Opinion ID: 1825850
Heading Depth: 2
Heading Rank: 1

Heading: Is the Substantive Law of Tennessee Applicable?

Text: Alabama follows the lex loci contractus rule in determining which state's law applies in a contract dispute. That principle was stated in Stovall v. Universal Construction Co., 893 So.2d 1090 (Ala. 2004): In a contractual dispute, Alabama law would have us first look to the contract to determine whether the parties have specified a particular sovereign's law to govern. Cherry, Bekaert & Holland v. Brown, 582 So.2d 502, 506 (Ala.1991). Lacking such a contractual specification, we follow the principle of lex loci contractus, applying the law of the state where the contract was formed. Brown, 582 So.2d at 506. That state's law then governs unless it is contrary to the forum state's fundamental public policy. Id. at 506-07. 893 So.2d at 1102. [9] Because of the variance in the burdens of proof applicable under Tennessee law or Alabama law, the parties vigorously contest whether the place of contract was Tennessee or Alabama. To support its argument that Tennessee law applies, Cherokee presented evidence indicating that the policy covering the vehicle (as well as Pemberton's other vehicles) was issued and delivered there; that Pemberton paid the premiums for the policy in Tennessee; that the vehicle was registered and licensed in Tennessee; and that the majority of vehicles covered under that policy were garaged in Tennessee. To support their argument that Alabama law applies, the plaintiffs  full-time residents of this State at the time of the 2002 accident  presented evidence indicating that, after working hours, the vehicle was regularly garaged at Sanches's home in Etowah County; that it was assigned to a Pemberton division based in Birmingham; that it was regularly repaired in Alabama; and that it was operated in the ordinary course of Pemberton's business in Alabama at the time of the 2002 accident. Notwithstanding the undisputed evidence concerning the regular operation, maintenance, and storage of the vehicle in Alabama, Tennessee was the place of contract because the policy was issued and delivered to Pemberton in that state. See Cincinnati Ins. Co. v. Girod, 570 So.2d 595, 597 (Ala.1990) (law of the state where an insurance policy is issued applies when interpreting that policy). Consequently, the substantive law of Tennessee (including § 56-7-1201(e), Tenn.Code Ann. (1994)) applies here and the corroborative-evidence provision is enforceable. In so holding, we reject two arguments advanced by the plaintiffs concerning substantive principles. First, the plaintiffs contend that the principles of Alabama law encompassed in our UM statute  § 32-7-23, Ala.Code 1975  must apply because the vehicle was garaged and operated in this State. However, the language of our UM statute is plain that it applies to a motor-vehicle-liability policy that is delivered or issued for delivery [in Alabama] with respect to any motor vehicle registered or principally garaged in this state. . . . § 32-7-23. Although the vehicle was principally garaged in Alabama, it was not licensed in this State, and the policy was issued and delivered in Tennessee. Second, the plaintiffs note that this Court previously has refused to enforce a corroborative-evidence provision that was asserted as defense to an UM claim concerning a phantom vehicle. We stated in Walker v. GuideOne Specialty Mutual Insurance Co., 834 So.2d 769, 772 (Ala.2002): Alabama's uninsured-motorist statute provides protection for `persons . . . who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom.' § 32-7-23, Ala.Code 1975. `[A] policy exclusion that is more restrictive than the uninsured motorist statute . . . is void and unenforceable.' Peachtree Cas. Ins. Co. v. Sharpton, 768 So.2d 368, 370 (Ala.2000) (quoting Watts v. Preferred Risk Mut. Ins. Co., 423 So.2d 171, 175 (Ala.1982)). Unknown phantom drivers, like the one Walker claims caused her accident, are included within the definition of an uninsured motorist. Criterion Ins. Co. v. Anderson, 347 So.2d 384 (Ala.1977). (Emphasis supplied.) The Walker Court further stated: The undeniable effect of [the insurer's] corroborative-evidence requirement, therefore, is to exclude from coverage those who were involved in an accident as the result of a phantom vehicle, but who cannot present `competent evidence other than the testimony of a person making [a] claim.' Such persons may be `legally entitled' to recover under § 32-7-23, but they are denied uninsured-motorist coverage because they do not meet [the insurer's] contractual burden of proof. [The insurer's] corroborative-evidence requirement contractually raises the burden of proof for Walker and others similarly situated to a burden higher than the evidentiary burden required by law in Alabama. [The insurer's] policy, therefore, excludes from coverage those who otherwise would be able to prove that they are `legally entitled to recover damages' under § 32-7-23. Because [the insurer's] corroborative-evidence requirement is more restrictive than the uninsured-motorist statute, it is void and unenforceable. Peachtree [Cas. Ins. Co. v. Sharpton, 768 So.2d 368 (Ala.2000)]. To hold otherwise would permit [the insurer] to alter Alabama law by contract. . . . . Alabama's statutory provisions relating to uninsured-motorist coverage are silent on the matter of corroborative-evidence requirements or any contractual burden of proof whatsoever . . ., while the uninsured-motorist statutes in some other states expressly provide that proof of `no-contact' or `phantom' unidentified-vehicle accidents must be established by corroborative evidence. . . . While we understand [the insurer's] desire to protect itself against fraudulent claims, we cannot insert into Alabama's uninsured-motorist statute an exception the Legislature has chosen not to include. 834 So.2d at 773-74 (emphasis supplied). Relying on the authority of Walker, the plaintiffs argue that we should not enforce the corroborative-evidence provision here because, they say, it conflicts with the public policy of this State. See 16 Am. Jur.2d Conflict of Laws § 19, p. 42 (1979) (stating that the forum is not necessarily compelled by the Full Faith and Credit Clause to give automatic effect to the statutes of another state and subordinate its own law). An exception to our lex loci contractus rule does apply where the law of a foreign state is contrary to [Alabama's] fundamental public policy. Stovall, 893 So.2d at 1102. Moreover, Walker was soundly reasoned, and the corroborative-evidence provision here clearly is more restrictive than [Alabama's] uninsured-motorist statute. 834 So.2d at 773. However, one of the facts in Walker was that the insurance policy was issued in Alabama. The public policy described in Walker applied to an insurance contract delivered or issued for delivery in [Alabama]. § 32-7-23. In interpreting § 32-7-23, we do not discern any legislative intent that the public policies encompassed in our UM statute were intended to take precedence over those of sister states. Accordingly, because the policy here was not delivered or issued for delivery in Alabama, the principles in Walker and the public-policy exception in Stovall are not extant. [10] In summary, the trial court erred if it determined, as it must have if it found the notice of determination timely, that Sanches's testimony alone was sufficient proof that the 2002 accident was caused by the negligent operation of the phantom vehicle. Given the applicable substantive law of Tennessee and in light of the corroborative-evidence provision in the policy, that evidence was insufficient to support a judgment for the plaintiffs. Accordingly, the trial court erred if it applied the substantive law of Alabama to the UM claim.