Opinion ID: 3029577
Heading Depth: 3
Heading Rank: 2

Heading: Contacts under the Restatement

Text: We begin the analysis by assessing each state’s contacts under the Second Restatement of Conflicts of Laws, bearing in mind that “[w]e are concerned with the contract of insurance” and not the underlying tort. McCabe v. Prudential Prop. & Cas. Ins. Co. 514 A.2d 582, 586 (Pa. Super. Ct. 1986). Section 193 of the Second Restatement specifically governs casualty insurance contracts, and provides that the “validity [of the contract] . . . and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless . . . some other state has a more significant relationship . . . to the transaction and the parties. . . .” Restatement (Second) of Conflict of Laws § 193. Comment b 12 We decline to accept Hammersmith’s broader argument that New York’s interest in applying its no prejudice rule can never be harmed by enforcing a prejudice requirement because the laws serve identical goals. New York has decided that requiring strict compliance with notice provisions is the most effective means of protecting certain interests of insurance carriers. See Argo Corp., 827 N.E.2d at 764. We will not substitute our judgment for that of the New York courts by concluding that a prejudice rule would just as effectively serve these interests. 23 explains that courts should generally give the location of the insured risk “greater weight than any other single contact.” Id. § 193 cmt. b. However, if the “policy covers a group of risks that are scattered throughout two or more states,” the location of the risk has “less significance” to the choice-of-law determination. Id. Section 193 clearly reflects a “preference that only one set of laws govern a given insurance contract, and a disapproval of the possibility that the laws of different jurisdictions might apply to different risks under the policy.” United Brass Works, Inc. v Am. Guar. & Liab. Ins. Co., 819 F.Supp. 465, 469 (W.D. Pa. 1992). The insurance contract between TIG and DKM provided coverage for DKM’s subsidiaries in more than twenty states and throughout the world. App. 1252a-1256a. In this case, then, there is no “principal location of the insured risk,” and the significance of this factor is “greatly diminish[ed].” Compagnie, 880 F.2d at 690 (noting the “difficulty in defining, or even locating, the insured risk” because the equipment manufactured by the insured is “distributed throughout the world”); see also Gould Inc. v. Cont’l Cas. Co., 822 F.Supp. 1172, 1175-76 (E.D. Pa. 1993) (finding § 193 inapplicable because the “comprehensive general liability policy . . . was intended to insure the risks of business operations scattered throughout a number of states”); Manor Care v. Cont’l Ins. Co., No.Civ.A. 01-CV-2524, 2003 WL 22436225, at  (E.D. Pa. Oct. 27, 2003) (holding that § 193 did not apply where the insured facilities were located in thirty states). Because § 193 is largely inapplicable, we turn to § 188(2) (the general provision governing contracts), which directs us to 24 take the following contacts into account: (1) the place of contracting; (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 domicile, residence, nationality, place of incorporation and place of business of the parties. In Compagnie, we observed that when notice is at issue, the “location of the insured risk is further diminished in importance while factors like the location of the injury, the domicile of the parties, and the location of contracting and negotiation become relatively more important.” 880 F.2d at 690. In particular, we explained, “[t]he place of contracting, negotiation, and performance are the most relevant contacts with respect to the notice procedures.” Id. (quoting Sandefer Oil & Gas, Inc. v. AIG Oil Rig of Texas Inc., 846 F.2d 319, 324 (5th Cir. 1988)). An insurance contract is made in the state where it is delivered. Harry L. Sheinman & Sons v. Scranton Life Ins. Co., 125 F.2d 442, 444 (3d Cir. 1941). The evidence in this case establishes that after TIG issued the policy, it was sent to New York for review by the underwriter. From there, it was forwarded to the broker, Brooks Wright, who was in either Connecticut or New York, and finally to Cynthia Leopold, DKM’s director of risk management, in New York. Leopold Dep., App. 877a-878a. The record does not contain any more specific evidence regarding the state of delivery. See id. (indicating she did not know where the policy was delivered). Nonetheless, TIG contends we should presume New York was the state of delivery because New York is the residence of the insured, DKM. In light of the fact that DKM’s headquarters are in New York, the insurance policy lists a New York address for 25 DKM, and the policy was sent to Leopold in New York for final review, we think it is fair to presume the policy was delivered in New York. See Jamison v. Miracle Mile Rambler, Inc., 536 F.2d 560, 563 n.1 (3d Cir. 1976) (presuming Pennsylvania was the state of delivery where the insured was incorporated and located in Pennsylvania, and the insurer engaged in business in Pennsylvania). The second factor, place of negotiation, also points to New York. DKM’s insurance broker, Aon Risk Services, Inc. of New York, is a New York corporation with its principal place of business in New York. Bryson, the wholesale broker which actually placed the TIG policy for DKM, is also located in New York. The application materials, as well as some of the revisions to the policy, were prepared in New York. See Wright Dep., App. 1150a (testifying that the application was prepared by Patrice Paz, the broker on the DKM account); Letter from Patrice Paz (Aon) to Kevin McLaughlin (Bryson), Jan. 9, 1997, App. 1298a-1300a (listing changes and corrections to be made to the policy). By contrast, there is no evidence that any part of the negotiations took place in Pennsylvania. The next contact, place of performance, is the state in which notice should have been provided.13 See Compagnie, 880 F.2d at 685 (assessing place of performance with respect to late notice, and discussing where notice had to be given and by 13 Generally, an insurance contract is performed where the premiums are received. Gould, 822 F.Supp. at 1176. In this case, there is no record evidence of where DKM paid its premiums. 26 whom). Under the insurance contract, DKM, a New York resident, was responsible for providing notice of claims to TIG, a California corporation with its principal place of business in Texas. App. 1211a; 875a; 274a. DKM, in turn, relied on its New York broker, Aon, to provide notice to its carriers upon request. See Leopold Dep., App. 839a, 841a, 879a-880a; McConaghy Dep., 1087a. Presumably, notice of the claim was to be given to TIG in Texas. See Letter from Hayes Battle (AIG) to TIG, Oct. 19, 2000, App. 1707a-1708a (providing notice of claim to TIG in Irving, Texas). It is very likely, then, that Texas was the state of performance. However, between New York and Pennsylvania, the third factor favors New York because the entities responsible for providing notice under the insurance contract were located in New York. The fourth factor, location of the subject matter of the contract, refers to the location of the insured risk. Manor Care, 2003 WL 22436225, at . Comment (e) provides that when the “contract deals with a specific physical thing such as land or chattel, or affords protection against a localized risk . . . the location of the thing or risk is significant.” § 188 cmt. e. As we previously explained in our discussion of § 193, the insured risk in this case is spread throughout numerous states and countries. Therefore, this factor is neutral. Regarding the parties’ domiciles, we note that the only resident of Pennsylvania is Hammersmith, the accident victim. DKM (the named insured), Aon (the broker), and Bryson (the wholesale broker that procured the policy) are all located in New York. TIG is a resident of both California and Texas, and CCC (DKM’s subsidiary that manufactured the conveyor) is 27 located in Texas. Comment (e) explains that the significance of the parties’ domiciles “depends largely upon the issue involved and upon the extent to which they are grouped with other contacts.” § 188 cmt. e. For example, “[t]he fact that one of the parties is domiciled or does business in a particular state assumes greater importance when combined with other contacts, such as that this state is the place of contracting or of performance. . . .” Id. In this case, where the issue is late notice, we think it is significant that New York domiciliaries were responsible for providing notice under the terms of an insurance policy which was issued, delivered and negotiated, at least in part, in New York. Weighing the above contacts on a “qualitative scale,” it is clear that New York has a more significant relationship to the insurance contract than Pennsylvania. The only connection Pennsylvania has to this dispute is that the plaintiff resides, and alleged tort occurred, in Pennsylvania. However, “we are [primarily] concerned with [the] contract of insurance, and, as to the insurance policy, [New York] has the most significant contacts.” McCabe, 514 A.2d at 586.14 14 The fact that TIG had a license to market insurance policies in Pennsylvania, and knew that DKM had subsidiaries in Pennsylvania, does not mean (as Hammersmith argues) that Pennsylvania has a greater interest in this dispute. TIG’s license to do business in Pennsylvania does not alter the fact that the insurance policy at issue is between a New York insured and a California/Texas insurer. Likewise, the fact that DKM had worldwide subsidiaries, including ones in Pennsylvania, does not mean that Pennsylvania law should govern because the 28