Michael Flint v. Liberty Insurance Corporation ( 2010 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 10a0357n.06
No. 09-5660
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
MICHAEL FLINT, )
)
Plaintiff-Appellant, ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
v. ) COURT FOR THE EASTERN
) DISTRICT OF KENTUCKY
LIBERTY INSURANCE CORPORATION, )
)
Defendant-Appellee. )
) FILED
Jun 09, 2010
LEONARD GREEN, Clerk
BEFORE: KEITH, CLAY, and GRIFFIN, Circuit Judges.
GRIFFIN, Circuit Judge.
Plaintiff Michael Flint appeals the district court’s order granting summary judgment in favor
of his automobile insurer, defendant Liberty Insurance Corporation (“Liberty”). Because we hold
that Kentucky choice of law principles favor the application of Indiana law to Flint’s underinsured
motorist policy, we affirm the judgment of the district court.
I.
On August 5, 2005, Flint was injured in a two-vehicle accident in Danville, Kentucky. The
driver of the second vehicle, Craig A. Stinson, carried an automobile insurance policy with a
$100,000 per-person bodily-injury limit. At the time of the accident, Flint was driving his 2004
Cadillac CTS, which was titled and registered in Indiana.
No. 09-5660
Flint v. Liberty Ins. Corp.
Stinson’s insurer paid Flint $100,000. Thereafter, Flint filed a claim with his automobile
insurer, Liberty, seeking underinsured motorist benefits (“UIM”). His 2002 Liberty automobile
policy, No. A07-248869582-002 (hereinafter “policy”), was written as an Indiana policy and
contained a UIM endorsement provision with policy limits of $250,000 (for each insured) and an off-
set provision under Indiana law for “all sums paid because of the ‘bodily injury’ by or on behalf of
persons or organizations who may be legally responsible.” Based on this off-set provision, Liberty
informed Flint that his maximum UIM benefit under Indiana law was $150,000 because he had
received $100,000 from Stinson’s insurer.
On December 3, 2007, Flint filed a complaint in Boyle County Circuit Court in Kentucky
seeking a declaration of his insurance benefits under the UIM provision of his Liberty policy.
According to Flint, his UIM benefits were governed by Kentucky law, rather than Indiana law,
because Kentucky had the most significant relationship with the insurance contract and the parties.
Liberty removed the complaint to the Eastern District of Kentucky pursuant to 28 U.S.C. §§ 1332,
1441, and 2201(a).
In its order granting summary judgment and declaratory relief in favor of defendant Liberty,
the district court accurately stated the relevant facts:
In 1995, Plaintiff Michael Flint (“Flint”) moved to Louisville, Kentucky. In 2000,
Flint purchased a farm in Deputy, Indiana, and owned other commercial and rental
properties in Indiana. In 2005, Flint moved his government consulting business from
Louisville to Frankfort, Kentucky. Flint split his time between his homes in
Louisville and Indiana. He renovated the Indiana home on weekends during the
warm months. Flint listed the Indiana home as his residence on his 2004 and 2005
federal income tax returns. He also testified that he told the Indiana Farm Service
Agency that he was an Indiana resident.
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Flint v. Liberty Ins. Corp.
Flint’s relationship with Defendant Liberty Insurance Corp. (“Liberty”) began in
2000. Liberty insurance agent Matt Sturgeon (“Sturgeon”), working in Louisville,
Kentucky, sold Flint an auto insurance policy to cover Flint’s 1999 GMC Yukon.
In June 2002, Flint purchased a 2001 GMC Sierra truck from his friend, an Indiana
auto dealer. Flint permitted his friend to register the vehicle in Indiana. Flint
testified that he knew Indiana insurance rates for the Sierra were less than Kentucky
rates, although he did not remember specific rates. He was informed that he needed
to register the vehicle in Indiana to receive the Indiana insurance rates. Flint stated
that he purchased the vehicle for use on his Indiana farm. The truck was titled and
registered in Indiana and Flint purchased insurance for the vehicle from Liberty
through Sturgeon. The policy was written in Indiana because the Sierra was
registered in Indiana, Flint held an Indiana driver’s license, and Flint requested an
Indiana policy, in part, to save money.
In April 2005, Flint traded the Sierra for a 2004 Cadillac CTS []. The Cadillac was
purchased and registered in Indiana by the same friend that purchased the Sierra. On
May 10, 2005, Flint substituted the Cadillac for the Sierra on his auto policy with
Liberty. He listed his residence as Deputy, Indiana, on his “Request for Auto Policy
Change” form. Under the terms of the policy, Flint’s insurance included
underinsured motorist (“UIM”) coverage up to a maximum of $250,000 per person.
Flint’s UIM endorsement, written in Indiana, states, in part:
LIMIT OF LIABILITY
A. The limit of liability shown in the Schedule or in the Declarations
for each person for Underinsured Motorists Coverage is our
maximum limit of liability for all damages, including damages for
care, loss of services or death, arising out of “bodily injury” sustained
by any one person in any one accident. . . .
B. The limit of liability shall be reduced by all sums paid because of
the “bodily injury” by or on behalf of persons or organizations who
may be legally responsible. . . .
***
D. [Liberty] will not make a duplicate payment under this coverage
for any element of loss for which payment has been made by or on
behalf of persons or organizations who may be legally responsible.
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(Internal citations omitted.)1
The parties filed cross-motions for summary judgment in December 2008. The parties agreed
that if Indiana law applied, Flint’s maximum UIM benefit was $150,000 because of the $100,000
payment Flint received from Stinson’s insurer, but if Kentucky law applied, his maximum UIM
benefit was $250,000. Thus, the sole issue before the district court was whether Kentucky or Indiana
law applied to Flint’s UIM policy. The district court ruled that Flint’s UIM policy was governed by
Indiana law and entered judgment in favor of Liberty.
Flint timely appeals.
1
The policy’s UIM provision reflects Ind. Rev. Code § 27-7-5-5(c)(1)(A), which permits a
reduction for “the amount paid in damages to the insured by or for any person or organization who
may be liable for the insured’s bodily injury.” “Other insurance” clauses are valid and enforceable
under Indiana law. Pafco Gen. Ins. Co. v. Providence Wash. Ins. Co., 587 N.E.2d 728, 729 n.2 (Ind.
Ct. App. 1992) (“‘Other insurance’ clauses limit coverage when coverage under another policy is
concurrently available so as to preclude stacking or double recovery of uninsured motorists
coverages.”). Uninsured and underinsured motorist statutes
are remedial provisions that are not intended to serve as a substitute for
comprehensive personal liability insurance, but rather to provide protection for the
innocent party by making the insurance carrier stand as the insurer of the uninsured
motorist, and enabling the insured to recover from his or her own insurer for injuries
caused by an uninsured motorist. In some states, uninsured motorist coverage is
designed to provide protection for the motoring public from injuries caused by
uninsured motorists and hit-and-run motorists, and to protect innocent persons from
the negligence of unknown or impecunious tortfeasors.
81 Am. Jur. Trials § 425 (2009). UIM coverage is unique insofar as it is personal to the insured,
whereas standard automobile insurance follows the vehicle. Id.
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II.
We review de novo the district court’s choice of law ruling. Mill’s Pride, Inc. v. Cont’l Ins.
Co., 300 F.3d 701, 704 (6th Cir. 2002); Salve Regina Coll. v. Russell, 499 U.S. 225, 231 (1991).
When sitting in diversity, a federal court “appl[ies] the law, including the choice of law rules, of the
forum state.” Himmel v. Ford Motor Co., 342 F.3d 593, 598 (6th Cir. 2003). Kentucky is the forum
state.
“Kentucky has consistently applied § 188 of the Restatement (Second) of Conflict of Laws
to resolve choice of law issues that arise in contract disputes.” Saleba v. Schrand, 300 S.W.3d 177,
181 (Ky. 2009). “Kentucky has ample case law explaining that . . . [Section 188(1) of the]
Restatement’s ‘most significant contacts’ test applies to contract disputes.” Id. (citing Breeding v.
Mass. Indem. & Life Ins. Co., 633 S.W.2d 717, 719 (Ky. 1982) (holding that in disputes involving
the “validity of a contract . . . [t]he modern test is which state has the most significant relationship
to the transaction and the parties.”)).
Section 188 of the Restatement (Second) states that:
(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 (see § 187), the
contacts to be taken into account in applying the principles of § 6 to determine 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,
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(d) the location of the subject matter of the contract, and
(e) the domicil, residence, nationality, place of incorporation and
place of business of the parties.
These contacts are to be evaluated according to their relative importance with respect
to the particular issue.
(3) If the place of negotiating the contract and the place of performance are in the
same state, the local law of this state will usually be applied, except as otherwise
provided in §§ 189-199 and 203.
Restatement (Second) Conflict of Laws § 188 (1971).
“Under this approach, the court hearing the case must apply the law of that jurisdiction
which, ‘because of its relationship or contact with the occurrence or the parties, has the greatest
concern with the specific issue raised in the litigation.’” Harris Corp. v. Comair, Inc., 712 F.2d
1069, 1072 (6th Cir. 1983) (quoting Breeding, 633 S.W.2d at 719); Bonnlander, 949 S.W.2d at 620
(“[I]t has been held in contract actions that the law of the state with the greatest interest in the
outcome of the litigation should be applied.”).
A.
Flint primarily argues that the district court placed too much emphasis on the “law of the state
of the insurance contract[,]” asserting that this factor “trump[ed] all other considerations[.]”
According to Flint, Kentucky has the most significant relationship to the UIM policy and the parties
in the present case because: (1) he filled out his application for automobile insurance in Kentucky;
(2) he signed it in Kentucky; (3) he used a Kentucky mailing address; (4) he paid all insurance
premiums from his Kentucky bank account; (5) his primary business and place of employment is in
Kentucky; (6) the accident occurred in Kentucky; and (7) his family lives in Kentucky. At the time
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of the 2005 accident, Flint also maintained a residence in Kentucky. Flint’s argument focuses upon
Restatement (Second) Conflict of Laws § 188 (2) (a)-(c) and (e), which considers the place of
contracting, the place of negotiating the contract, his Kentucky residence, and his employment in
Kentucky.
Liberty responds that the great weight of authority under Kentucky law supports the district
court’s decision to apply Indiana law to Flint’s UIM policy. We agree. Indeed, the majority of
Kentucky case law addressing automobile accidents in Kentucky that involve Indiana residents
insured by Indiana policies apply Indiana law to determine the scope of the insured’s UIM benefits.
In Lewis v. American Family Insurance Group, 555 S.W.2d 579 (Ky. 1977), an Indiana
driver and passenger in a vehicle registered and insured in Indiana were involved in a two-car
accident with a vehicle driven by an uninsured Kentucky resident. 555 S.W.2d at 581. The injured
Indiana plaintiffs filed a lawsuit in Kentucky against the Kentucky driver and their own insurer,
which had issued two automobile insurance policies – to the driver and the driver’s uncle (who
owned the vehicle) – both of which included uninsured motorist coverage. The question in Lewis
was whether the law of Indiana or that of Kentucky would govern the question of plaintiffs’
uninsured motorist coverage. Id.
The Supreme Court of Kentucky concluded that where Indiana drivers of an Indiana
registered automobile seeking UIM coverage under an Indiana-issued automobile policy for injuries
sustained in Kentucky, Kentucky courts should apply Indiana law to interpret the contract of
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insurance. Id. at 582. The Lewis court quoted Restatement (Second) of Conflict of Laws § 193
(1971) as relevant to its choice of law analysis:
Contracts of Fire, Surety or Casualty Insurance:
The validity of a contract of fire, surety or casualty 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 sec. 6 to the transaction and the parties, in
which event the local law of the other state will be applied.
Id. (emphasis added). After reciting §§ 188 and 193 from the Restatement (Second) of Conflict of
Laws, the Lewis court held that “[b]ecause the insurance contracts . . . were entered into in Indiana
between Indiana parties and concerned automobiles which were licensed and garaged in Indiana, we
are of the opinion that Indiana law should govern the rights and liabilities of the parties under these
contracts.” Id.
Similarly, in Bonnlander, several insureds from Indiana were injured in an automobile
accident in Kentucky. 949 S.W.2d at 619. The insureds had automobile policies written under
Indiana law that were provided by out-of-state insurance companies that conducted business in
Kentucky. Id. The appellants argued that Ky. Rev. Stat. § 304.39.100(2) required the out-of-state
insurance companies to provide the same UIM coverage as required under Kentucky law,
notwithstanding the fact that the policies at issue were written under Indiana law. Id. at 621.
According to the Bonnlander court:
[a]ppellants [] maintain that because appellee insurance companies were authorized
to do business in the state of Kentucky and each filed a “Declaration of Compliance
with No-fault Insurance Requirements,” they must provide underinsured motorists’
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coverage to appellants pursuant to Kentucky law. The declarations filed by appellees
pursuant to KRS 304.39-100(2) only require that appellees provide basic reparations
benefits and the statutory minimum tort liability insurance on any covered vehicle
while it is in the state of Kentucky. There is no requirement that they provide
underinsured motorists coverage to their insureds. This is in keeping with the public
policy of Kentucky’s Motor Vehicle Reparations Act, which is to protect Kentucky
residents from out-of-state vehicles which come into Kentucky and cause accidents
and have inadequate or no insurance. It follows that basic reparations benefits and
minimum tort liability insurance go with the vehicle, while underinsured motorists
coverage is personal to the insured.
Id. at 620-21. Consequently, the Bonnlander court held that Ky. Rev. Stat. § 304.39.100(2) did not
require a foreign insurance company doing business in Kentucky to provide the minimum UIM
coverage required under Kentucky law for automobile insurance policies written in other states. Id.
Finally, Owens v. Declark, No. CIV. A94-265, 1995 WL 912492, at *1 (E.D. Ky. 1995), aff’d
134 F.2d 372 (6th Cir. 1998) (unpublished opinion), also lends support to Lewis and Bonnlander.
In Owens, an Indiana resident was injured in an automobile accident in Kentucky where the insured’s
passenger was covered by an Indiana policy. Id. Subsequently, a dispute arouse between the insurer
and the injured passenger regarding whether the policy’s UIM coverage applied. Id. Kentucky law
provided coverage and Indiana law did not.2 The district court ruled that Indiana law applied to the
insured’s UIM policy, relying on Lewis and the Restatement (Second) Conflicts of Laws. Id.
2
Specifically, pursuant to Indiana law and the language of the plaintiffs’ policies, the
defendant was not an underinsured motorist because his total insurance coverage of $125,000 per
individual was greater than the UIM limit contained in the plaintiffs’ policies. Although the
plaintiffs had two separate policies, each policy contained anti-stacking language for underinsured
motorists. Owens, 134 F.3d 372, at *1.
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On direct appeal, we agreed, citing Lewis and Bonnlander, holding “that the district court
properly held that Indiana, not Kentucky, law applies, because Kentucky was only the site of the
accident. The significant contacts in this case between Mr. and Mrs. Owens [the injured plaintiffs]
and State Farm [their insurer] were in Indiana.” Owens, 134 F.3d 372 at *2. As in Lewis, we
concluded that Kentucky had no significant interest in the outcome of the litigation because the
district court was interpreting policies written under Indiana law that intended to provide UIM
coverage to Indiana residents. Id.
The same result was reached in Hammer v. State Farm Mutual Automobile Insurance Co.,
950 F. Supp. 192 (W.D. Ky. 1996) where the plaintiff driver, an Indiana resident, was injured in an
automobile accident in Kentucky involving an underinsured Kentucky motorist. Id. at 193. Once
again, the injured plaintiff was insured under an Indiana automobile policy that included UIM
coverage. Nevertheless, the driver argued that Kentucky law governed the UIM provision of her two
Indiana policies because Kentucky law provided more favorable coverage. There, the district court
applied Indiana law, relying on Lewis and Owens, for the proposition that Indiana had the most
significant interest in the outcome of the litigation. Id. at 195.
In the present case, under Lewis, Owens, Bonnlander, and Hammer, Kentucky choice of law
principles almost exclusively favor Liberty’s position. Moreover, Flint has failed to persuasively
distinguish these cases. Indiana has a more significant interest in the interpretation of Flint’s UIM
provision because the policy was written as an Indiana policy to cover an Indiana resident who
garaged his vehicle in Indiana. Both Flint and Stinson reported that they were Indiana residents,
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Flint affirmatively claimed Indiana residency when he executed the policy, he was licensed in
Indiana, and he titled and registered his vehicle in Indiana.
Most importantly, Flint took affirmative steps to remove his Kentucky address as his
residential address in his 2003 request for policy change. Specifically, the “Describe Change”
section in a March 13, 2003 “Request for Auto Policy Change” form reports:
corrected ph’s residential address (he lives in deputy, indiana) [sic] and corrected the
mailing address. (the current address on his policy is his work address and should
have been listed not as his residential address, but as his mailing address.) also, pls
delete alternate garaging.
(Emphasis added.)
Flint’s policy change request applied to policy number No. A07-248869582-002, the policy
that covered the 2004 Cadillac. At the time of the accident, the 2004 Cadillac was the policy’s only
insured vehicle. Flint’s request that Liberty delete an alternate garaging option and change his
residential address to Indiana creates, by implication, an assurance to Liberty that as of March 2003,
the insured vehicle was garaged exclusively in Indiana. Thus, Flint’s affirmative conduct created
an assurance to Liberty that Indiana “was to be the principal location of the insured risk during the
term of the policy . . . .” Lewis, 555 S.W.2d at 582.
Flint asserts that he made the 2003 policy change when the policy covered the 2001 Sierra
and not the 2004 Cadillac, and, thus, the March 2003 policy change is insignificant. We reject this
argument. Simply put, it was Flint’s decision to substitute the 2004 Cadillac for the 2001 Sierra on
his existing policy instead of seeking a fresh policy to cover the Cadillac.
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We hold that the district court correctly applied Kentucky choice of law principles and
properly ruled that Indiana, not Kentucky, law applied, because Indiana has the most significant
relationship with the contract and the parties. The significant contacts between Flint and Liberty
were in Indiana. Flint’s contacts with Kentucky – his former part-time Kentucky residence, his
Kentucky business, and his family – have very little to do with the scope of Flint’s UIM coverage
as a licensed Indiana driver operating a vehicle titled, insured, and garaged in Indiana, who was
involved in an accident with an underinsured Indiana driver. In fact, similar to Lewis, Kentucky’s
only significant connection with the transaction and parties is the site of the accident.
B.
Flint makes a perfunctory argument that the district court should have declined to exercise
its jurisdiction over this diversity action under the Declaratory Judgment Act. See 28 U.S.C. §
2201(a). The Supreme Court has explained that while the Declaratory Judgment Act provides the
district court with the authority to decide such actions, it is “under no compulsion to exercise [its]
jurisdiction.” Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942). However, Flint did not
raise this argument before the district court.
We have held that where a party “fail[s] to properly raise the issue of the propriety of the
district court’s exercise of jurisdiction with the district court” under the Declaratory Judgment Act,
the party forfeits the claim on appeal. Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 553 (6th Cir.
2008). Moreover, even if Flint had properly presented this argument (and we conclude that he did
not), his appellate brief provides insufficient treatment of this issue. “Issues adverted to in a
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perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed
waived.” El-Moussa v. Holder, 569 F.3d 250, 257 (6th Cir. 2009) (citation and internal quotation
marks omitted).
III.
For these reasons, we affirm the order of the district court.
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