Opinion ID: 1924955
Heading Depth: 1
Heading Rank: 5

Heading: Choice-of-Law

Text: Erie contends that the District Court should not refer to Maryland's tort choice of law principles to determine whether Maryland or Delaware tort law applies because the District Court can resolve this case by application of Maryland contract law. Further, Erie asserts that this case has been filed pursuant to a Maryland contract and that fault should be determined in accordance with Maryland law, as that is the law that the parties contemplated would apply; but, that such a determination does not indicate that Delaware tort law should be applied. Conversely, the Heffernans argue that contract and tort law converge whenever an uninsured motorist claim is presented, and that the forum court must apply contract principles to certain portions of the uninsured motorist claim and tort principles to other aspects. The result, the Heffernans contend, is that the forum court has to make two choice of law analyses. As discussed infra, we agree with the Heffernans. Generally, in a conflict-of-laws situation, a court must determine at the outset the nature of the problem presented to it for solution, specifically, if it relates to torts, contracts, property, or some other field, or to a matter of substance or procedure. See Handy v. Uniroyal, Inc., 327 F.Supp. 596 (D.Del.1971). Accordingly, we first address the nature of an action by an insured against his own insurer for uninsured motorist benefits. The action by the insured against the insurer is a contract action. Recovery is based upon the element of tortious conduct, in this case, the negligence of a third party. In Reese, supra, we were presented with circumstances factually similar to those of the instant case. William Reese, the plaintiff in that action, was injured in an accident that occurred in Danville, Virginia. Reese alleged that his injuries occurred as a result of the negligence of the other driver and that State Farm Mutual Automobile Insurance Company, his insurer at the time of the collision, breached its contract by denying him coverage under the uninsured motorist provision of that policy. In Reese, the issue before this Court was whether as a condition precedent to the insurer's liability . . . [an injured] plaintiff must first bring suit and recover a judgment against the uninsured motorist. Reese, 285 Md. at 553, 403 A.2d at 1232. Preliminarily, we determined that the language of the uninsured motorist statute in force at that time, Md.Code (1957, 1972 Repl.Vol., 1978 Cum.Supp.), Art. 48A § 541(c), and the language of the automobile insurance policy were substantially identical, obligating State Farm `to pay all sums which the insured . . . shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury or injury to the covered vehicle. Reese, 285 Md. at 552, 403 A.2d at 1231. Rejecting State Farm's contention that there must first be a determination of the alleged tortfeasor's liability, we stated that uninsured motorist coverage is `first party coverage' like collision, comprehensive, medical payments or personal injury protection and not `third party coverage' such as personal injury or property damage liability insurance. Reese, 285 Md. at 552, 403 A.2d at 1231-32. We held that an insured need not, as a condition for recovery against his insurer under the uninsured motorist endorsement, sue and obtain a judgment against the uninsured tortfeasor. Reese, 285 Md. at 554, 403 A.2d at 1233. In so holding, we determined that [a] suit based upon the insured's allegation that he is entitled to payment under one of the first party coverage clauses in the contract he entered into with his insurance carrier, and that the carrier has refused payment thereby breaching its promise, is clearly a contract action. Reese, 285 Md. at 552-53, 403 A.2d at 1232 (emphasis added). Furthermore, in Reese, we cited with approval the decision of the Supreme Court of Kansas in Winner v. Ratzlaff, 211 Kan. 59, 505 P.2d 606 (1973). Winner pointed out that the words legally entitled to recover as damages meant that the insured must be able to establish fault on the part of the uninsured motorist which gives rise to the damages and to prove the extent of those damages. Reese, 285 Md. at 555, 403 A.2d at 1233 (citation omitted). Further, we noted that [i]n resisting the claim the insurer would have available to it, in addition to policy defenses compatible with the statute, [the insurer could raise] the substantive defenses that would have been available to the uninsured motorist such as contributory negligence, etc. [5]  Reese, 285 Md. at 556, 403 A.2d at 1233; see also, Nationwide Mut. Ins. Co. v. Webb, 291 Md. 721, 736, 436 A.2d 465, 474 (1981) (noting, in accordance with Reese, supra, that the uninsured motorist statute requires the claimant to establish that he or she is entitled to recover. This Court held in Reese and Webb that the injured party can establish that he or she is entitled to recover (and thereby satisfy the statutory requirement) by obtaining a valid final tort judgment, entered against the uninsured motorist. After obtaining a final tort judgment, the injured party must then prove the contract in order to recover uninsured, motorist benefits from the insurer.). Notably absent, however, from our decisions in Reese and Webb, is any discussion of choice of law principles, specifically whether the substantive tort law of Maryland or Virginia applied to determine what William Reese was legally entitled to recover as damages. We surmise that the issue was not squarely before the Court because there was no dispute with regard to the issue of fault. The substantive tort law of Maryland and the law of Virginia, the situs of the accident, at the time of the accident were the same. Specifically, Virginia, like Maryland, adhered to the common law doctrine of contributory negligence. See generally City of Bedford v. Zimmerman, 262 Va. 81, 547 S.E.2d 211 (2001); Sawyer v. Comerci, 264 Va. 68, 563 S.E.2d 748 (2002); Ponirakis v. Choi, 262 Va. 119, 546 S.E.2d 707 (Va.2001); Anderson v. Payne, 189 Va. 712, 54 S.E.2d 82 (1949). In the case sub judice, unlike in Reese, the substantive tort law of the place of the automobile collision, Delaware, differs from the law of Maryland and, here, there are allegations that the insured was con tributorily negligent. Despite not squarely addressing the question presented before us in this case, our holding in Reese stands for the proposition that although an action by an insured against the insurer for uninsured/underinsured motorist benefits sounds in contract, the determination of contractual liability hinges on substantive tort law. In Allstate Ins. Co. v. Hart, 327 Md. 526, 611 A.2d 100 (1992), the issue before the Court was whether the household exclusion provision in a Florida automobile insurance policy should be enforced in light of Maryland's public policy against household exclusion clauses contained in such policies. We noted that [i]n deciding questions of interpretation and validity of contract provisions, Maryland courts ordinarily should apply the law of the jurisdiction where the contract was made. This is referred to as the principle of lex loci contractus. Hart, 327 Md. at 529, 611 A.2d at 101 (citations omitted). Both the Heffernans and Erie concede that the automobile insurance policy issued to the Heffernans by Erie was issued, delivered and executed in Maryland and is, therefore, a Maryland contract. To that end, for choice of law purposes, we generally would apply Maryland law to decide questions of the interpretation and validity of the policies issued by Erie to the Heffernans. A contract action for uninsured/underinsured motorist benefits may raise issues of both tort and contract law, even though the action sounds in contract. See Reese, 285 Md. at 552-53, 403 A.2d at 1231; Lee v. Saliga, 179 W.Va. 762, 373 S.E.2d 345, 349 (1988) (holding that the physical contact requirement is a contract question as opposed to a liability question for conflicts of law purposes); see also Eugene F. Scoles et al, Conflict of Laws, § 17.56 (4th ed.2004) (discussing the split of authority as to whether the insured must prove he or she is legally entitled to recover under the law of the state where the policy was issued or the state in which the accident occurred, for purposes of uninsured/underinsured motorist coverage); Crossley v. Pacific Employees Ins. Co., 198 Neb. 26, 251 N.W.2d 383, 386 (1977) (holding that in an action to recover uninsured motorist benefits, the law of the state where the accident occurred controls the right to recover and the amount of the recovery (in that case, Colorado's no-fault law governed the threshold issue of the tortfeasor's liability)). As discussed supra, uninsured motorist coverage is first party coverage that exists where a third party is at fault and the third party was not adequately insured. A breach of contract action filed against the insurer on the basis of an uninsured/underinsured motorist claim differs from that which [the insured] would normally prosecute against the tortfeasor in that he must prove the contract and then his tort claim, which is an element of his contractual right to recover damages. State Farm Mut. Auto. Ins. Co. v. Fass, 243 So.2d 223, 224 (Fla.App. 1971); see also Reese, 285 Md. at 554, 403 A.2d at 1232. By contrast, in a direct action against the tortfeasor, the injured party must prove four well-established elements: (1) that the defendant was under a duty to protect the plaintiff from injury, (2) that the defendant breached that duty, (3) that the plaintiff suffered actual injury or loss, and (4) that the loss or injury proximately resulted from the defendant's breach of the duty. Hemmings v. Pelham Wood Ltd. Liab. Ltd. P'ship, 375 Md. 522, 535, 826 A.2d 443, 451 (2003) (citations omitted). Here, we are not asked to interpret the validity of a contractual term or decide questions of coverage. The question here is the applicability of the appropriate substantive law to resolve the issues of tort liability and damages. Because the nature of the problem relates to tort, rather than contract principles, we look to tort choice of law principles, namely, the law of the place of the accident to answer the question. In that regard, Delaware is the place of the tort and the place of injury.