Nautilus Insur Co v. Reuter, David ( 2008 )

  •                              In the
     United States Court of Appeals
                   For the Seventh Circuit
    Nos. 06-4019 & 07-1400
    DAVID REUTER, Individually and as
    Representative of the Estate of Shirley
    Reuter, and JUSTIN L. CHRETIEN,
                Appeals from the United States District Court
          for the Northern District of Indiana, South Bend Division.
                      No. 05 C 30—Allen Sharp, Judge.
        ARGUED DECEMBER 7, 2007—DECIDED AUGUST 8, 2008
     Before EASTERBROOK, Chief Judge, and MANION and
    KANNE, Circuit Judges.
      KANNE, Circuit Judge. After numerous small corpora-
    tions submitted claims to Nautilus Insurance Company
    (“Nautilus”) for the insurer’s defense and indemnity for
    lawsuits the small corporations were facing, Nautilus
    sought a declaration that it did not owe such duties to the
    small corporations for the underlying claims. The insur-
    ance policies did not contain choice-of-law provisions; as
    a federal court sitting in Indiana, the district court
    2                                   Nos. 06-4019 & 07-1400
    applied Indiana choice-of-law rules to choose which state
    had the most intimate contacts with the contracts. After
    deciding that Indiana law governed the interpretation of
    the contracts, the district court granted summary judg-
    ment in favor of Nautilus on the ground that Indiana
    law does not contemplate insurance coverage for the
    types of claims arising under the insurance policies held
    by the insureds—claims for negligent hiring. The district
    court correctly applied Indiana law to the insurance
    policies involving two of the small corporations involved
    in this appeal. However, for the insurance policies involv-
    ing one of the corporations, Phoenix Imagery, there is
    conflicting evidence about the small corporation’s prin-
    cipal place of business. Because we cannot resolve the
    conflict on the basis of the paper record, we remand this
    particular choice-of-law determination to the district
    court for further proceedings, such as an evidentiary
                           I. HISTORY
      This insurance-coverage case arose after several individ-
    uals tragically suffered violent crimes committed by door-
    to-door magazine salespersons. The assailants were
    employees of small corporations associated with Ameri-
    can Community Services (“ACS”), an Indiana-based
    magazine clearinghouse that sells magazines by con-
    tracting with small corporations that, in turn, hire and
    employ their own door-to-door salespersons. The small
    corporations that employed the violent offenders were
    insured by Nautilus; ACS was listed as an additional
    insured on each of the relevant Comprehensive General
    Liability (“CGL”) policies. When numerous civil lawsuits
    were brought against the small corporations and ACS by
    Nos. 06-4019 & 07-1400                                      3
    the victims of the crimes and their families, the insureds
    submitted claims to Nautilus, requesting the insurer’s
    defense and indemnification. Nautilus then filed this
    suit in federal district court, under 28 U.S.C. § 1332,
    seeking rescission of the contracts and a judgment de-
    claring that it did not owe duties of defense or indem-
    nification under the CGL policies. Nautilus explained
    that the civil complaints alleged only negligent hiring
    by the small corporations and ACS, but in Indiana, negli-
    gent hiring and negligent supervision do not fall within
    the ambit of traditional CGL coverage, where an “occur-
    rence” is defined as an accidental event. See Erie Ins. Co. v.
    Am. Painting Co., 
    678 N.E.2d 844
    , 846 (Ind. Ct. App. 1997).
    Nautilus argued that Indiana law governed the insurance
    contracts, because the small corporations were incorpo-
    rated in Indiana and were mere “shells” of ACS.
       The insurance policies secured by the small corporations
    (in which ACS is listed as an additional insured) contain
    no choice-of-law provisions. The small corporations were
    all incorporated in Indiana, but Illinois addresses were
    listed on their insurance applications. Accordingly, the
    insurance policies listed the corporations’ locations at the
    Illinois addresses. The insurer (Nautilus or its agent,
    Jimcor) paid taxes on the policies in Illinois, and the
    policies were stamped by the Illinois Department of
    Insurance, in accordance with Section 445 of the Illinois
    Insurance Code, which outlines the requirements for
    “surplus line insurance” that insures an “Illinois risk.” 215
    Ill. Comp. Stat. 5/445.
       The choice-of-law determination is especially important
    in this case because the substantive law in Indiana and
    Illinois differs on the point of law at the heart of the
    underlying lawsuits against the magazine-sale corpora-
    4                                  Nos. 06-4019 & 07-1400
    tions: whether negligent hiring can constitute an “occur-
    rence” under an insurance policy. Under Indiana law,
    allegations of negligent hiring do not trigger an insurer’s
    duties to defend and indemnify the insured if the policy
    defines “occurrence” as an accidental event. See Am.
    Painting Co., 678 N.E.2d at 846. But under Illinois law,
    negligent hiring can constitute an “occurrence” under
    insurance policies that define the term as an accidental
    event. See Am. Family Mut. Ins. Co. v. Enright, 
    781 N.E.2d 394
    , 398-400 (Ill. App. Ct. 2002).
      Nautilus named as defendants in its declaratory action
    ACS, the numerous small corporations that submitted
    claims to Nautilus for defense and indemnification, and
    the individual plaintiffs who had filed lawsuits against
    ACS and the small corporations, including David
    Reuter, individually and as a representative of the Estate
    of Shirley Reuter, and Justin Chretien. Shirley Reuter,
    David Reuter’s mother, was murdered by a door-to-door
    salesman in her New Jersey home, and Justin Chretien
    was assaulted by a salesman in Virginia. In their respec-
    tive lawsuits, David Reuter sued ACS and the small
    corporations Phoenix Imagery and G.O. Innovators;
    Chretien sued ACS and the small corporation Unified
       The parties engaged in extensive discovery, which
    included document production, interrogatories, deposi-
    tions, and declarations. The gathered evidence—which
    will be discussed more thoroughly below as it relates to
    the choice-of-law analysis—showed that the states of
    Illinois and Indiana both have contacts with the insur-
    ance contracts.
      Following cross-motions for summary judgment, the
    district court granted summary judgment in favor of
    Nos. 06-4019 & 07-1400                                     5
    Nautilus. It concluded that Indiana law applied to the
    insurance policies and consequently, that Nautilus had
    no duty to defend or indemnify ACS or the small corpora-
    tions in the civil lawsuits. The district court observed
    that ACS is an Indiana corporation with its principal
    place of business in Indiana. It labeled all of the small
    corporations “Shell Corporations” of ACS, and found
    that each had an Indiana registered agent. The court also
    relied on the fact that ACS procured the insurance policies
    for the small corporations from its base in Michigan City,
    Indiana. On these facts, the district court decided: “All
    of that is enough to get this court to the substantive law
    of Indiana with regard to the key question about the
    contents of the insurance contract here.”
                           II. ANALYSIS
      Neither ACS, nor any of the small corporations, ap-
    pealed from the judgment. Of the individually named
    defendants, only Reuter and Chretien have appealed.
    Reuter and Chretien have a strong pragmatic interest in
    the application of Illinois law—so the insurer (with its
    deep pockets) may be liable for costs attributable to the
    allegedly negligent small companies (with their very
    shallow pockets).1
      Nautilus’s declaratory-relief action named numerous small
    corporations as defendants. However, because Reuter and
    Chretien are the only parties appealing the district court’s
    decision, the only small corporations relevant to this appeal
    are those implicated by Reuter’s and Chretien’s underlying
    lawsuits: Phoenix Imagery, G.O. Innovators, and Unified
    6                                       Nos. 06-4019 & 07-1400
       Reuter and Chretien argue that the district court improp-
    erly pierced ACS’s corporate veil by concluding that the
    small corporations were “shells” of ACS, and that the
    district court erred by deciding that the substantive law
    of Indiana, and not Illinois, governed the construction of
    the insurance policies. Reuter and Chretien contend that
    Illinois law should have applied because Illinois had the
    most intimate contacts with the insurance contracts. See
    Restatement (Second) of Conflicts § 188 (1971). Reuter
    and Chretien claim that the district court erred by
    granting summary judgment in favor of Nautilus as a
    result of its erroneous choice of law. Nautilus continues
    to use the “shell” terminology for the small corporations,
    and insists that the district court correctly applied Indi-
    ana law to the insurance policies.
      The selection of one state’s substantive law over another
    in the event of a conflict presents a question of law that
    is decided by the court. Gramercy Mills, Inc. v. Wolens, 
    63 F.3d 569
    , 571 (7th Cir. 1995). We review that selection de
    novo. Tanner v. Jupiter Realty Corp., 
    433 F.3d 913
    , 915 (7th
    Cir. 2006). The district court, sitting in diversity, used
    Stars. Even though Reuter and Chretien are not parties to the
    insurance contracts at issue, they have standing to appeal
    because they were named defendants in the district court
    action. See Essex Ins. Co. v. Kasten Railcar Servs., Inc., 
    129 F.3d 947
    , 948 (7th Cir. 1997). However, their standing is limited to
    the extent that the district court decision harmed them, that is,
    to the extent that it involves the corporations against whom
    Reuter and Chretien brought lawsuits. See Chase Manhattan
    Mortgage Corp. v. Moore, 
    446 F.3d 725
    , 727 (7th Cir. 2006) (ex-
    plaining that if an appellant is not harmed by a judgment,
    he lacks standing to appeal).
    Nos. 06-4019 & 07-1400                                      7
    Indiana choice-of-law principles to determine “which
    state’s substantive law governs the proceeding.” Id.; see
    also Klaxon Co. v. Stentor Elec. Mfg. Co., 
    313 U.S. 487
    , 496
    (1941). “Indiana’s choice of law rule for contract actions
    calls for applying the law of the forum with the most
    intimate contacts to the facts.” Employers Ins. of Wausau v.
    Recticel Foam Corp., 
    716 N.E.2d 1015
    , 1024 (Ind. Ct. App.
    1999). This approach is embodied in the Restatement
    (Second) of Conflicts, id., and calls for consideration of the
    following factors: “(a) the place of contracting; (b) the
    place of contract negotiation; (c) the place of performance;
    (d) the location of the subject matter of the contract; and
    (e) the domicile, residence, nationality, place of incorpora-
    tion, and place of business of the parties,” id. (citing Eby
    v. York-Division, Borg-Warner, 
    455 N.E.2d 623
    , 626
    (Ind. Ct. App. 1983)); Restatement (Second) of Conflicts
    § 188 (1971).
      In its choice-of-law analysis, the district court noted that
    ACS is an Indiana corporation with its principal place of
    business in Michigan City, Indiana. It then stated that
    “most of the remaining defendants are so-called Shell
    Corporations with an Indiana registered agent.” A shell
    corporation is “ ‘a company that is incorporated, but has no
    significant assets or operations.’ ” Shell (corporation)
    Wikipedia Entry,
    Shell_(corporation) (last visited June 26, 2008) (quoting
    Barron’s Finance & Investment Handbook); see also Guid-
    ance Memorandum from the Department of the Treasury,
    Financial Crimes Enforcement Network 1 (Nov. 9,
    2006), available at
    guidance/pdf/AdvisoryOnShells_FINAL.pdf (stating
    that shell companies “typically have no physical presence
    (other than a mailing address) and generate little or no
    8                                     Nos. 06-4019 & 07-1400
    independent economic value”). Shell companies are not
    in themselves illegal, see Guidance Memorandum, supra, at
    1-2, but may be used by another corporation or entity to
    advance fraud by way of the shell’s “front.” See HOK Sport,
    Inc. v. FC Des Moines, L.C., 
    495 F.3d 927
    , 936 (8th Cir. 2007)
    (“[P]iercing the corporate veil is appropriate if the corpora-
    tion is a mere shell, serving no legitimate business pur-
    pose, and used primarily as an intermediary to perpetuate
    fraud or promote injustice.” (internal quotation omitted)).
      The district court apparently assumed the small corpora-
    tions were shells. Because there was no analysis in the
    district court opinion to support the statement that the
    small corporations were shells, we do not read the
    court’s invocation of the “shell” terminology to be a
    factual finding that the corporations existed as shams,
    solely to facilitate ACS’s alleged fraud. The district court’s
    dismissal of the plaintiff’s rescission claims as moot
    supports our conclusion that the district court made no
    finding of fact about the legitimacy of the small corpora-
    tions. Had the court actually concluded that the small
    corporations were shams that existed solely to further
    ACS’s fraud, then Nautilus would have been granted
    rescission of the insurance policies under either Illinois
    or Indiana law. See Va. Sur. Co., Inc. v. Bill’s Builders, Inc.,
    865 N.E.2d 985
    , 992 (Ill. App. Ct. 2007); Jesse v. Am. Cmty.
    Mut. Ins. Co., 
    725 N.E.2d 420
    , 424-25 (Ind. Ct. App. 2000).
      On the record before us, it is not clear that the small
    corporations were illegitimate, sham corporations under
    either Indiana law or Illinois law. Although it is evident
    that the small corporations operated to the benefit of ACS,
    that fact alone does not render the corporations alter egos
    of one another. In fact, the record contains evidence that
    the small corporations maintained operations independ-
    Nos. 06-4019 & 07-1400                                     9
    ent from their dealings with ACS. The Independent
    Contractor agreements between the small corporations
    and ACS provide that the small corporations are free to
    work with other magazine clearinghouses. Lynne Harvey,
    the President of Phoenix Imagery, attested that she was
    not an employee of ACS, and that she alone controlled
    the operations of Phoenix. She explained that Phoenix
    reimbursed ACS for its insurance premiums, and that
    Phoenix’s principal place of business was in Crete, Illinois.
    Additionally, ACS denied that it operated as a single
    business enterprise with the small corporations.
      On the other hand, there is evidence in the record that
    supports Nautilus’s shell theory. The address provided
    by Lynne Harvey for Phoenix’s principal place of busi-
    ness is actually the residential address of ACS’s founders.
    Phone numbers listed for some of the small corporations
    overlap with phone numbers for ACS. ACS personnel
    are listed as contact persons for some of the small corpora-
    tions in insurance documents and marketing materials.
    Additionally, the record is devoid of Independent Con-
    tractor agreements between G.O. Innovators and ACS,
    and between Unified Stars and ACS, and neither of
    those two small corporations responded to Nautilus’s
    discovery requests.
      With the conflicting evidence regarding the nature of the
    small corporations, we are not comfortable piercing ACS’s
    corporate veil and declaring the small corporations to be
    “shells” that existed solely to allow ACS to perpetrate
    insurance fraud. To resolve that conflict at this
    point—where there are factual disputes surrounding the
    nature of the small corporations and their relationships
    with ACS—would effectively relieve Nautilus of its
    burden (under either Illinois law, see Pederson v. Paragon
    10                                   Nos. 06-4019 & 07-1400
    Pool Enters., 
    574 N.E.2d 165
    , 167 (Ill. App. Ct. 1991), or
    Indiana law, see Cmty. Care Centers, Inc. v. Hamilton, 
    774 N.E.2d 559
    , 564-65 (Ind. Ct. App. 2002)) of proving that
    the small corporations and ACS were alter egos of one
    another, and that they should be treated as the same
    entity for all purposes, including for choice-of-law deter-
    minations surrounding insurance policies.
      One of the factual disputes at the heart of Nautilus’s
    “shell” argument mirrors the dispute at the heart of the
    choice-of-law determination—that is, whether the
    small corporations’ principal places of business are in
    Indiana, or alternatively, in Illinois. The first four factors
    outlined in § 188 of the Restatement (Second) of Conflicts
    do not conclusively call for application of the substan-
    tive law of either Indiana or Illinois, so the domicile,
    residence, nationality, place of incorporation and place
    of business of the parties is particularly important. See
    Restatement (Second) of Conflicts § 188. We turn now to
    the Restatement factors to decide whether Indiana had the
    most intimate contacts to the facts of the insurance con-
    tracts with each of the three small corporations.
    A. Place of contracting
      The comment to § 188 instructs that the place of con-
    tracting is “the place where occurred the last act neces-
    sary, under the forum’s rules of offer and acceptance, to
    give the contract binding effect . . . .” Restatement (Second)
    Conflicts § 188 cmt. e. The place of contracting, standing
    alone, is often insignificant. Id. In several recent Indiana
    cases dealing with contractual negotiations between
    insureds, their agents, and insurers in different states, the
    place of contracting was deemed “indeterminate” by the
    Nos. 06-4019 & 07-1400                                     11
    Indiana Court of Appeals. See Am. Employers Ins. Co. v.
    Coachmen Indus., Inc., 
    838 N.E.2d 1172
    , 1178-79 (Ind. Ct.
    App. 2005); Recticel, 716 N.E.2d at 1023; Travelers Indem. Co.
    v. Summit Corp. of Am., 
    715 N.E.2d 926
    , 932 (Ind. Ct. App.
    1999); Hartford Accident & Indem. Co. v. Dana Corp., 
    690 N.E.2d 285
    , 293 (Ind. Ct. App. 1997). In Recticel, the insured
    sometimes listed its address in Indiana, and other times
    in New York, but the insured “managed its insurance
    affairs” in Indiana. Even so, the Indiana Court of Appeals
    decided that the place of contracting was “not deter-
    minative.” 716 N.E.2d at 1023.
      From the testimony of Tina Green, ACS’s office manager,
    it appears that ACS initially procured the insurance
    policies on behalf of the affiliated small corporations,
    from its location in Indiana. Thereafter, ACS charged the
    cost of the insurance to the small corporations’ accounts
    with ACS. Lynne Harvey, of Phoenix Imagery, confirms
    that she “reimbursed” ACS for the cost of Phoenix’s
    insurance premium.
      The insurance agent with whom ACS communicated,
    John Damiani, worked for Sun Insurance in New Jersey.
    The policies were ordered from and underwritten by
    Jimcor, a Pennsylvania insurance agency. The ultimate
    insurer, Nautilus, is incorporated in Arizona, and has its
    principal place of business there. The policies were
    stamped by the Illinois Department of Insurance, in
    accordance with Section 445 of the Illinois Insurance Code,
    which outlines the requirement for “surplus line insur-
    ance” that insures an “Illinois risk.” 215 Ill. Comp. Stat.
    5/445. Illinois law provides that it is “unlawful for an
    insurance producer to deliver any unauthorized insurer
    contract unless such insurance contract is countersigned
    by the Surplus Line Association of Illinois.”
    12                                    Nos. 06-4019 & 07-1400
      With all of the different parties involved in these particu-
    lar insurance contracts—ACS, Sun Insurance, Jimcor,
    Nautilus, the small corporations, and the Illinois Depart-
    ment of Insurance—it is impossible to pinpoint the place
    of contracting. Under Illinois law, the contract could not
    be delivered, and thus could not come into effect, until it
    was approved by the Surplus Line Association of the
    state. That fact weighs in favor of applying Illinois law
    to the contracts. On the other hand, the Indiana Court of
    Appeals has downplayed the significance of counter-
    signatures that are required by state law as indicators of
    the place of contracting—at least where the countersigna-
    tures are of the insurer’s registered agent. See Dana Corp.,
    690 N.E.2d at 293. Like the Indiana Court of Appeals in
    Coachmen, “we cannot conclusively point to [Illinois or
    Indiana] as being the state where ‘the last act necessary’ to
    give the contract binding effect occurred . . . .” Coachmen,
    838 N.E.2d at 1179. So we conclude that this factor is not
    B. Place of negotiation of contract
      Normally, the place of a contract’s negotiation is a
    “significant contact.” Restatement (Second) of Conflicts
    § 188 cmt. e. The state where contract negotiations occur
    has an interest in the legality of the negotiations them-
    selves, as well as the ultimate agreement. See id. However,
    “[t]his contact is of less importance when there is no one
    single place of negotiation and agreement, as for example,
    when the parties do not meet but rather conduct their
    negotiations from separate states by mail or telephone.” Id.
     The testimony of ACS’s office manager confirms that
    ACS negotiated for the insurance policies on behalf of
    Nos. 06-4019 & 07-1400                                   13
    the small corporations. Those negotiations took place by
    phone, between an ACS employee in Indiana, and John
    Damiani, at Sun Insurance in New Jersey. In turn, Damiani
    worked with Jimcor, the Pennsylvania Insurance
    agency—the communications between Damiani and Jimcor
    seemed to have occurred by fax and e-mail. In Coachmen,
    the Indiana Court of Appeals noted that because some of
    the negotiations were done by mail, fax, or phone be-
    tween individuals in different states, “there [was] not a
    single place of negotiation.” Id. The court could not say
    the place of negotiation was conclusive, and found the
    factor indeterminate. Id. Likewise, we cannot identify a
    particular place of negotiation because the evidence
    shows that parts of the negotiations took place in Indiana,
    New Jersey, and Pennsylvania. Notably, none of the
    negotiations took place in Illinois.
    C. Place of performance
    The place of performance “is the location where the
    insurance funds will be put to use.” Id. at 1180. If a con-
    tract is to be performed in a particular state, that state
    has “an obvious interest in the nature of the performance
    and in the party who is to perform.” Restatement (Second)
    of Conflicts § 188 cmt. e. However, the place of perfor-
    mance will not significantly affect the choice-of-law
    analysis when “(1) at the time of contracting it is either
    uncertain or unknown, or when (2) performance by a
    party is to be divided more or less equally among two or
    more states with different local law rules on the particular
    issue.” Id. The “performance” at issue in these insurance
    contracts is the insurance of a corporation that sells maga-
    zines door-to-door in numerous states. The actual incidents
    for which the small corporations submitted claims to
    14                                  Nos. 06-4019 & 07-1400
    Nautilus occurred in New Jersey and Virginia. At the
    time of contracting, the specific states from which in-
    surance claims would arise was not known, so, this
    factor also is indeterminate of which state’s law to
    apply. See id.
    D. Location of the subject matter
    The subject matter of the insurance policies at issue is not
    a tangible object, the location of which could be limited
    to one state. However, it should be noted that the insurer’s
    compliance with requirements with Illinois law for pro-
    viding surplus line insurance indicates that Nautilus,
    through Jimcor, intended to insure risks located, to some
    extent, in Illinois.
       Additionally, the insurance policies themselves sug-
    gest that Nautilus committed to insuring risks in Illinois.
    The policies for each corporation identify the name and
    address of the insured. The policy period is listed, and is
    followed by the phrase “at your mailing address shown
    above.” The addresses shown above are Illinois addresses.
    Further, the policies ask for the “location of all premises
    you own, rent, or occupy,” and the policies state, “same
    as mailing address,” again, all of which are listed in
      Nautilus argues that the Illinois addresses are shams, and
    that it would not have insured the small corporations
    had it known the truth about their relationships with
    ACS. This contention brings us to the next § 188 fac-
    tor—if the small corporations are truly Indiana corpora-
    tions, then Indiana law should apply. If, on the other hand,
    they are Illinois corporations, then Illinois law should
    Nos. 06-4019 & 07-1400                                      15
    E. Domicile, residence, nationality, place of incorporation and
       place of business of the parties
      Because the first four factors are so inconclusive, this
    factor becomes pivotal. All of the insureds—Phoenix
    Imagery, G.O. Innovators, and Unified Stars—are incorpo-
    rated in the state of Indiana. However, “[a]t least with
    respect to most issues, a corporation’s principal place of
    business is a more important contact than the place of
    incorporation, and this is particularly true in situations
    where the corporation does little, or no, business in the
    latter state.” Restatement (Second) of Conflicts § 188 cmt. e.
    ACS, the additional insured on each of the policies, has its
    primary place of business in Indiana. The determination
    of the primary places of business for the three small
    corporations is more difficult.
       Lynn Harvey, President of Phoenix Imagery, stated in a
    declaration that the principal place of business for the
    corporation from the date of its formation until June 2004,
    was in Crete, Illinois. However, the address she provided
    for Phoenix’s principal place of business is that of the
    residential home of ACS’s founders, in Crete. The phone
    number Phoenix Imagery provides to customers is the
    Indiana number for ACS. These pieces of evidence to-
    gether are suspicious—does Harvey work out of somebody
    else’s home? Is Phoenix Imagery truly a separate entity
    from ACS? Harvey’s declarations that she is the sole
    decision-maker and manager of Phoenix, and that
    Phoenix Imagery’s principal place of business is in
    Illinois, appear to conflict with other evidence sug-
    gesting that Phoenix is, in fact, an alter ego “shell” of ACS,
    operating out of Indiana. By failing to respond to Nauti-
    lus’s requests for admission, Phoenix Imagery admitted
    (via Fed. R. Civ. P. 36) to using the mailing address for
    16                                  Nos. 06-4019 & 07-1400
    ACS, in Indiana; obtaining its insurance through its
    contacts with ACS; allowing ACS to “terminate” its
    salespersons in the event of complaints of misconduct
    from customers; accepting advisement from ACS relating
    to the accounting, record keeping, and management of its
    business; and allowing its employees to wear ACS iden-
    tification badges when selling magazines door-to-door.
       Ultimately, we cannot tell from the evidence whether
    Phoenix Imagery principally operates out of Illinois, or
    whether the corporation is a shell of ACS. Its links with
    Illinois are established by its President’s declaration and
    by its Independent Contractor agreement with ACS. But
    that evidence is weakened by other evidence that sug-
    gests the small corporation is not an independent entity
    and that its business address in Crete, Illinois, is a sham.
       As for G.O. Innovators and Unified Stars, these two small
    corporations did not respond to Nautilus’s complaint—
    they failed to file answers or to otherwise defend against
    the lawsuit. The record does not contain Independent
    Contractor agreements between ACS and these corpora-
    tions (as it does for Phoenix Imagery), which would
    have been useful for identifying the corporations’ prin-
    cipal places of business. All we know about G.O. Innova-
    tors and Unified Stars with respect to this factor of § 188
    is that they are both incorporated in Indiana and
    have registered agents in Indiana, but they listed their
    addresses on the insurance-policy materials in Illinois.
    These small corporations may have operated out of
    Illinois, but they also may have operated out of Indiana.
    The only definite evidence linking them to Illinois appears
    in their insurance materials. For the purposes of this § 188
    factor, the scale tips in favor of applying Indiana law,
    because G.O. Innovators and Unified Stars are incorporated
    in Indiana.
    Nos. 06-4019 & 07-1400                                       17
    F. Choice of law determination
       After considering the various Restatement factors, we
    find that “none of the § 188 factors is compelling or con-
    clusive.” Coachmen, 838 N.E.2d at 1181. So, we will con-
    sider the “overall number and quality of contacts,” id., to
    decide whether we agree that the district court should
    have applied Indiana law to the insurance policies. The
    first factor—place of contracting—while not determinative,
    involved the states of Indiana (ACS), New Jersey (Sun
    Insurance), Pennsylvania (Jimcor), and Illinois (Illinois
    Department of Insurance). The negotiations for the
    contracts—factor two—took place over the phone and
    through other means of long-distance communication,
    between the parties in Indiana, New Jersey, and Pennsylva-
    nia. The place of performance was unknown at the time
    of contracting because the magazine-sales corporations
    conducted their business in various states. The fourth
    factor—location of the subject matter—tips the analysis
    slightly in favor of the application of Illinois law, because
    the insurance policies indicate that they are for a certain
    time period, “at” the specified locations in Illinois. Addi-
    tionally, Jimcor referred to the policies as “IL policies” in
    some of its communications, which indicates an intention
    to insure risks in Illinois. Finally, under the fifth factor, we
    identified a factual dispute about Phoenix Imagery’s
    principal place of business; we could not determine the
    principal places of business of G.O. Innovators and
    Unified Stars, both of which are incorporated in Indiana.
      The fact that we know nothing about the principal
    places of business of G.O. Innovators and Unified Stars
    makes it difficult for us to conclude that anything other
    than Indiana law applies to their insurance policies. What
    we know about these two corporations ties them to
    18                                   Nos. 06-4019 & 07-1400
    Indiana—except for the Illinois addresses that were used
    on the insurance applications, which are not corroborated
    by any other documentation or evidence. They are incorpo-
    rated in Indiana and ACS procured the insurance con-
    tracts on their behalf from its base in Indiana. If we were to
    apply Illinois law for the insurance policies involving
    these two corporations, we would effectively replace
    the multi-factor approach outlined in § 188 with a single-
    factor determination by which the law of the state identi-
    fied on the insurance policy would automatically govern a
    contract dispute, absent a choice-of-law provision. We
    agree with the district court that, based on the factors
    enunciated in § 188, the state of Indiana had the most
    intimate contacts with the insurance policies of G.O.
    Innovators and Unified Stars. And, the district court
    correctly interpreted Indiana law to preclude coverage
    under the CGL insurance policies for claims of negligent
    hiring, see Am. Painting Co., 678 N.E.2d at 846. Sum-
    mary judgment in favor of G.O. Innovators and Unified
    Stars was proper.
      With respect to Phoenix Imagery, on the other hand,
    there is evidence suggesting that the small corporation
    might be legitimate, and that it might have its principal
    place of business in Illinois. Though, conflicting evidence
    calls into question the truthfulness of Lynne Harvey’s
    declaration to that effect. We, as an appellate court, cannot
    resolve this factual dispute. Because the district court
    decides as a preliminary matter which substantive law
    to apply, see Gramercy Mills, Inc., 63 F.3d at 570, we are of
    the opinion that the district court must also resolve
    factual disputes that bear on the choice-of-law determina-
    tion. See Vaz Borralho v. Keydril Co., 
    696 F.2d 379
    , 386 (5th
    Cir. 1983) (upholding judicial resolution of facts affecting
    Nos. 06-4019 & 07-1400                                    19
    choice-of-law determination); but cf. Marra v. Bushee, 
    447 F.2d 1282
    , 1284-85 (2nd Cir. 1971) (deciding that resolution
    of factual issues bearing on choice-of-law determination
    belonged to jury). In this case, the district court needs to
    decide whether Phoenix Imagery is a legitimate corpora-
    tion operating out of Illinois—if it is, then Illinois law
    should govern its insurance policies. The most direct
    way to make such a determination would be for the dis-
    trict court to hold an evidentiary hearing to assess the
    veracity of Lynne Harvey’s statements.
       It might seem odd to charge the district court with
    resolving a factual dispute that could affect the rights and
    liabilities of the litigants—such disputes are ordinarily
    within the province of the jury. But, presenting the choice-
    of-law factual issue to a jury in this instance is even more
    problematic. As we pointed out in Gramercy Mills, “it
    would make little sense to let a jury decide which facts
    are true and then to say that there was never a dispute to
    begin with.” Id. And, as we noted recently in Pavey v.
    528 F.3d 494
    , 496-97 (7th Cir. 2008), “not every
    factual issue that arises in the course of a litigation is
    triable to a jury as a matter of right.” We explained that
    matters of subject-matter jurisdiction, personal juris-
    diction, venue, and abstention are often decided by the
    judge “even if there are contestable factual questions
    bearing on the decision.” Id.
      Without knowing which state’s substantive law governs
    this dispute, the case cannot move forward. But without
    resolving the contested issues of Phoenix’s corporate
    status and its principal place of business, the choice-of-law
    determination cannot be made. Thus, we vacate in part
    and remand for the district court to make factual findings
    about Phoenix Imagery, and then to reconsider the choice-
    of-law analysis based on the results of its inquiry.
    20                                 Nos. 06-4019 & 07-1400
                       III. CONCLUSION
      For the foregoing reasons, we AFFIRM in part and VACATE
    in part the district court’s judgment, and REMAND for
    further proceedings.