Whose law applies to insurance claims for hurricane damage? At first glance, one would expect the law of the jurisdiction where the hurricane took place to apply. Indeed, in most cases that would make the most sense for multiple reasons. However, this may not always be the case.

Insurance policies are in essence contracts, and as such, the law of contracts typically governs insurance disputes. Oftentimes the parties may contract in one jurisdiction to cover property or conduct in another jurisdiction. When this happens a conflict of law issue may arise. Conflict of law is an independent area of law that addresses the question of whose law will apply to a dispute. Depending on the jurisdiction, the courts may use different conflicts rules.

Historically, the conflict of law rule that applied to contracts was lex loci contractus. Under this rule, the court applied the law of the jurisdiction where the contract was executed. This means that if the parties enter into an insurance contract in Texas, Texas law would apply even if the policy was to cover property or events outside of Texas. The modern trend, however, has been to adopt the more equitable “significant relationship” test to determine whose law applies. Under the significant relationship test, the court will not only look at where the contract was executed, but also where negotiations took place, where performance was to occur, where the subject of the contract is located, and where the parties are. The courts that have adopted the significant relationship test have reasoned that it gives the court more flexibility to be fair in light of all circumstances involved in a case.

In Florida, the Supreme Court has taken a different approach. In 1988, the Florida Supreme Court decided Sturiano v. Brooks, 523 So. 2d 1126 (Fla. 1988). In Sturiano, the court stuck with lex loci contractus to determine whose law to apply in an automobile insurance case, but expressly limited the application of lex loci contractus to automobile cases. The concern was changing an agreement to apply the law of another state if the insured drove an insured automobile across state lines. Years later, in 2006, the Florida Supreme Court decided another automobile case, State Farm Mut. Auto. Ins. Co. v. Roach, 945 So. 2d 1160 (Fla. 2006). In Roach, the Supreme Court again applied lex loci contractus to an automobile case. Although the facts of Sturiano were almost identical to Roach and involved automobiles that had crossed state lines, the language in the Roach opinion did not expressly limit the holding to automobile insurance.

In 2008 the Eleventh Circuit Court of Appeals specifically asked the Florida Supreme Court whether the Roach case and the lex loci contractus doctrine applied to insurance risks that were fixed and permanently located in Florida in the case of U.S. Fid. & Guar. Co. v. Liberty Surplus Ins. Co., 550 F. 3d 1031, 1035 (11th Cir. 2008). Unfortunately, the Florida Supreme Court never answered the question before the case was dismissed. Since then, many Florida state and federal courts have held that lex loci contractus applies to all insurance contracts, even when the contract was to insure a property located in Florida for events like hurricanes that happen in Florida. In effect, this means that Nebraska law could govern a Florida hurricane insurance claim if the insurance contract was executed in Nebraska, even though Nebraska hurricane law is not nearly as developed as Florida hurricane law (for obvious reasons).

Is this the right result? Should it be? Is it fair and equitable to permit an insurance company to avoid application of Florida hurricane law simply by executing the contract in another state with more favorable laws? We know that insurance companies calculate premiums based on risks, and often charge higher premiums in Florida to cover hurricane risks that are unique to Florida, so is it fair to apply the law of another state based on a rigid choice of law doctrine? Even if these answers to these questions point back to Florida law, the reality is that under Roach, Florida courts have been rigidly applying lex loci contractus and applying the law of other states to Florida hurricane claims.

What does this mean from a practical standpoint? Looking to the location the policy was executed may help establish the rights and responsibilities of the party early on in a case by determining whose law will apply.