Choice of Law by Judicial Estoppel

COMMERCIAL LIABILITY – CHOICE OF LAW
Appalachian Ins. Co. v. Di Sicurata
(1st Dept., decided 3/17/2009)

Question:  If a liability insurance policy does not contain a choice-of-law clause and covers risks in multiple states, which state's law should govern the interpretation application of policy provisions?  Answer:  the state of the insured's "domicile", meaning the principal place of business of a corporate insured.  If an insured has previously obtained judicial rulings in its favor on a particular state being its principal place of business, the doctrine of judicial estoppel applies to preclude the insured from relitigating that issue. 

So held the First Department in this case, with respect to General Electric Company:

We have held that a contract of liability insurance is "governed by the law of the state which the parties understood was to be the principal location of the insured risk ...'" (Certain Underwriters at Lloyd's, London v Foster Wheeler Corp., 36 AD3d 17, 22-23 [2006], affd 9 NY3d 928 [2007]), that "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" (id. at 24) and that a corporate insured's domicile is the state of its principal place of business (id. at 25). The contracts of liability insurance at issue here, which do not contain choice-of-law clauses and cover risks that are spread through multiple states, were purchased by GE, which, having obtained rulings in its favor as to its principal place of business (see e.g. Gafford v General Elec. Co., 997 F2d 150, 161-163 [6th Cir 1993]; Northeast Nuclear Energy Co. v General Elec. Co., 435 F Supp 344, 347-348 [D Conn 1977]), is judicially estopped from denying that its principal place of business is New York (see e.g. D & L Holdings, LLC v RGC Goldman Co., 287 AD2d 65, 71 [2001], lv denied 97 NY2d 611 [2002]; Bankers Trustee Co. Ltd. v First Mexican Acceptance Corp., 273 AD2d 81, 81 [2000], lv denied 95 NY2d 766 [2000]). Accordingly, we find New York law controlling in this matter. 

Believe it or not, all state courts don't agree on insurance coverage issues -- liability or otherwise.  An insured may want the law of another state to apply to a particular coverage dispute because that law -- usually case law -- is more favorable to the insured on the disputed issue or issues at hand.  In this case, GE apparently sought unsuccessfully to have the law of a state other than New York apply to the coverage issues in this declaratory judgment action. However, in other cases, GE had previously convinced the US 6th Circuit Court of Appeals (Kentucky, Michigan, Ohio and Tennessee) and US District Court of Connecticut that its principal place of business was New York.  New York it was, then, ruled the First Department.