insurer of the move. In Florida, they sold one car and bought another. The out-of-state insurer issued a new policy for the car in Florida. The insurer, however, did not alter the existing policy on the insureds' other car. When the insureds were later involved in an accident in Florida, they sought recovery under both policies. The insurer paid under the Florida-issued policy, but refused to pay under the other policy issued in New Hampshire, citing its other insurance clause. Id. at 4-5. Despite the insurer's issuance of the policy in New Hampshire, we applied Florida law based on three factors. First, we previously had held that other insurance clauses violated Florida public policy. See Sellers v. U.S. Fid. & Guar. Co., 185 So.2d 689 (Fla.1966). [4] Second, the insureds moved permanently from New Hampshire. As we noted, they were in the process of establishing themselves as permanent residents of this State, and as such are proper subjects of this Court's protection from injustice or injury. Gillen, 300 So.2d at 6 (emphasis added). Third, the insureds notified the insurer of the move to Florida, and the insurer issued a policy here. We emphasized that [t]his c[ould] be seen as an acknowledgment of domiciliary change and would indicate to [the insurer] that coverage under both policies would be shifted to Florida. Id. Accordingly, we concluded: Here, the substantial interest of Florida in protecting its citizens from the use of `other insurance' clauses rises to a level above New Hampshire's interest in permitting them. Public policy requires this Court to assert Florida's paramount interest in protecting its own from inequitable insurance arrangements. Id. at 7. Several years after Gillen, we decided Sturiano. In that case, we not only rejected the most-significant-relationships test, but applied the lex loci rule to facts essentially identical to those here. The insureds were residents of New York who purchased an automobile insurance policy in New York and who each year spent several winter months in Florida. 523 So.2d at 1129. We held that [u]nder the doctrine of lex loci contractus, it is clear that New York law must apply. Id. at 1129. Finally, ten years after Sturiano, we once again applied the lex loci rule to answer a question certified by the Eleventh Circuit Court of Appeals. In Strochak v. Federal Insurance Co., 717 So.2d 453 (Fla.1998), the facts were similar to those in Gillen. The insurer had issued a Masterpiece policy in 1985 covering a couple's cars and two residencesthe primary one in New Jersey and one in Florida. After the husband's death in 1987, his widow bought one of the cars from their business, and in 1989 she moved to Florida. She registered the car in Florida, listing her Florida residence, regularly garaged the car at that address, and obtained a Florida-issued and-delivered policy covering it. In 1990, the insurer issued a new Masterpiece policy, adding the Florida car. The policy had a different number than the one issued to her late husband, listed a different named insured Mrs. Strochakand provided different coverage. Moreover, the policy contained Florida policy terms and Florida signatures and the insurer issued and delivered the policy to Mrs. Strochak at her Florida residence. Id. at 455. In 1992, Mrs. Strochak was involved in an accident in Florida. The insurer contended that Mr. Strochak waived excess uninsured motorists benefits back in 1985 (under the prior policy), and that New Jersey law governed the contract. We concluded, however, that the 1990 Masterpiece policy that provided excess liability coverage for the 1984 Lincoln was not the same policy that was issued and delivered in New Jersey in 1985. The 1990 policy was issued and delivered in Florida, renewed in June 1992, and was in effect at the time of the accident. Under these circumstances, we must presume that the parties to this contract bargained for, or at least expected, Florida law to apply. Id. (footnote omitted) (emphasis added). Accordingly, we held that the requirement of section 627.727(2), Florida Statutes (Supp.1990), that automobile insurance policies delivered or issued for delivery in this state contain uninsured motorist coverage, unless expressly waived by the insured, applied to the 1990 policy. In answer to the federal court's certified question, we held the insurer was required under Florida law to offer excess uninsured motorist benefits in 1990, when it first delivered the new policy covering the car in Florida. 717 So.2d at 455-56. Because Strochak involved the application of a Florida statute to a Florida-issued contract covering a Florida-based risk, the case did not involve the policy exception of Gillen, but a straightforward application of the lex loci rule of Sturiano. As these cases demonstrate, the public policy exception is intended to be narrow. It displaces the lex loci rule only when the insurer has notice that the insured is not merely a temporary visitor, but a permanent Florida resident. We now turn to the district court's decision applying the public policy exception to this case.