Opinion ID: 888364
Heading Depth: 2
Heading Rank: 2

Heading: Did the District Court err in allowing offsets and precluding stacking under the personal auto policy, in violation of Montana public policy?

Text: ¶ 48 Modroo asserts that Montana courts refuse to enforce an insurance policy's language that violates Montana public policy, regardless of the state in which the policy was issued. Modroo maintains that the personal auto policy violates Montana public policy because it allows offsets and precludes stacking of coverages. ¶ 49 In Youngblood v. American States Ins. Co., we held that we will enforce an unambiguous contract term unless the term violates Montana public policy or is against good morals. 262 Mont. 391, 395, 866 P.2d 203, 205 (1993). In Youngblood, we refused to enforce an insurance contract's clear choice-of-law provision that allowed subrogation of medical payments under Oregon law. 262 Mont. at 400, 866 P.2d at 208. We held that subrogating medical payment benefits in Montana is void as against public policy, and we concluded that, [b]ecause such subrogation violates Montana's public policy, that term of the insurance contract is unenforceable. Youngblood, 262 Mont. at 400, 866 P.2d at 208. ¶ 50 In Casarotto v. Lombardi, we recognized that, when faced with a choice-of-law conflict in contract disputes, we follow the most significant relationship approach contained in the Restatement (Second) of Conflict of Laws to determine the applicable state law. 268 Mont. 369, 373-74, 886 P.2d 931, 934 (1994), rev'd on other grounds, Doctor's Assocs. Inc. v. Casarotto, 517 U.S. 681, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). In Casarotto, we expanded on the Youngblood rule, and we applied the Restatement (Second) of Conflict of Laws § 187 and § 188 (1971) to determine the effectiveness of a choice-of-law provision that potentially violated Montana public policy. 268 Mont. at 374-75, 886 P.2d at 934-35. We again applied the Restatement to determine the validity of a choice-of-law provision that potentially violated Montana policy in Keystone, Inc. v. Triad Systems Corp., 1998 MT 326, ¶¶ 10-14, 292 Mont. 229, ¶¶ 10-14, 971 P.2d 1240, ¶¶ 10-14. ¶ 51 In Swanson v. Hartford Ins. Co. of Midwest, we refused to enforce an insurance policy's choice-of-law provision that designated Colorado law as governing the insurer's rights to subrogation. 2002 MT 81, ¶ 33, 309 Mont. 269, ¶ 33, 46 P.3d 584, ¶ 33. We determined that application of Colorado law would allow the insurer to subrogate before the insured had been made whole. We concluded that the provision violated Montana's made whole doctrine, and thus, was void as against Montana public policy. Swanson, ¶ 32. For reasons unstated in the opinion, we applied the original Youngblood rule without addressing the Restatement factors. Though Youngblood and Swanson both addressed subrogation provisions, and Casarotto and Keystone, Inc. both addressed arbitration provisions, we did not limit the respective holdings to those particular types of provisions. ¶ 52 In this case, the District Court applied the Restatement (Second) of Conflict of Laws and conducted a conflicts-of-law analysis to the personal auto policy. The District Court determined that Montana did not have a materially greater interest in the case and that Ohio law governed Modroo's entitlement to UIM coverage. The District Court's approach approximated that set forth in Casarotto and Keystone, Inc. As discussed in ¶ 39, Modroo has not appealed the District Court's determination that Ohio law applied to the personal auto policy. Relying on Swanson, however, Modroo contends that the personal auto policy's language violates Montana public policy, and thus is unenforceable. ¶ 53 Montana does not recognize a public-policy exception to the most significant relationship analysis because the purpose of the analysis is to resolve conflicts between different states' competing policies; thus, such an exception would be redundant. Phillips v. General Motors Corp., 2000 MT 55, ¶ 75, 298 Mont. 438, ¶ 75, 995 P.2d 1002, ¶ 75. Nevertheless, though Modroo's argument more appropriately would be raised as a challenge to the District Court's choice-of-law determination, we can see how our analysis in Swanson could create confusion regarding the analysis we apply to determine whether Montana public policy will invalidate a choice-of-law provision. Thus, we will review whether application of the personal auto policy's choice-of-law provision is effective under Montana law. We reiterate that the Restatement (Second) of Conflict of Laws governs whether to give effect to parties' contractual choice-of-law provisions. Keystone, Inc., ¶ 10. ¶ 54 Under the Restatement, we will apply the law of the state chosen by the parties to govern their contractual rights unless application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties. Restatement (Second) of Conflict of Laws § 187(2)(b). Stated differently, we will not apply the law of the state chosen by the parties if three factors are met: (1) if, but for the choice-of-law provision, Montana law would apply under § 188 of the Restatement; (2) if Montana has a materially greater interest in the particular issue than the state chosen by the parties; and (3) if applying the state law chosen by the parties would contravene a fundamental policy of Montana. ¶ 55 Section 188 of the Restatement governs situations in which the contracting parties fail to select an effective choice of law: (1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6 [Choice-of-Law Principles]. Section 6(1) of the Restatement provides that a court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law. Montana law provides that a contract is to be interpreted according to the law and usage of the place where it is to be performed.... Section 28-3-102, MCA. ¶ 56 In Mitchell v. State Farm Ins. Co ., we considered a case similar to Modroo's. In that case, Mitchell was insured under his parents' California insurance policies and suffered injuries in Montana while a passenger in a vehicle. Mitchell sued his parents' insurance company and claimed that he was entitled to UIM coverage for five vehicles that his parents owned and insured in California. The District Court determined that California law, rather than Montana law, applied and that Mitchell was not entitled to UIM coverage. Mitchell, ¶ 11. In reversing the District Court, we determined that Montana was an anticipated place of performance because the policy provided that coverages you choose apply (1) in the United States of America.... Mitchell, ¶ 19. We further reasoned that a contract's place of performance is the place where an insured is entitled to receive benefits, has incurred accident related expenses, or is entitled to judgment. Mitchell, ¶ 20. We ultimately concluded that Montana was the place of performance, and thus, under § 28-3-102, MCA, Montana law applied to determine whether Mitchell was entitled to stack UIM coverage. Mitchell, ¶ 23. We determined that Montana was the place of performance because Mitchell was working and living in Montana at the time of the accident; the underinsured tort-feasor's vehicle was insured in Montana; Mitchell's medical expenses were incurred in Montana; Mitchell settled with the [carowner's] insurers for the policy limit giving rise to the underinsured motorist claim in Montana; and judgment concerning the accident will be rendered and paid in Montana. Mitchell, ¶ 22. ¶ 57 In this case, Modroo's policy provided that Nationwide would pay damages that you or a relative are legally entitled to recover from the owner or driver of an uninsured motor vehicle under the tort law of the state where the motor vehicle accident occurred.... Based on our reasoning in Mitchell, we conclude that Montana constitutes an anticipated place of performance. Moreover, at the time of the accident, Mamie attended the University of Montana in Missoula; she lived and worked in Montana; she paid taxes in Montana; Mamie's medical expenses were incurred in Montana; Modroo settled with Lemaire's insurer for the policy limit, which gave rise to the underinsured motorist claim in Montana; and any judgment concerning the underlying accident will be rendered and paid in Montana. Mitchell, ¶ 22. We conclude that, under Mitchell and § 28-3-102, MCA, Montana constitutes the place of performance for the personal auto policy. Thus, setting aside the parties' contractual choice-of-law provision, Montana law would apply under § 188 of the Restatement. ¶ 58 Under Montana law, the law of the place of performance governs a contract's interpretation unless the terms of the insurance contract provide otherwise. Mitchell, ¶ 20. When insurance policies contain no choice-of-law provisions, we need not consider whether Montana possesses a materially greater interest in the contract issue than another state. Restatement (Second) of Conflict of Laws § 188. In Mitchell, the insurance policies did not include a choice-of-law provision. Thus, once we determined that Montana constituted the place of performance, we next considered whether Mitchell was entitled to recover UIM damages under Montana law, without analyzing whether Montana had a materially greater interest than California. Mitchell, ¶¶ 22-24; accord Wamsley v. Nodak Mut. Ins. Co., 2008 MT 56, ¶¶ 42-44, 341 Mont. 467, ¶¶ 42-44, 178 P.3d 102, ¶¶ 42-44. In this case, however, in light of the parties' choice-of-law provision specifying that Ohio law governs the interpretation of the personal auto policy, we must determine whether Montana has a materially greater interest in the issue than Ohio. If we determine that Montana has a materially greater interest, we then analyze whether applying Ohio law would violate Montana public policy. Restatement (Second) of Conflict of Laws §§ 187-188. ¶ 59 To determine whether Montana has a materially greater interest in an issue than the parties' chosen state, we have focused on the contacts enumerated in § 188(2) of the Restatement: (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicil, residence, nationality, place of incorporation and place of business of the parties. Keystone, Inc., ¶ 10. We evaluate these contacts according to the relative importance they bear on the particular issue. Restatement (Second) of Conflict of Laws § 188(2). ¶ 60 Modroo purchased her personal auto policy in Ohio from the Skala Insurance Agency, which sold Nationwide insurance. Ohio thus constitutes the place of contracting. Further, Modroo is an Ohio resident and Nationwide is headquartered in Ohio. The comments to the Restatement clarify that these contacts bear little significance when considered separately, but gain importance based on their relationship to the contract issue involved and the other contacts. Restatement (Second) of Conflict of Laws § 188 cmt. e. The location of the subject matter bears no significance to the present case because the subject matter of the insurance contract does not constitute a specific physical thing or a localized risk. Restatement (Second) of Conflict of Laws § 188 cmt. e. ¶ 61 The comments to the Restatement indicate that the place of the contract's negotiation and the place of performance bear greater significance to determine the applicable law. Restatement (Second) of Conflict of Laws § 188 cmt. e. The Restatement accords weight to the place of negotiation because such a state has an obvious interest in the conduct of the negotiations and the subsequent agreement. Restatement (Second) of Conflict of Laws § 188 cmt. e. If any negotiations occurred regarding Modroo's personal auto policy, they would have taken place in Ohio. Unlike most contracts, however, an insurance policy's terms are not the result of negotiation and bargaining by the parties; insurance policies occupy the same status as take-it-or-leave-it adhesion contracts. McAlear v. Saint Paul Insurance Companies, 158 Mont. 452, 458-59, 493 P.2d 331, 335 (1972). Thus, due to the parties' unequal bargaining status, we accord this contact little weight. ¶ 62 As discussed in ¶ 57, Montana constitutes the place of performance for Modroo's personal auto policy. The Restatement accords weight to the place of performance because such a state has an obvious interest in the nature of the performance and in the party who is to perform. Restatement (Second) of Conflict of Laws § 188 cmt. e. The comments offer the caveat, however, that the place of performance bears little weight in choice-of-law determinations when the place of performance is uncertain or unknown at the time of contracting. Restatement (Second) of Conflict of Laws § 188 cmt. e. In the present case, Montana constituted an anticipated place of performance because Nationwide agreed to pay UIM damages under the tort law of the state where the motor vehicle accident occurred.... Montana did not become the place of performance, however, until Mamie's accident occurred and the underlying claims arose. Thus, we accord this contact little weight because Montana's status as the place of performance was uncertain or unknown at the time of contracting. Restatement (Second) of Conflict of Laws § 188 cmt. e. ¶ 63 Analyzing the contacts from the Restatement (Second) of Conflict of Laws § 188, we conclude that, although Montana has an interest in the particular issue based on its status as the place of performance, Montana does not possess a materially greater interest that would warrant applying Montana law over the parties' express choice-of-law provision selecting Ohio as the governing law for contract interpretation. In light of this conclusion, we do not reach the question whether applying Ohio law would contravene a fundamental public policy of Montana. ¶ 64 The dissent cautions that we should be wary of a reflexive and rote application of the § 188(2) factors when analyzing the materially greater interest factor, and the dissent suggests that we should abandon the Restatement analysis set forth in Casarotto and Keystone, Inc. The dissent cites to a Ninth Circuit opinion for the proposition that Montana courts conflate the Restatement analysis so that whichever state has a materially greater interest under § 188 is also the state whose law would apply absent an effective choice of law provision. Ticknor v. Choice Hotels Intl., Inc., 265 F.3d 931, 937 (9th Cir.2001). Though both Keystone, Inc. and Casarotto lacked analysis regarding which state's law would apply absent the parties' express choice, neither case set forth the rule applied by the Ninth Circuit. On the contrary, both Keystone, Inc. and Casarotto expressed the three-factor inquiry from the Restatement (Second) of Conflict of Laws § 187(2)(b) as the rule Montana courts apply to determine whether the parties' chosen state's law will apply. Keystone, Inc., ¶ 10; Casarotto, 268 Mont. at 374-75, 886 P.2d at 934-35. As this case illustrates, we do not conflate the Restatement factors as suggested in Ticknor. ¶ 65 After pointing out Montana's apparent anomaly of conflating the Restatement factors, the dissent then provides its own Restatement analysis and conflates the materially greater interest factor with the violates fundamental public policy factor, concluding that Montana's interest is materially greater than Ohio's, because anti-stacking provisions are against public policy here as a matter of constitutional principle. (Emphasis added.) The District Court applied § 188(2) of the Restatement and Keystone, Inc. to determine that Montana did not have a materially greater interest. Neither party has proposed that we overrule our precedent. With no briefing on this issue, we decline to use this case to announce a change in our conflicts-of-law principles and to overrule Keystone, Inc. and Casarotto. ¶ 66 Moreover, the dissent's assumption that applying Ohio law would violate Montana public policy is questionable. Anti-stacking provisions violate Montana public policy if they allow an insurer to charge separate premiums for multiple UIM coverages but limit the amount an insured may recover to the limits available under a single UIM coverage. Hardy v. Progressive Specialty Ins. Co., 2003 MT 85, ¶¶ 40-42, 315 Mont. 107, ¶¶ 40-42, 67 P.3d 892, ¶¶ 40-42. Such provisions violate Montana public policy because they contravene the insured's reasonable expectation that he or she has purchased UIM coverage. Hardy, ¶ 45. Consistent with this underlying principle, the number of premiums paid determines the number of coverages an insured is entitled to stack. Chaffee v. U.S. Fid. and Guar. Co., 181 Mont. 1, 7, 591 P.2d 1102, 1105 (1979) (citation omitted). In this case, Modroo's personal auto policy lists two vehicles in the declarations. The declarations indicate that, although Nationwide charged separate premiums for each vehicle's liability coverage, Nationwide charged only a single premium for UM/UIM coverage. Modroo received UIM benefits for a single vehicle. Thus, it is unlikely that the personal auto policy's language defeated Modroo's reasonable expectations and thereby violated Montana public policy. ¶ 67 V Did the District Court err when it applied the forum non conveniens doctrine to dismiss Modroo's negligence claim in favor of Ohio proceedings? ¶ 68 Modroo and Hardy assert that the District Court erroneously applied the forum non conveniens doctrine to dismiss Modroo's negligence claim. Modroo and Hardy argue that this Court repeatedly has declined to adopt the doctrine and that the doctrine is inapplicable to the present case. ¶ 69 Nationwide responds that the District Court properly dismissed the negligence claim under the forum non conveniens doctrine because the insurance contract is an Ohio contract, the agents who sold the policy reside in Ohio, and most of the allegedly negligent acts occurred in Ohio. Further, Nationwide asserts that, with the exception of FELA cases, the forum non conveniens doctrine has never been rejected in Montana and the doctrine properly was applied in this case. ¶ 70 We have stated that § 25-2-201, MCA, codifies the doctrine of forum non conveniens to allow a court to change venue from one Montana county to another Montana county. Rule v. Burlington Northern and Santa Fe, 2005 MT 6, ¶ 19, 325 Mont. 329, ¶ 19, 106 P.3d 533, ¶ 19; Haug v. Burlington Northern R. Co., 236 Mont. 368, 374-75, 770 P.2d 517, 521 (1989). We have not, however, construed § 25-2-201, MCA, to authorize a district court to dismiss a case because it can be tried more conveniently in another state. State v. Dist. of Eighth. Jud. Dist. Ct., 270 Mont. 146, 154, 891 P.2d 493, 499 (1995). This case does not require that we resolve the extent of the forum non conveniens doctrine in Montana. In light of our conclusions under Issues I and III, we must reverse and remand this case to the District Court. Thus, a primary rationale underlying the District Court's application of the forum non conveniens doctrine no longer exists: the negligence claim no longer constitutes the only remaining claim. As the District Court continues to provide a convenient forum for the claims presented in this case, we reverse the District Court's ruling that dismissed Modroo's claims in favor of the Ohio proceedings.