Choice of law issues arising from coverage disputes of both individual and group insurance policies many times determine which party will prevail on the merits of a particular case. Also, in today's mobile economy, insurance transactions frequently cross state boundaries.
It is important to note that the choice of law issue can become even more complex in the context of group insurance policies because the group insurance policy will cover many people that often live across the country.
In choice of law cases, the Restatement (Second) of Conflict of Laws may apply. However, if the jurisdiction has adopted the approach set forth in the Restatement, it is important for companies to determine which section of the Restatement applies to the particular facts.
Section 188 applies to policies that do not contain a choice-of-law provision. It provides that the law of the state with the most significant relationship to the transaction and parties governs.
Section 193 of the Restatement contains a provision directly related to certain insurance contracts. Section 193 states that the "validity of. . .[the] insurance 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 with respect to the particular issue, some other state has a more significant relationship under the principles stated in [Section] 6 [of the Restatement] to the transaction and the parties, in which event the local law of the state will be applied." In comment b of Section 193, the location of the insured risk is given greater weight than any other single contact in determining which state's law controls, although less weight when the policy covers a group of risks scattered throughout two or more states. It is important to note that the choice of law analysis may be different in a jurisdiction, which has not adopted the Restatement.
Barry Senterfitt is a partner in the insurance industry practice of Akin Gump Strauss Hauer & Feld LLP in the firm's Austin, Texas, office.
Janet Farrer is an associate in the Austin office of Akin Gump Strauss Hauer & Feld.
This column is written for informational purposes only and should not be construed as legal advice.