                                Cite as 2014 Ark. App. 120

                ARKANSAS COURT OF APPEALS
                                    DIVISIONS I & II
                                     No. CV-13-524


                                                Opinion Delivered   February 19, 2014
JOEY HOOSIER ET AL.
                             APPELLANTS         APPEAL FROM THE GARLAND
                                                COUNTY CIRCUIT COURT
V.                                              [NO. CV-10-952]

                                                HONORABLE MARCIA R.
INTERINSURANCE EXCHANGE OF                      HEARNSBERGER, JUDGE
THE AUTOMOBILE CLUB
                    APPELLEE                    AFFIRMED



                          JOHN MAUZY PITTMAN, Judge

       This case involves a motor-vehicle accident that occurred on September 10, 2009,

in Arkansas. Appellants were traveling on Interstate 30 when they were struck head-on by

a vehicle driven by Jerry Adams. Mr. Adams, who was determined to be at fault in that

accident, had automobile insurance with a policy limit of $50,000. Appellant Cyrena

Hoosier sustained severe injuries and incurred approximately $200,000 in medical bills. Mrs.

Hoosier was an insured on an automobile-insurance policy issued by appellee Interinsurance

Exchange (AAA) with a limit of $50,000 for damages caused by an underinsured motorist.

Appellants brought an action against AAA asserting that they were entitled to underinsured-

motorist benefits under their policy. The trial court granted summary judgment to appellee

AAA, and this appeal followed. We affirm.

       The crucial question in this case is whether the law of California or that of Texas

should be applied in interpreting the underinsured-motorist provisions of appellants’
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insurance policy. The Arkansas Supreme Court has long held that matters bearing upon the

interpretation of a contract are to be determined by the law of the place where it is made.

Howcott v. Kilbourn, 44 Ark. 213 (1884). Appellants were residents of California when their

automobile-insurance policy was issued in that state on March 21, 2009, under the auspices

of the AAA Automobile Club of Southern California. The policy expiration date was March

21, 2010. Part IV of the insurance contract sets out the terms of the uninsured and

underinsured-motorist coverage (Coverage F). The definitions section of Coverage F

provides that:

       Underinsured motor vehicle — means a motor vehicle which at the time of the
       accident is either:

       (a) insured under a motor vehicle liability policy or an automobile liability insurance
       policy; or

       (b) self-insured; or

       (c) covered under a cash deposit or bond posted to satisfy a financial responsibility
       law;

       but for an amount that is less than the limits shown in the declarations for
       COVERAGE F.

       The policy language mirrors the definition of underinsured motor vehicle set out by

the California legislature in California Insurance Code § 11580.2(p)(2) (Deering 2009).1 The

meaning of this provision under California law is clear:




       1
        “‘Underinsured motor vehicle’ means a motor vehicle that is an insured motor
vehicle but insured for an amount that is less than the uninsured motorist limits carried on
the motor vehicle of the injured person.”

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       Underinsurance coverage does not apply unless the tortfeasor’s vehicle is an
       underinsured motor vehicle. An underinsured motor vehicle, by definition, is a
       vehicle insured for an amount that is less than the uninsured/underinsured motorist
       limits carried by the injured person. Thus, if the tortfeasor is insured for an amount
       equal to or greater than the uninsured/underinsured limits of the injured person, that
       person never gets to collect any underinsurance coverage.

State Farm Mutual Automobile Insurance Co. v. Messinger, 283 Cal. Rptr. 493, 496 (Cal.

Dist. Ct. App. 1991).

       In the present case, the tortfeasor (Adams) was insured for liability for bodily injury

in the amount of $50,000 per person. The uninsured/underinsured-motorist limits of the

injured persons (appellants) were likewise in the amount of $50,000 per person. The

amounts being equal, appellants’ underinsured-motorist coverage under their AAA policy

was, under California law, never triggered, and they are not entitled to collect any

underinsurance amount from AAA. See id.

       Recognizing this, appellants assert no claim under California law. Instead, they argue

that the provisions of their insurance policy are governed by Texas law because they had

moved to Texas three months before the wreck, as reflected on a change to the declarations

page of their policy noting that their residence had changed to Houston, Texas, effective

June 4, 2009, and that there would be no change to the premium. Appellant Joey Hoosier

asserted that, when he went to appellee’s office and notified their insurer of their move, he

was told that the policy “was converted to a Texas Policy.” The location of the branch

office and the employee to whom Mr. Hoosier spoke were not identified. Appellants argue

that this presented a question of material fact that precluded the grant of summary judgment,

and that the trial court therefore erred by granting it.

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       Summary judgment may be granted only when there are no genuine issues of material

fact to be litigated and the moving party is entitled to judgment as a matter of law.

Nationwide Mutual Fire Insurance Co. v. Citizens Bank & Trust Co., 2014 Ark. 20, ___ S.W.3d

___. Once the moving party has established a prima facie entitlement to summary judgment,

the opposing party must meet proof with proof and demonstrate the existence of a material

issue of fact. Holt Bonding Co. v. First Federal Bank, 82 Ark. App. 8, 110 S.W.3d 298 (2003).

On appeal from the grant of summary judgment, we determine if there are genuine issues

of material fact in dispute by viewing the evidence in the light most favorable to the party

resisting the motion and resolving any doubts and inferences against the moving party.

Nationwide Mutual Fire Insurance Co., supra. As to the issues of law presented, our review is

de novo. Id.

       Whether appellants’ move caused their California-issued insurance to be “converted

to a Texas Policy” is a matter of law, not of fact, and we therefore afford no weight to the

asserted hearsay statement of an unidentified branch-office employee in determining whether

summary judgment was proper. Instead, we look to the insurance contract itself. Although

the policy-change declarations page did reflect a change of residence by appellants, it

expressly stated that “[t]hese declarations, together with the contract and the endorsements

in effect, complete your policy.” The only reasonable conclusion to be drawn from this

language is that the original California policy remained in effect despite appellants’ residence

change.




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       The only reference to a change of primary residence as affecting a policy provision

appears in the “Guaranteed Renewal Endorsement” in which the insurer agreed not to

cancel or refuse to renew the policy, but which stated that this agreement would become

void upon the occurrence of specific enumerated events, including if “[y]our primary

residence is outside the state of California.” Plainly, the agreement that would become void

upon such a change of residence was the agreement to guarantee renewal; with respect to

the policy per se, the Guaranteed Renewal Endorsement expressly provides that “[a]ll

provisions of your policy not affected by this endorsement remain unchanged.”

       In the absence of any material change to the policy provisions upon appellants’ change

of residence, the only remaining question is whether the change of residence from California

to Texas had the legal effect of changing the state in which the insurance policy was issued.

Under Arkansas law, it did not. The law of the place where the contract was made prevails.

Lincoln National Life Insurance Co. v. Reed, 234 Ark. 640, 353 S.W.2d 521 (1962).

       The validity, interpretation and obligation under a policy applied for, executed and
       delivered to the insured in one state has been held governed by the law of that state,
       though the insured subsequently moved elsewhere. The laws of the latter place apply
       only to remedy and procedure.

Id. at 643, 353 S.W.2d at 523.

       Affirmed.

       GLADWIN, C.J., and WALMSLEY and WOOD, JJ., agree.

       HIXSON and BROWN, JJ., dissent.

       KENNETH S. HIXSON, Judge, dissenting. On the facts of this case I believe the trial

court erred in applying California law to the Hoosiers’ underinsured-motorist claim against

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the appellee. Because Texas law should have been applied, I dissent from the majority’s

holding and would reverse and remand.

       In this case the parties agree that if California law applies, the Hoosiers are not eligible

to receive UIM benefits. However, if Texas law applies, the Hoosiers are entitled to UIM

benefits assuming their damages exceed the limits of the tortfeasor’s policy as they claim.

       In deciding whether California or Texas law should apply, there are two significant

Arkansas cases. In reaching its conclusion that California law applies to this case, the majority

relies on Lincoln Life v. Reed, 234 Ark. 640, 353 S.W.2d 521 (1962). Lincoln generally stands

for the proposition that the doctrine of lex loci contractus (lex loci) should apply in a choice-of-

law insurance case. Lexi loci provides that the law of the jurisdiction where the contract was

entered into should apply. One of the primary rationales behind the lex loci rule is that the

law associated with the location of risk should control. The supreme court in Lincoln held

that, where the insured purchased several disability policies in Tennessee and later moved to

Arkansas, the law of Tennessee applied to his disability claim.

       The second case is Southern Farm Bureau Casualty Insurance Co. v. Craven, 79 Ark. App.

423, 89 S.W.3d 369 (2002). In that case, the Cravens were Arkansas residents and purchased

an auto-insurance policy through Southern Farm Bureau. The Cravens were injured in an

accident in Colorado, and they asked the Arkansas court to apply Colorado law, which

mandated significantly higher UIM coverage than that required under Arkansas law. The trial

court declined to apply Colorado law, and we affirmed.




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       In Craven, we acknowledged that choice-of-law questions regarding insurance

coverage have traditionally been resolved by applying the lex loci rule. However, we also

observed that, in addition to the easy applicability of the lex loci rule, courts sometimes

consider, in addition to the place where the contract was made, which state has the most

“significant contacts” with the issue at hand. The contacts to be taken into account include

(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. Craven,

supra. We noted in Craven that Arkansas courts have not applied the significant contacts

analysis in a case involving an insurance contract, but it has been applied in the case of

ordinary contracts. See Ducharme v. Ducharme, 316 Ark. 482, 872 S.W.2d 392 (1994).

       In Craven, we held that whether the lex loci rule or the significant contacts analysis was

applied, the insurance contract at issue was governed by Arkansas law. That was because

although the traffic accident occurred in Colorado, the auto-insurance contract was made in

Arkansas, and virtually all significant contacts were with the state of Arkansas. The insureds

were Arkansas residents, the contract was written through an Arkansas agent, the insured

vehicles were registered and principally located in Arkansas, and the policy complied with

Arkansas law regarding minimum coverages.

       It should be noted that the insurance policy at issue in Lincoln was a disability policy

as opposed to an automobile policy, and the underwritten risk for disability would not be

significantly different for Tennessee versus Arkansas. It should also be noted that the Lincoln


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court relied in part on the 1962 version of Appleman on Insurance, and that since that time

there have been significant changes to insurance law and in the itinerant nature of our society

in general. While the lex loci approach was dominant in 1962, the “significant contacts” test

has since gained popularity.

       The 2013 version of Appleman is more on point than the 1962 version cited in Lincoln.

Appleman on Insurance § 6.02[2][a] (2013) provides in part:

              The lex loci rule was adopted in the first Restatement of Conflict of Laws in
       1934. The primary virtues of the rule were thought to be simplicity and certainty,
       although its application has become more complex in modern times. Once the
       majority rule, it is now followed by only ten states. [Arkansas was not cited as one of
       the ten states].

Under the modern Restatement 2d rule, the most significant relationship test is now the

majority approach, as many states have found the traditional lex loci test too rigid in its

application. Restatement 2d § 193 provides, “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 some other state had a more significant relationship to the

transaction and the parties. Appleman on Insurance § 6.02 [3][b] (2013).

       Similarly, C.J.S. on Insurance, also cited in Lincoln, more recently sets forth the

significant relationship test. 44 C.J.S. Insurance § 28 (2007) provides:

       Fire, surety and casualty insurance: In the absence of an effective choice of law by the
       parties, 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 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. . . . For purposes of this test, an insured risk is the object or activity

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       which is the subject of the insurance, and it has its principal location in the state where
       it will be during at least the major portion of the insurance period. Under this test, even
       if the principal location of the risk shifts to some state other than the state at the time of
       contracting, application of the law of the other state would not be unfair to the insurance company
       if the insurance company had reason to foresee there might be a shift in location (emphasis
       added).

       Turning to the facts in the case at bar, the auto-insurance policy purchased by the

Hoosiers in March 2009 was undeniably a California policy at that time. The insurance

contract issued in California contained a “guaranteed renewal endorsement” providing that

the agreement became void in the event that the Hoosier’s residence was outside of

California. However, in June 2009 Joey Hoosier notified his insurance agent that the

Hoosiers had moved from California to Texas, and in his affidavit Mr. Hoosier stated that the

agent informed him that the insurance contract was converted to a Texas policy and that no

additional premium was required. The appellee insurance company, IEAC, was authorized

to issue insurance policies in Texas, and in June 2009 it acknowledged the move to Texas and

issued a new declaration sheet reflecting the new Texas address.

       In my view, this case is governed by Texas law whether we use the lex loci contractus

approach or the significant contacts approach. Even though the contract was originally made

in California, it was effectively reissued in the state of Texas after the Hoosiers moved there

and IEAC issued a written policy change for a change of residence, with a policy-change

effective date of June 4, 2009. Even under lex loci, one of the most important underlying

rationales is the location of the risk. Here, the location of the primary risk was in Texas, and

IEAC was fully aware of that location. Under the significant relationship approach, all the



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contacts are in Texas. The only relationship with California is that California is probably

where the premiums were sent.

       Therefore, in my view the trial court erred in applying California law and thereby

entering summary judgment for IEAC. Because Texas law should have been applied, and the

parties agree that under Texas law the Hoosiers may make a claim for underinsured-motorist

benefits in excess of the tortfeasor’s policy limits, the summary judgment should be reversed.

I would reverse the summary judgment and remand for a trial for the Hoosiers to present

evidence of their damages.

       BROWN, J., joins.

       Paul Pfeifer, for appellants.

       Laser Law Firm, P.A., by: James M. Duckett, for appellee.




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