465 S.W.3d 150
Tenn. Ct. App.2014Background
- July 17, 2010: David and Summer Williams were in a car crash in Tennessee while driving a vehicle owned by North Carolina residents (the Riegs). The driver who hit them had Tennessee minimum liability limits ($25,000/$50,000).
- The Riegs purchased a GEICO policy issued as a Missouri policy (with a Missouri choice‑of‑law clause) because their daughter primarily used the car while attending college in Missouri.
- The GEICO policy provided uninsured motorist coverage but no underinsured motorist (UIM) coverage; Missouri law did not require UIM coverage.
- Under North Carolina law, the at‑fault driver’s limits would be treated as inadequate (i.e., an uninsured motorist) because NC minimums exceed Tennessee/Missouri minimums, which could trigger additional coverage if NC law applied.
- Plaintiffs sued GEICO asserting the Missouri choice‑of‑law clause is unenforceable and that North Carolina law (which would require UIM coverage) should apply; the trial court granted GEICO summary judgment enforcing the choice‑of‑law clause.
- The appeal turns on Tennessee choice‑of‑law rules for contracts: whether the parties’ selection of Missouri law satisfies the Messer factors and whether that selection is contrary to a fundamental policy of North Carolina.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of Missouri choice‑of‑law clause in insurance policy | Choice clause is unenforceable because North Carolina has a materially greater interest and a fundamental public policy requiring certain insurance protections | Choice clause is valid: Missouri has a material connection (vehicle principally used in Missouri), clause was made in good faith and is not a sham | Clause is enforceable; Missouri law governs |
| Whether application of Missouri law is contrary to North Carolina’s fundamental public policy | NC statutes regulating insurance embody a fundamental policy protecting insureds; foreign law that undermines that should be rejected | NC public policy exception applies only to fundamental moral or justice concerns; regulating an out‑of‑state principal risk is not such a fundamental policy here | Applying Missouri law is not contrary to NC fundamental policy |
| Whether there was oppressive bargaining or take‑it‑or‑leave‑it circumstances | Insureds are vulnerable to insurer bargaining power; choice clauses can be oppressive and should be scrutinized | Mrs. Rieg consulted GEICO and chose a Missouri policy for legitimate reasons; no evidence of coercion | No oppressive bargaining found; Riegs had a genuine choice |
| Proper conflict‑of‑law analysis under Tennessee law (lex loci contractus vs. chosen law) | Policy was formed in NC so NC law should apply | Parties manifested intent to apply Missouri law; Tennessee law honors valid contractual choice if Messer factors satisfied | Tennessee law honors valid choice when Messer factors met; here they were met |
Key Cases Cited
- Messer Griesheim Indus., Inc. v. Cryotech of Kingsport, Inc., 131 S.W.3d 457 (Tenn. Ct. App. 2003) (framework for enforcing contractual choice‑of‑law clauses)
- Ohio Cas. Ins. Co. v. Travelers Indem. Co., 493 S.W.2d 465 (Tenn. 1973) (lex loci contractus presumption and honoring contrary good‑faith choice)
- Boudreau v. Baughman, 368 S.E.2d 849 (N.C. 1988) (defining when foreign law is contrary to forum public policy)
- Collins & Aikman Corp. v. Hartford Accident & Indem. Co., 436 S.E.2d 243 (N.C. 1993) (application of NC insurance statutes in choice‑of‑law analysis)
- Stovall v. Clarke, 118 S.W.3d 715 (Tenn. 2003) (summary judgment standard cited on review)