Insurance policies are complicated enough without getting into what law from what state will apply. Some policies have a special “choice of law” or “governing law” provision that allows the parties to agree that a particular state’s laws will be used to interpret the agreement even if the insured lives in a different state.
In New York, General Obligations Law § 5-1401 was passed by the New York Legislature in 1984 to allow parties without New York Contacts to choose New York law to govern their contracts. The statute provides:
The parties to any contract, agreement or undertaking, contingent or otherwise, in consideration of, or relating to any obligation arising out of a transaction covering in the aggregate not less than two hundred fifty thousand dollars…may agree that the law of this state shall govern their rights and duties in whole or in part, whether or not such contract, agreement or undertaking bears a reasonable relation to this state.
Most contracts for property insurance carry a policy limit at $250,000 or above for building or personal property coverage. That makes most insurance policies fall within the purview of the statute. Adjusters and attorneys should be aware of the choice of law provisions in their insurance contracts because it could greatly alter an insured’s rights. For example, New York courts have upheld the insurance carrier’s right to modify the statute of limitations to only one year from the date of loss.1 If you have an out-of-state property but your insurance carrier has a choice of law provision for New York, most likely your policy will be subject to New York law and a one-year statute of limitations will be enforceable regardless of your own states rules, statutes, or regulations. In IRB-Brasil Resseguros v. Inepar Investments,2 the Court of Appeals held that under N.Y. General Obligations Law § 5-1401, New York courts must apply New York law without conducting a choice of law analysis.
I leave you with a quote by former coach and current President of the Miami Heat, Pat Riley: “You have no choices about how you lose, but you do have a choice about how you come back and prepare to win again.”
1 See e.g., Kozemko v. Griffith Oil Co., 256 A.D.2d 1199, 1200 (1998), H.P.S. Capitol, Inc. v. Mobil Oil Corp., 186 A.D.2d 98, 99 (1992).
2 IRB-Brasil Resseguros, S.A. v. Inepar Invs., S.A., 20 N.Y.3d 310, 315-16 (N.Y. 2012).