1.17 Determining the Governing Law

• Jurisdiction: Arizona

As general references, see:

12 J. Appleman, Insurance Law & Practice Sec. 7071-7095 (1981).

Annot., Conflict of laws in determination of coverage under automobile liability insurance policy, 20 A.L.R.4th 738 (1983).

R. Brazener, Automobile liability policy: choice of law as to validity of " other insurance" clause of uninsured motorist coverage, 83 A.L.R.3d 321 (1978).

R. Brazener, Extraterritorial application of statute permitting injured person to maintain direct action against tortfeasor's automobile liability insurer, 83 A.L.R.3d 338 (1978).

Annot., Conflict of laws as to right of injured person to maintain direct action against tortfeasor's automobile liability insurer, 16 A.L.R.2d 881 (1951).

R. Brazener, Conflict of Laws as to Right of Insured to Maintain Under Uninsured Motorist Clause a Direct Action Against Automobile Liability Insurer, 83 A.L.R.3d 308 (1978).

See generally D. Van Knapp, Resolution of conflicts, in non-automobile liability insurance policies, between excess or pro-rata "other insurance" clauses, 12 A.L.R.4th 993 (1982).

Under Arizona's choice of law rules, the law governing the interpretation of a liability insurance policy is the law of the state where the policy was made (lex loci contractus) and the place where the negligence took place (lex loci delecti).^[215]

Most declaratory judgment actions involve the interpretation of insurance policies; where the fundamental nature of the action is policy interpretation, the court will follow the significant contact principles of the Restatement (Second) Conflict of Laws Sec. 188.^[216]

Under the Restatement approach, the local law of the state having the most significant relationship to the transaction and the parties is the law that will be applied.^[217] The court will consider the following contacts in making the choice of law determination:

(1) the place of contracting,

(2) the place of negotiation of the contract,

(3) the place of performance,

(4) the location of the subject matter of the contract, and

(5) the domicile, residence, nationality, place of incorporation, and place of business of the parties.^[218]

The Restatement method of selection is not based upon a counting of the contacts; the selection is made by considering which contacts are the most significant based upon their relevancy to a specific policy provision or domestic law, and the reasons underlying the policy provision or domestic law.^[219] In determining which law is finally to be applied, the court will consider each contact within a framework of goals to be achieved.^[220] These goals are enumerated in Restatement (Second) Conflict of Laws Sec. 6:

(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.

(2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be applied.

The public policy of a state, established either by express legislative enactment or by decisions of its courts, reigns supreme in the choice of law analysis, and will not be relaxed on the general basis of interstate comity.^[221] Where the enforcement of an insurance policy provision conflicts with the public policy of the forum state, the forum's courts may not enforce the policy terms even though the policy would be enforceable under the laws of another state.^[222] "Traditional conflicts of law rules are changing due to rapid judicial acceptance and recognition by the courts that forum has a vital interest in applying its own law, particularly where its residents may be concerned in some manner."^[223]

At least one court has chosen to...