Insurance Policy Covering Multi-State Risks Governed by Law of State Where Insured is Domiciled

On December 11, 2013, the Second Department issued a decision in QBE Ins. Corp. v. Adjo Contracting Corp., 2013 NY Slip Op. 08238, discussing the choice of law rules determining which law governs the interpretation of a liability insurance policy.

The Second Department wrote:

In the context of liability insurance contracts, the jurisdiction with the most significant relationship to the transaction and the parties will generally be the jurisdiction which the parties understood was to be the principal location of the insured risk. However, where it is necessary to determine the law governing a liability insurance policy covering risks in multiple states, the state of the insured's domicile should be regarded as a proxy for the principal location of the insured risk.

The rule that an insurance policy covering multi-state risks is governed by the law of the state where the insured is domiciled (as opposed, for example, to the location of the occurrence that triggers coverage) allowed two insurance companies in QBE Ins. Corp. to avoid the duty to defend. Attorneys and businesses should bear the choice of law rules in mind when negotiating, or preparing to assert claims under, insurance policies covering multi-state risks.