Opinion ID: 1122980
Heading Depth: 3
Heading Rank: 1

Heading: Arguments in the Instant Case

Text: Having established that a conflict exists, we must determine what law applies. Under Restatement of Conflict, § 205 cmt. b, questions involving the extent of contractual obligations are determined by the law chosen by the parties if they have made an effective choice .... Otherwise, these questions are determined by the law selected by application of the rule of § 188. Section 188 provides: (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. (2) In the absence of an effective choice of law by the parties ..., the contacts to be taken into account in ... [determining] the law applicable to an issue include: (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 domicile, residence, nationality, place of incorporation and place of business of the parties. (Emphasis added.) The insurance contract between Larson and Farmers clearly has a significant relationship with Idaho, having been negotiated and executed there and involving an Idaho resident and an automobile which is registered and garaged in that state. National argues that the contract also has a substantial relationship to Utah since the accident occurred here and therefore Utah law should apply. National relies on Watson v. Employers Liability Assurance Corp., 348 U.S. 66, 75 S.Ct. 166, 99 L.Ed. 74 (1954), for the proposition that in a tort action involving an insurance contract, the law of the forum state should be applied. In Watson, the Court applied Louisiana law to a Massachusetts insurance contract involving product liability, reasoning that persons injured or killed in Louisiana are likely to be Louisiana residents and Louisiana may have to care for them or that treatment may involve Louisiana doctors and hospitals or Louisiana welfare resources. Watson, 348 U.S. at 72, 75 S.Ct. at 169-70. However, Watson involved the right to bring a direct action against an insurer  strictly a procedural issue  rather than the substantive content of the contract or the rights of the parties to damages. In the instant case, by contrast, National asks us to alter the terms of the contract between Farmers and Larson and thus impose greater liability upon Farmers than the parties to that contract bargained for. Therefore, Watson is inapposite to the case before us. National also cites Clay v. Sun Insurance Office Ltd., 377 U.S. 179, 84 S.Ct. 1197, 12 L.Ed.2d 229 (1964), in support of applying the law of the state where the injury occurred rather than the state where the contract was made. In Clay, however, the plaintiff was living in the foreign state, not merely traveling through, and the issue involved a statute of limitations. The statute of limitations, again, is a procedural issue which deals, not with the substance of the bargain, but simply with time restraints on its enforcement. The court in Clay was not required to recast the terms of the contract in order to apply the law of the forum state.