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State Farm Mutual Automobile Insurance Co. v. Marley12/16/2004
o uphold exclusion applicable to underinsured motorist (UIM) coverage, which exclusion would have been invalid under Kentucky law, where insurance policy was issued in Virginia to a Virginia resident providing coverage for a vehicle licensed and garaged in Virginia even though insured was injured in Kentucky in a vehicular collision caused by a Kentucky resident) (disc. rev. denied April 14,1999); Bonnlander v. Leader Nat'l Ins. Co., Ky. App., 949 S.W.2d 618 (1997) (same factual scenario; Indiana law applied to deny UIM coverage that would have been recoverable under Kentucky law) (disc. rev. denied August 27, 1997); Hammer v. State Farm Mut. Auto. Ins. Co., 950 F.Supp. 192, 194 (W.D. Ky. 1996) (applying Kentucky law) (same factual scenario; Indiana law applied to uphold set-off and anti-stacking provisions in UIM policy even though similar set-off provision had been deleted from KRS 304.39-320(2), 1988 Ky. Acts, ch. 180, ยง 1, and anti-stacking provisions had been declared contrary to Kentucky public policy in Allstate Ins. Co. v. Dicke, Ky., 862 S.W.2d 327, 329 (1993)).
The application of Indiana law -in this case would not violate any public policy of Kentucky because such would not deny benefits to a Kentucky resident who would otherwise be entitled to them under our law; and Kentucky has no interest in applying our public policy to provide benefits to Indiana residents who would not be entitled to them under Indiana law.
The vast majority of jurisdictions that have considered this issue have concluded that household exclusion clauses are enforceable if valid where the policy was issued and where the parties reside even if invalid in the state where the accident occurred. E.g.., Am. Family Ins. Co. v. Williams, 839 F.Supp. 579, 583 (S.D. Ind. 1993) (applying Indiana law to enforce exclusion though accident occurred in Kansas where exclusion was invalid); Draper v. Draper, 772 P.2d 180, 183 (Idaho 1989) (applying Oregon law to enforce exclusion though accident occurred in Idaho where exclusion was invalid); Allstate Ins. Co. v. Hart, 611 A.2d 100, 102-04 (Md. 1992) (applying Florida law to enforce exclusion though accident occurred in Maryland where exclusion was against public policy, noting, id at 102, that "there is a heavy burden on him who urges rejection of foreign law on the ground of public policy"); Bonner v. Auto. Club Inter-Ins. Exch., 899 S.W.2d 925, 929 (Mo. Ct. App. 1995) (applying Missouri law to uphold insurer's failure to defend permissive user against suit by insureds because household exclusion clause precluded coverage though accident occurred in New Mexico where exclusion was invalid); Sotirakis v. United Serv. Auto. Ass'n, 787 P.2d 788, 790-91 (Nev. 1990) (applying California law to enforce exclusion though accident occurred in Nevada where exclusion was invalid); Dairyland Ins. Co. v. State Farm Mut. Auto. Ins. Co., 701 P.2d 806, 809 (Wash. Ct. App. 1985) (applying Idaho law under which, at that time, exclusion was valid though accident occurred in Washington where exclusion was invalid); Urhammer v. Olson, 159 N.W.2d 688, 690 (Wis. 1968) (applying Minnesota law to enforce exclusion though accident occurred in Wisconsin, noting that although household exclusion clauses were invalid in Wisconsin, it was not against Wisconsin public policy to recognize and enforce such a provision in a foreign contract). As the great Cardozo once wrote: "The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness." Loucks v. Standard Oil Co. of New York, 120 N.E. 198, 202 (N.Y. 1918).
V. KENTUCKY LAW.
Even if Appellees were residents of Kentucky, there is no public policy that pr
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