Williams v. State Farm Mutual Automobile Insurance
641 A.2d 783, 229 Conn. 359, 1994 Conn. LEXIS 128 (1994)
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Rule of Law:
In an underinsured motorist claim arising from an out-of-state accident, the substantive law of the state where the tort occurred governs whether the insured is 'legally entitled to collect' damages from the tortfeasor. An insured cannot collect under their policy if the tortfeasor has a substantive defense, such as failure to meet a 'serious injury' threshold, under the law of the state of the accident.
Facts:
- Mark Williams, a Connecticut resident, was insured by State Farm under a policy issued in Connecticut, which provided $25,000 in underinsured motorist coverage.
- On June 5, 1987, Williams was injured in a car accident in New Windsor, New York, caused by the negligence of Roily Bain.
- Bain, who had a California driver's license, was driving a vehicle registered in New York and was insured for New York's minimum liability limit of $10,000.
- Williams sustained neck and chest injuries, incurring $2,253 in medical expenses, but did not miss any work as a result of the accident.
- Bain's insurance carrier paid its full policy limit of $10,000 to Williams.
- Williams then sought to recover the remaining $15,000 in alleged damages from his own underinsured motorist policy with State Farm.
- State Farm denied Williams' claim, asserting that he was not 'legally entitled to collect' further damages because his injuries did not meet the 'serious injury' threshold required to sue under New York's no-fault insurance law.
Procedural Posture:
- Williams's claim against State Farm was submitted to an arbitration panel as required by the insurance policy.
- The arbitration panel, applying New York law, found in favor of State Farm, concluding Williams's injuries did not meet New York's 'serious injury' threshold.
- Williams filed an application in the Connecticut Superior Court (trial court) to vacate the arbitration award.
- The Superior Court denied the application and affirmed the arbitrators' award.
- Williams, as appellant, appealed the judgment of the Superior Court to the Appellate Court; State Farm was the appellee.
- The Supreme Court of Connecticut transferred the appeal from the Appellate Court to itself for decision.
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Issue:
Does the law of the state where a motor vehicle accident occurred, rather than the law of the state where the insurance contract was made, determine whether an insured is 'legally entitled to collect' damages under their underinsured motorist policy?
Opinions:
Majority - Borden, J.
Yes. The law of the state where the accident occurred determines whether an insured is 'legally entitled to collect' damages. The insurance policy's phrase 'legally entitled to collect' is unambiguous and means that the insured must prove the tortfeasor is legally liable under the prevailing law, which includes any substantive defenses available to the tortfeasor. Because the accident occurred in New York, the tortfeasor could raise New York's 'serious injury' threshold as a substantive defense. Uninsured motorist coverage is not intended to place the insured in a better position than they would be in if the tortfeasor had been adequately insured. Applying a tort choice-of-law analysis under the Restatement (Second) of Conflict of Laws also points to New York law, as New York has the 'most significant relationship' to the dispute since both the injury and the conduct causing it occurred there. The court also affirmed the finding that Williams's injuries did not meet New York's 'serious injury' threshold.
Dissenting - Berdon, J.
No. The law of Connecticut, where the insurance contract was made, should govern the dispute. The phrase 'legally entitled to collect' is ambiguous and should be construed against the insurer, meaning it should only require the insured to prove the tortfeasor was at fault, not overcome substantive defenses from other states. This is a contract dispute, not a tort action, so contract choice-of-law principles should apply, pointing to the law of the place where the contract was made—Connecticut. The parties' rights under the policy should be fixed and not depend on the 'fortuitous circumstance of the place of the accident.' Applying Connecticut's less stringent no-fault threshold would honor the reasonable expectations of a Connecticut resident who purchased insurance in Connecticut.
Analysis:
This decision solidifies the principle that in conflicts between tort and contract law for underinsured motorist claims, the law of the place of the tort (lex loci delicti) governs the substantive right to recovery. It establishes that the contractual term 'legally entitled to collect' incorporates the substantive tort law of the accident state, including liability thresholds or immunities. This holding significantly impacts policyholders, as their ability to recover under their own insurance policy can be defeated by the laws of a state they are merely passing through, potentially frustrating the expectations they had when purchasing coverage in their home state.
