7.10 Determining Governing State Law

• Jurisdiction: Arizona

The statutory requirements governing uninsured and underinsured coverage in Arizona apply only to policies "delivered or issued for delivery" in Arizona.

In Government Employees Insurance Co. v. Fenton,^[141] the insurance company, GEICO, issued an automobile policy to Diehl. At the time, Diehl resided in Texas. The policy was applied for and delivered in Texas. The vehicle to be insured was a 1984 Mazda truck owned by Diehl and registered in Texas. The application for insurance provided that the vehicle would be used to drive Diehl to and from her place of employment in Texas. On August 24, 1987, Diehl and her husband were involved in an automobile accident in Tucson while occupying another vehicle. Diehl was seriously injured. Although Diehl owned the vehicle in which she was driving, that vehicle was not insured under the GEICO policy. The truck that was insured under GEICO's policy remained in Texas at the time of the accident. Diehl subsequently settled her claim against the driver of the other vehicle and then made a UIM claim against the GEICO policy. GEICO denied the claim, arguing that Diehl was a resident of Texas and that, under Texas law, the amount of UIM coverage is reduced by the amount recovered from liability coverage of the underinsured motorist. GEICO took the position that, because Diehl had recovered more than her UIM policy limits from the driver of the other vehicle, GEICO owed nothing under its policy.

The Diehls argued that she and her husband had moved to Arizona the day before the accident and were residents of Arizona. Diehl argued that, because she was a resident of Arizona at the time of her accident, Arizona law should apply to permit her to recover under the UIM provision of the GEICO policy. The Arizona Court of Appeals rejected this claim.

The Fenton court held that there was no coverage under the GEICO policy. The court ruled that A.R.S. Sec. 20-259.01, by its express terms, applies only to policies "delivered or issued for delivery in this state, with respect to any motor vehicle registered or principally garaged in this state . . . ." Because it was undisputed that the GEICO policy was issued for delivery and delivered in Texas with respect to Diehl's Mazda truck, which was registered in Texas and principally garaged in Texas, the court held that A.R.S. Sec. 20-259.01 had no application to the GEICO policy.^[142]

The court in Fenton also rejected Diehl's contention that Arizona law regarding UIM coverage was made applicable to the GEICO policy by virtue of the "out-of-state coverage" provision of the GEICO policy. Most policies have a conformance clause stating, in essence, that the policy limits will be modified to conform to the financial responsibility act requirements of the various states. The court in Fenton held that the "out-of-state coverage" clause in the GEICO policy pertained only to liability coverage, and not to UIM coverage. The court observed that Arizona law imposes mandatory insurance requirements on nonresidents only with respect to liability coverage, and the clause, therefore, could not reasonably be construed to incorporate Arizona law regarding UIM coverage into the policy.

The court in Beckler v. State Farm Mutual Automobile Insurance Co.^[143] chose not to follow Government Employees Insurance Co. v. Fenton^[144] in determining the governing state law regarding whether stacking would be permitted under State Farm's uninsured motorist policy issued in Nebraska.^[145]

The court in Beckler found that Fenton was not controlling on the choice of law question because the statutory language in A.R.S. Sec. 20-259.01 limiting the applicability of the statute to policies issued or delivered in Arizona had since been deleted from the statute...