Ohayon v. Safeco Ins. Co. of Illinois - Ohio Supreme Court Opinion - Ohio Supreme Court Decision

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[Cite as Ohayon v. Safeco Ins. Co. of Illinois, 91 Ohio St.3d 474, 2001-Ohio-100.]

OHAYON ET AL., APPELLANTS, v. SAFECO INSURANCE COMPANY OF ILLINOIS,
APPELLEE.
[Cite as Ohayon v. Safeco Ins. Co. of Illinois (2001), 91 Ohio St.3d 474.]
Insurance -- Motor vehicles -- Action by insured against insurance carrier for
payment of underinsured motorist benefits is a cause of action sounding
in contract, rather than tort, even though tortious conduct triggers
applicable contractual provisions -- 1 Restatement of the Law 2d,
Conflict of Law (1997), Section 205, applied.
(No. 00-262 -- Submitted November 29, 2000 -- Decided May 30, 2001.)
APPEAL from the Court of Appeals for Summit County, No. 19617.
__________________
SYLLABUS OF THE COURT
1. An action by an insured against his or her insurance carrier for payment of
underinsured motorist benefits is a cause of action sounding in contract,
rather than tort, even though it is tortious conduct that triggers applicable
contractual provisions. (Landis v. Grange Mut. Ins. Co. [1998], 82 Ohio
St.3d 339, 341, 695 N.E.2d 1140, 1141, followed.)
2. Questions involving the nature and extent of the parties' rights and duties
under an insurance contract's underinsured motorist provisions shall be
determined by the law of the state selected by applying the rules in
Sections 187 and 188 of the Restatement of the Law 2d, Conflict of Laws
(1971). (1 Restatement of the Law 2d, Conflict of Laws [1971], Section
205, applied.)
__________________

COOK, J. In their sole proposition of law, appellants ask this court to hold
that when an insured under an automobile insurance policy issued in Ohio is

SUPREME COURT OF OHIO
injured in an automobile accident in another state, coverage under the
uninsured/underinsured motorist provisions of the policy is determined by the law
of the state in which the injury occurred. For the following reasons, we decline to
adopt this proposition and instead affirm the judgment of the court of appeals.
I. Background

In 1996, Safeco Insurance Company of Illinois ("Safeco") issued an
automobile insurance policy to Summit County residents Jacob and Brenda
Ohayon. The policy covered three vehicles and provided underinsured ("UIM")
motorist coverage limited to $100,000 per person and $300,000 per occurrence.
The policy contained a setoff provision providing that "the limit of liability [for
UIM coverage] shall be reduced by all sums paid because of bodily injury by or
on behalf of persons or organizations who may be legally responsible." (Boldface
sic.) The policy also contained an antistacking clause providing that "[i]n no
event shall the limit of liability for two or more vehicles or two or more policies
be added together, combined, or stacked to determine the limit of insurance
coverage available to injured persons."

In 1996, Jacob and Brenda's son Jonathon--who lived at the Ohayons'
Ohio residence--visited Pennsylvania, where he was struck by an automobile.
Jonathon sustained serious leg injuries and eventually settled his claim against the
tortfeasor for the $100,000 limit of the tortfeasor's liability coverage.

Jacob, Brenda, and Jonathon Ohayon filed a complaint against Safeco in
the Summit County Court of Common Pleas, seeking a declaratory judgment that
they were entitled to recover benefits under the UIM provisions of their Safeco
policy. The Ohayons sought a declaration (1) that Pennsylvania tort law applied
to Jonathon's UIM claims; (2) that Pennsylvania law entitled Jonathon to stack
the coverage amounts for each vehicle insured under the Safeco policy, up to
$300,000 plus interest and costs; (3) that Pennsylvania law precluded Safeco from
setting off the amount already paid by the tortfeasor's insurer in settlement; (4)
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January Term, 2001
that due to the loss of their son's consortium, Jonathon's parents could each
collect the per-person limit of the UIM coverage provided in the policy, stacking
the policy limits to a combined total of $600,000; and (5) that they were entitled
to attorney fees and prejudgment interest.

Safeco conceded that Jacob and Brenda Ohayon were named insureds
under the Safeco policy in effect on the date of the accident and admitted that
Jonathon Ohayon, if a resident of the Ohayon household, was also an insured.
Safeco denied, however, that the plaintiffs could recover the UIM benefits that
they sought under the applicable policy provisions.

Following discovery, the Ohayons moved for partial summary judgment
on the coverage issues. In this motion, the Ohayons reiterated their claims that
under Ohio's choice-of-law analysis, Pennsylvania law controlled, that therefore
Safeco was precluded from setting off the funds that Jonathon had already
received in settlement, and that Pennsylvania law permitted the Ohayons to stack
their claims. In its response, Safeco contended that R.C. 3937.18 applied and
entitled it to judgment as a matter of law.

The common pleas court held that the Ohayons' claims "are largely based
upon tort law and thus tort law governs," and agreed with the Ohayons that
Pennsylvania law applied. The court thus concluded that, in spite of the
antistacking provision in the Safeco policy, Pennsylvania's Motor Vehicle
Financial Responsibility Law, 75 Pa.Cons.Stat. 1738, permitted the Ohayons to
stack the stated limits of UIM coverage. The trial court also concluded that
Pennsylvania law precluded Safeco from setting off the amount already paid by
the tortfeasor's insurer in settlement. Safeco appealed the trial court's order to the
Summit County Court of Appeals.

The court of appeals unanimously reversed the lower court's decision,
concluding that the trial court erred when it applied Pennsylvania law instead of
Ohio law to determine the UIM coverage issues under the insurance contract.
3

SUPREME COURT OF OHIO
Though the court of appeals determined that Ohio's UIM law was the proper law
to apply, it concluded that a material fact remained in dispute regarding which
version of Ohio's UIM statute should apply. Accordingly, the court of appeals
remanded the cause. The Ohayons appealed, and the cause is before this court
upon the allowance of a discretionary appeal.
II. Choice of Law

Because the Ohayons seek a declaration that Pennsylvania law should
apply to resolve the coverage issues in this action, and because the incident
underlying their cause of action occurred in Pennsylvania, resort to Ohio's choice-
of-law rules is necessary. Our state's choice-of-law rules "do not themselves
determine the rights and liabilities of the parties, but rather guide decision as to
which local law rule will be applied to determine these rights and duties." 1
Restatement of the Law 2d, Conflict of Laws (1971) 3, Section 2, Comment a(3).

The Restatement's choice-of-law rules depend on the "classification of a
given factual situation under the appropriate legal categories and specific rules of
law." Id. at 18, Section 7, Comment b. We must classify the Ohayons' cause of
action before we answer the choice-of-law question raised in their complaint
because different choice-of-law rules apply depending on whether the cause of
action sounds in contract or in tort. Compare Schulke Radio Prod., Ltd. v.
Midwestern Broadcasting Co. (1983), 6 Ohio St.3d 436, 6 OBR 480, 453 N.E.2d
683 (contract), with Morgan v. Biro Mfg. Co., Inc. (1984), 15 Ohio St.3d 339, 15
OBR 463, 474 N.E.2d 286 (tort).

We apply different choice-of-law principles to actions sounding in
contract than to actions sounding in tort for several reasons. For one, the parties
to a contract are largely free to negotiate the law to be applied to disputes arising
thereunder. See 1 Restatement of Conflicts at 15, Section 6, Comment g; see,
also, id. at Section 187. In the absence of such a choice, the Restatement's
4

January Term, 2001
contractual choice-of-law rules seek to protect the justified expectations of the
contracting parties. See id. at 576, Section 188, Comment b.

Unlike a contracting party, on the other hand, a negligent tortfeasor acts
without a conscious regard for the legal consequences of his or her conduct--let
alone the particular law to be applied to that conduct--and the parties contesting
liability and/or the appropriate measure of damages for the conduct thus "have no
justified expectations to protect." Restatement at 15, Section 6, Comment g.
Accordingly, the Restatement and courts emphasize different factors when
resolving choice-of-law issues in these contextually distinct legal fields.
III. Choosing the Applicable Law in Causes of Action Sounding in Contract
In
Schulke, supra, this court adopted Section 187 of the Restatement of
Conflicts. Schulke, 6 Ohio St.3d at 438-439, 6 OBR at 482, 453 N.E.2d at 686.
Section 187 provides that, subject to very limited exceptions, the law of the state
chosen by the parties to a contract will govern their contractual rights and duties.
The very next section of the Restatement, Section 188, enumerates factors that
courts should consider in the absence of such a choice, and soon after Schulke this
court expressly adopted Section 188 in Gries Sports Ent., Inc. v. Modell (1984),
15 Ohio St.3d 284, 15 OBR 417, 473 N.E.2d 807, syllabus.
In
Gries, minority shareholders in Cleveland Browns, Inc., a Delaware
corporation, filed an action in Ohio seeking specific performance of a voting
agreement that they had executed over fifteen years earlier with Arthur Modell,
the majority shareholder. The parties to the voting agreement had not chosen a
particular forum's law to be applied to any controversies arising thereunder. If
Delaware law applied to the minority shareholders' cause of action, the voting
agreement would have statutorily lapsed by the time the minority shareholders
brought their action and thus could not have been specifically performed.
Accordingly, this court had to determine which forum's law applied before
assessing the merits of the minority shareholders' complaint.
5

SUPREME COURT OF OHIO

To resolve the choice-of-law issue, the Gries court examined the factors in
Section 188 of the Restatement. Section 188 provides that, in the absence of an
effective choice of law by the parties, their rights and duties under the contract are
determined by the law of the state that, with respect to that issue, has "the most
significant relationship to the transaction and the parties." Restatement at 575,
Section 188(1). To assist in making this determination, Section 188(2)(a) through
(d) more specifically provides that courts should consider the place of contracting,
the place of negotiation, the place of performance, the location of the subject
matter, and the domicile, residence, nationality, place of incorporation, and place
of business of the parties.

Applying the foregoing principles to the voting agreement executed by the
shareholders in Gries, this court determined:

"[T]he place of contracting was Ohio, the place of negotiation was Ohio,
the place of performance was Ohio, the location of the subject matter of [the]
contract was Ohio, the place of incorporation was Delaware, and the place of
business of the parties was Ohio. The conclusion is inescapable that Ohio `bears
the most significant relationship to the contract.' " Gries, 15 Ohio St.3d at 287, 15
OBR at 420, 473 N.E.2d at 810, quoting Schulke, 6 Ohio St.3d at 438, 6 OBR at
482, 453 N.E.2d at 685-686.

Accordingly, this court reversed the court of appeals' decision to apply
Delaware law.
IV. The Application of Gries and Section 188 to Insurance Coverage Disputes:
Nationwide Mut. Ins. Co. v. Ferrin

Just over a year after Gries, this court applied Section 188 to resolve a
choice-of-law issue that arose in a dispute over insurance coverage. Nationwide
Mut. Ins. Co. v. Ferrin (1986), 21 Ohio St.3d 43, 44-45, 21 OBR 328, 330, 487
N.E.2d 568, 569 (citing Gries and Section 188 as "controlling law"). The
application of Ohio's contractual choice-of-law analysis to such a dispute was not
6

January Term, 2001
a surprising development, considering that this court has long held that an
insurance policy is a contract between the insurer and the insured. Ohio Farmers
Ins. Co. v. Cochran (1922), 104 Ohio St. 427, 135 N.E. 537, syllabus.

In Ferrin, an employee of a trucking company headquartered in Florida
drove a tractor and attached trailer from Florida on his way to Michigan on
company business. One weekend during this trip, the driver separated the trailer
from the tractor in Dayton, Ohio, and drove the tractor to his parents' residence in
Orient for a personal visit. On his way to his parents' home, the driver had an
accident. His employer's insurer filed a complaint in Ohio seeking a declaration
that the driver was not covered by the insurance policy that it had issued to the
driver's employer. The employer's insurance policy covered employees using
covered vehicles "with [the employer's] permission," but an employee handbook
indicated that the driver should not have been operating the company tractor for
his personal use.

Because the applicable insurance policy was issued to the driver's Florida
employer, but the insurer's complaint was filed here in Ohio, it was necessary for
the trial court to determine which state's law would apply to resolve the
controversy about coverage. The trial court determined that Florida law applied
and that under Florida law the driver was indeed covered by the policy issued to
his employer. Both the court of appeals and this court agreed. Applying the
factors enumerated in Section 188 of the Restatement, this court noted in Ferrin
that the insurance contract had been issued to the driver's Florida employer at the
employer's Florida address. Id. at 45, 21 OBR at 330, 487 N.E.2d at 570. Thus
Florida law controlled the question of whether the policy covered the employee
during his personal trip to see his parents. Id.

After summarizing Ohio choice-of-law precedent in contract cases, the
Ferrin court proceeded to apply Florida law to the merits of the case. The Ferrin
court observed that, at the time, Florida courts apparently adhered to the "initial
7

SUPREME COURT OF OHIO
permission rule." Id. at 45, 21 OBR at 330, 487 N.E.2d at 570. Under that rule,
once an owner gave express or implied consent to another to operate the owner's
automobile, the owner became liable for its negligent operation no matter where
the driver went. Id., citing Boggs v. Butler (1937), 129 Fla. 324, 326, 176 So.
174, 176. Florida courts had applied the Boggs rule both with respect to the
vehicle owner's liability and with respect to the scope of the owner's insurance
coverage. Ferrin at 46, 21 OBR at 331, 487 N.E.2d at 571. For these reasons,
this court affirmed the lower courts' decision in favor of coverage. Id.
In
Ferrin, the application of Florida law ultimately resulted in an outcome
favorable to the driver-insured. If, however, the insurance policy had been issued
in a state that did not adhere to the "initial permission rule," and if a consideration
of Section 188's factors had resulted in applying that state's law, the final
outcome of the insurer's declaratory judgment action may have been different.
We note this possibility simply to underscore the fact that Section 188's choice-
of-law methodology does not, in and of itself, favor either insureds or insurers in
disputes over insurance coverage. As noted above, the choice-of-law rules
contained in Section 188 do not themselves determine the actual rights and
liabilities of the parties to a contract; they simply decide which forum's local law
should apply in determining those rights and liabilities. See Restatement at 3,
Section 2, Comment a(3). The factors enumerated in Section 188 are keyed to the
justifiable expectations of the parties to the contract, not to the ultimate benefit of
one party over another. See id. at 15, Section 6, Comment g.

Section 188's choice-of-law methodology focuses on the place of
contracting, the place of negotiation, the place of performance, the location of the
subject matter, and the domicile of the contracting parties. In insurance cases, this
focus will often correspond with the Restatement's view that the rights created by
an insurance contract should be determined "by the local law of the state which
the parties understood was to be the principal location of the insured risk during
8

January Term, 2001
the term of the policy, unless with respect to the particular issue, some other state
has a more significant relationship * * * to the transaction and the parties."
(Emphasis added.) Restatement at 610, Section 193. "[I]n the case of an
automobile liability policy, the parties will usually know beforehand where the
automobile will be garaged at least during most of the period in question." Id. at
611, Comment b. The principal location of the insured risk described in Section
193 neatly corresponds with one of Section 188's enumerated factors--the
location of the subject matter of the contract.
V. The Application of Section 188, Gries, and Ferrin to Choice-of-Law Issues
Arising in Disputes Over UIM Coverage
After
Ferrin, application of the Restatement's contractual choice-of-law
provisions to liability insurance cases is no longer a subject of dispute in Ohio.
See Babcock & Wilcox Co. v. Arkwright-Boston Mfg. Mut. Ins. Co. (N.D.Ohio
1992), 867 F.Supp. 573, 577 (deciding, in a diversity action regarding liability
coverage, that "the determinative Ohio choice of law rules" are set forth in Ferrin
and Gries). Similarly, resort to the Restatement's contractual choice-of-law
provisions in declaratory judgment actions seeking UIM coverage should no
longer be a subject of dispute. This court has determined that an action by an
insured against his or her insurance carrier for payment of UIM benefits is a cause
of action sounding in contract, rather than tort, even though it is tortious conduct
that triggers applicable contractual provisions. Landis v. Grange Mut. Ins. Co.
(1998), 82 Ohio St.3d 339, 341, 695 N.E.2d 1140, 1141; see, also, Miller v.
Progressive Cas. Ins. Co. (1994), 69 Ohio St.3d 619, 624, 635 N.E.2d 317, 321
("We recognize that an action by an insured against an insurance carrier for
payment of uninsured or underinsured motorist benefits is a cause of action
sounding in contract"); Kurent v. Farmers Ins. of Columbus, Inc. (1991), 62 Ohio
St.3d 242, 245, 581 N.E.2d 533, 536 ("The Kurents' claim for uninsured motorist
coverage is determined by their contractual relationship with Farmers"); Motorists
9

SUPREME COURT OF OHIO
Mut. Ins. Co. v. Tomanski (1971), 27 Ohio St.2d 222, 223, 56 O.O.2d 133, 134,
271 N.E.2d 924, 925 ("The right to recover under an uninsured motorist insurance
policy is on the contract, not in tort").

The Sixth Circuit Court of Appeals, in diversity actions concerning claims
for UIM coverage, has likewise concluded that Ohio's choice-of-law rules derive
from Gries, Ferrin, and Section 188. Natl. Union Fire Ins. Co. v. Watts (C.A.6,
1992), 963 F.2d 148, 150; see, also, Miller v. State Farm Mut. Auto. Ins. Co.
(C.A.6, 1996), 87 F.3d 822, 824-825.

There are several reasons to apply the same choice-of-law principles to
disputes over UIM coverage that we have already applied to disputes over liability
insurance coverage and other contractual disputes. For one, although our state
requires insurers to offer UIM coverage, R.C. 3937.18(A)(1), and although a
minimum level of coverage will arise by operation of law in the absence of such
an offer, Abate v. Pioneer Mut. Cas. Co. (1970), 22 Ohio St.2d 161, 51 O.O.2d
229, 258 N.E.2d 429, R.C. 3937.18 does not impose upper limits on the amount
of UIM coverage that may be negotiated between the parties to an insurance
agreement. The limits of UIM coverage under a particular policy are subject to
negotiation and modification by the contracting parties just as other terms of the
contract are. Insureds can receive higher limits when they agree to pay higher
premiums. The Restatement's contractual choice-of-law rules will protect the
justified expectations of the parties who bargain for those terms. See Restatement
at 15, Section 6, Comment g.

Finally, R.C. 3937.18, unlike some Ohio statutes that apply to contractual
relationships, imposes no choice of law on the parties if a dispute arises
concerning the existence or extent of coverage. Compare R.C. 3937.18 with
1302.43(C)(2) (imposing the "law of the state where the goods are situated" to
determine whether a fraudulent transfer or voidable preference has occurred).
Courts need a predictable methodology, such as the one embodied in Restatement
10

January Term, 2001
Section 188, to choose the applicable law if neither the parties nor the statutory
scheme make that choice for them.
VI. Application of the Foregoing Principles to the Case at Bar

When addressing the parties' competing motions for summary judgment
in this case, the trial court erroneously applied the Restatement's tort choice-of-
law methodology. In doing so, the trial court relied not on the authority discussed
above, but rather on an unreported case from the Erie County Court of Appeals,
Mayse v. Watson (Sept. 27, 1985), Erie App. No. E-85-8, unreported, 1985 WL
7613. In Mayse, which was decided before this court had even applied Section
188 of the Restatement to the insurance context in Ferrin, the plaintiffs had an
accident in Florida with an uninsured motorist. At the time, Florida's no-fault
laws limited a plaintiff's potential recovery for pain, suffering, mental anguish,
and inconvenience. For this reason, in their complaint against their insurer, the
Mayses sought a declaration that Florida law did not control the parties' rights
and duties under the insurance contract.

The trial court awarded damages to the Mayses, ordered their insurer to
proceed to arbitration, and determined that Florida's no-fault laws should apply--
effectively limiting the Mayses' potential recovery. The Erie County Court of
Appeals reversed, applying a tort choice-of-law analysis to conclude that Ohio
law should control. In reaching this conclusion, the Mayse panel reasoned that
the crucial issue in the case concerned the measure of damages recoverable from
the tortfeasor: "[I]f tort law controls the factors which establish how the injury
occurred and who was at fault, then tort law should also control the measure of
damages which are recoverable." (Emphasis added.)

Relying on this language from Mayse, the trial court in this case applied a
tort choice-of-law analysis to determine which state's law applies. The trial court
thus applied the Restatement's presumption that the law of the place of injury
controls unless another jurisdiction has a more significant relationship. See
11

SUPREME COURT OF OHIO
Morgan v. Biro Mfg., 15 Ohio St.3d at 341-342, 15 OBR at 465, 474 N.E.2d at
289, citing 1 Restatement of Conflicts at 430, Section 146. Because Jonathon was
injured in Pennsylvania, the trial court determined that Pennsylvania law should
control.

The trial court's choice-of-law analysis, however, was flawed. If the
Ohayons had filed a civil action for damages against the Pennsylvania tortfeasor
in an Ohio court, the measure of damages--if any--recoverable from the
tortfeasor would have been the essential issue before the court, and our state's tort
choice-of-law analysis, as expressed in Mayse, would indeed determine which
local law to apply. See id.

In the case at bar, however, the measure of damages recoverable from the
Pennsylvania tortfeasor is not the critical issue. Jonathon Ohayon has already
settled with the Pennsylvania tortfeasor for the $100,000 limit of the tortfeasor's
liability insurance. Instead of seeking damages from the tortfeasor for liability in
tort, the Ohayons now seek a declaration that they may stack the stated per-person
limits of UIM coverage contained in their insurance contract with Safeco, and that
Safeco is not entitled to set off the amounts Jonathon has already received in
settlement. The resolution of these stacking and setoff issues is a coverage issue,
separate and independent from the measure of damages assessed to the tortfeasor.
The resolution of these coverage issues depends on (1) the applicable UIM
provisions of the insurance contract executed by the parties, contained in Part C of
that contract; and (2) the enforceability of those contractual provisions under state
law. These are issues to be resolved under the law of contracts, to which the court
of appeals correctly applied the Restatement's contract choice-of-law analysis.

The Sixth Circuit Court of Appeals agrees that Mayse's tort choice-of-law
analysis does not apply in a suit for UIM benefits. Miller v. State Farm Mut.
Auto. Ins. Co., 87 F.3d at 826. In Miller, the executor of a Pennsylvania insured
exhausted the limits of the Ohio tortfeasor's insurance policy, then instituted a
12

January Term, 2001
declaratory judgment action against her decedent's insurer to recover UIM
benefits. The Sixth Circuit, while noting that Mayse's tort choice-of-law analysis
would indeed apply if the measure of damages due the executor had been at issue,
upheld the district court's application of Ohio's contract choice-of-law analysis.
Id. at 826. As the Sixth Circuit unanimously determined, "The question before us
* * * does not concern the measure of damages from the underlying accident;
rather, it concerns the limits on the amount of coverage which State Farm must
provide under the policy it issued to [the decedent]." Id. The Miller court
concluded, "[W]e view the instant case as one that sounds in contract and not in
tort. * * * [T]he true heart of the matter--i.e., whether to apply the `per person' or
`per accident' limit stated in the policy--involves the interpretation of an
insurance contract executed in Pennsylvania by a Pennsylvania resident, with a
company licensed to do business in Pennsylvania." Id. at 826-827, citing Ferrin,
21 Ohio St.3d 43, 21 OBR 328, 487 N.E.2d 568.

Like the cause of action in Miller, the Ohayons' declaratory judgment
action against Safeco here concerns the nature and extent of the rights and duties
created by the UIM provisions of their contract of insurance. Questions involving
the nature and extent of the parties' rights and duties under an insurance
contract's underinsured motorist provisions shall be determined by the law of the
state selected by applying the rules of Sections 187 and 188 of the Restatement.
Id. at 660, Section 205.

For the foregoing reasons, the court of appeals correctly applied Section
188 of the Restatement to resolve the choice-of-law issue. The insurance contract
was executed and delivered in Ohio by Ohio residents and an Ohio-licensed
insurance agent. The policy insured vehicles principally garaged in Ohio. Under
Section 188's contractual choice-of-law analysis, Ohio law should apply to
determine the parties' rights and duties under that contract, including those rights
and duties created by the contract terms providing UIM coverage.
13

SUPREME COURT OF OHIO
VII. The Ohayons' Alternative Arguments
A. Csulik v. Nationwide Mut. Ins. Co.

The Ohayons contend that the foregoing choice-of-law analysis is not
necessary and that the decision of the court of appeals should be reversed on the
authority of this court's recent decision in Csulik v. Nationwide Mut. Ins. Co.
(2000), 88 Ohio St.3d 17, 723 N.E.2d 90. We disagree.

As a threshold matter, we note that only three justices of this court joined
the lead opinion in Csulik. See id., 88 Ohio St.3d at 20-22, 723 N.E.2d at 93-94
(Douglas, J., concurring separately with the judgment of the majority "but only on
a very limited basis"; Lundberg Stratton, J., dissenting, joined by Moyer, C.J., and
Cook, J.). Moreover, the case at bar differs substantively from Csulik. In Csulik,
the insurer agreed to pay "compensatory damages, including derivative claims,
which are due by law to you or a relative." (Emphasis added.) Id. at 17, 723
N.E.2d at 91. The justices joining the lead opinion in Csulik deemed the phrase
"due by law" ambiguous and interpreted that phrase in favor of the insured under
Ohio's law for resolving contractual ambiguities. The Ohayons contend that "the
same ambiguous provision exists in the policy in the present case," but this
assertion is incorrect.

The Safeco policy, in an amendatory endorsement specifically written for
policies issued in Ohio, provides that the insurer "will pay damages which an
insured is legally entitled to recover from the owner or operator of an uninsured
motor vehicle or underinsured motor vehicle because of bodily injury."
(Emphasis added; boldface sic.) This provision differs on its face from the one
addressed in Csulik and is not ambiguous.

As this court has already noted, "the phrase `legally entitled to recover'
means the insured must be able to prove the elements of his or her claim" against
the tortfeasor. Kurent v. Farmers Ins. of Columbus, 62 Ohio St.3d at 245, 581
N.E.2d at 536; see, also, State Farm Auto. Ins. Co. v. Webb (1990), 54 Ohio St.3d
14

January Term, 2001
61, 62, 562 N.E.2d 132, 133 (noting that the very same phrase appears in R.C.
3937.18[A]). Here, Jonathon's ability to prove the elements of his claim and
recover damages from the Pennsylvania tortfeasor is not at issue--he has already
received $100,000 in settlement with the tortfeasor's insurer. As the Sixth Circuit
explained in Miller, "there is no question that Miller is `legally entitled to recover'
underinsured motorist benefits under the policy * * *. Miller has already
exhausted the tortfeasor's insurance." Id., 87 F.3d at 825. Instead, the issue in
the Ohayons' declaratory judgment action is the amount of coverage, if any, that
Safeco must provide under the contract it executed with the Ohayons--an issue
itself dependent on the enforceability and application of the policy's stacking and
setoff provisions. These are issues sounding in contract law, and Csulik did not
displace this court's traditional contract choice-of-law principles. See Csulik, 88
Ohio St.3d at 20-21, 723 N.E.2d at 93 (Douglas, J., concurring separately in
judgment). For these reasons, the Ohayons' reliance on Csulik is misplaced.
B. Kurent v. Farmers Ins. of Columbus

The Ohayons also contend in their brief that in Kurent, 62 Ohio St.3d 242,
581 N.E.2d 533, "this Court established the basic principle, using a tort conflict-
of-law analysis, that there is a strong presumption in favor of applying the law of
the state where the injury occurred in determining uninsured/underinsured
motorist claims." Though the Ohayons are correct that this court applied a tort
choice-of-law analysis in Kurent, we did so for reasons not applicable to the case
at bar. Accord Miller, 87 F.3d 822 (distinguishing Kurent).
In
Kurent, a Michigan driver injured Ohio residents in Michigan. At the
time, Michigan law denied noneconomic damages to plaintiffs unless such
damages surpassed a certain threshold. The Ohio plaintiffs, who could not meet
that threshold, sued their insurer in Ohio for uninsured motorist benefits,
contending that Ohio law should control the determination of coverage. This
court held:
15

SUPREME COURT OF OHIO

"[W]hen an Ohio resident is injured in an automobile accident in a no-
fault insurance state, by a resident of that state who is insured under that state's
no-fault insurance laws, the Ohio resident's legal right to recover from the
tortfeasor-motorist must be determined with reference to the no-fault state's laws.
Where the no-fault state does not recognize a claim against the tortfeasor-
motorist, the Ohio insured is not entitled to collect uninsured motorist benefits
from his own insurer." Id. at syllabus.

The Ohayons misinterpret Kurent's holding as a statement that a tort
choice-of-law analysis will always control UM and UIM claims. But the
Ohayons overlook the fact that in Kurent, this court applied Michigan tort law to
the underlying accident, explicitly recognized that "[t]he Kurents' claim for
uninsured motorist coverage is determined by their contractual relationship with
Farmers," and interpreted the terms of that contract "[a]ccording to Ohio law."
(Emphasis added.) Id. at 246 and 245, 581 N.E.2d at 536. As the Sixth Circuit
explained in Miller, the substantive tort question of whether the insured was
"legally entitled to recover" benefits at all from the tortfeasor was the central
issue in Kurent--a question that Michigan's no-fault laws answered in the
negative. Id., 87 F.3d at 825. Accord Hooker v. Nationwide Mut. Ins. Co. (June
19, 1997), Cuyahoga App. No. 71472, unreported, 1997 WL 337623. Here, the
substantive tort question regarding the damages Jonathon is entitled to recover
from the tortfeasor is not before us. Instead, the Ohayons seek a declaration
regarding the stacking and setoff provisions of their insurance agreement with
Safeco--contract issues to which a contract choice-of-law analysis applies.
C. An Alleged Choice-of-Law Provision

Finally, the Ohayons contend that resort to Section 188 is unnecessary
because the Safeco policy already contains a choice-of-law provision. To support
this contention, the Ohayons point to the following policy language:

"OUT OF STATE COVERAGE
16

January Term, 2001

"If an auto accident to which this policy applies occurs in any state or
province other than the one in which your covered auto is principally garaged,
we will interpret your policy for that accident as follows:

"A. If the state or province has:

"1. A financial responsibility or similar law specifying limits of liability
for bodily injury or property damage higher than the limit shown in the
Declarations, your policy will provide the higher specified limit.

"2. A compulsory insurance or similar law requiring a nonresident to
maintain insurance whenever the nonresident uses a vehicle in that state or
province, your policy will provide at least the required minimum amounts and
types of coverage." (Boldface sic.)

This provision of the Safeco policy assures the policyholder that he or she
may drive an insured vehicle into states that may require higher levels of liability
insurance without violating those states' financial responsibility laws. It appears
in a section of the Safeco policy titled "PART A--LIABILITY COVERAGE."
Without this provision, an insured would be required to check the financial
responsibility statutes of every jurisdiction into which he or she happened to drive
in order to ensure that his or her policy included sufficient liability insurance to
comply with each jurisdiction's laws.

This provision, however, does not represent an express choice of law to be
applied by courts in an action for UIM benefits under those independent
provisions of the Safeco policy that appear in Part C. We do not invoke
Restatement Section 187 to apply the law of the state chosen by the parties unless
we are satisfied that the parties have actually made an express choice of law
regarding the issue before the court. See Restatement at 561-562, Section 187,
Comment a ("the rule of this Section is inapplicable unless it can be established
that the parties have chosen the state of the applicable law. It does not suffice to
demonstrate that the parties, if they had thought about the matter, would have
17

SUPREME COURT OF OHIO
wished to have the law of a particular state applied"). We do not agree with the
Ohayons that the policy's provision for minimum out-of-state liability coverage
dispenses with the need for a choice-of-law analysis regarding UIM coverage.
VIII. Conclusion

Our holding today does not determine the respective rights and liabilities
of the parties in this case. Rather, we decide only that the trial court must employ
Ohio law to make this determination. And as the court of appeals noted, in order
for the trial court to resolve this case, it must also determine which version of R.C.
3937.18 (and related authority from this court) would apply to these facts. The
parties have not briefed this issue here, and we express no opinion as to its
resolution.1

1.
The author of the dissent states, "Having determined that this case presents issues in
contract, and since appellants concede that `under contract law analysis, Ohio law prevails,' our
inquiry should end here. The only remaining issue is whether Ohio law in effect at the time of
contracting upheld or prohibited setoff and antistacking provisions in a UM/UIM policy, * * * and
this issue should be remanded to the trial court for determination."

This is precisely the disposition adopted by the majority herein. By affirming the court of
appeals' judgment, which reversed the trial court's decision granting summary judgment in favor
of Safeco, we likewise adopt the court of appeals' disposition remanding the cause to the trial
court for further proceedings. As noted supra, these proceedings will address the very issue
correctly identified by the dissent as "[t]he only remaining issue"--the application of Ohio law to
the stacking and setoff questions contained in the Ohayons' declaratory judgment action. Given
that the dissent agrees that "our inquiry should end" precisely where the majority's does, and
given that the dissent also agrees that the appellants have conceded that Ohio law would apply
"under contract law analysis," the dissent's criticism of the majority's analysis as "myopic and
mechanical" is puzzling.

Equally puzzling is the fact that, after deciding that "our inquiry should end" with a
determination that the lower court should apply Ohio law on remand, the dissent then embarks on
a lengthy analysis of what it concedes is a rare exception to the contract choice-of-law analysis in
the Restatement of the Law 2d, Conflict of Laws. At the conclusion of this analysis, the dissent
declares that, in fact, Pennsylvania law should apply. This conclusion directly contradicts the
dissent's prior statement that "our inquiry should end" (as it already does) with the appellants'
concession that Ohio law prevails.

The dissent also decides that the majority's stated reasons for rejecting the Ohayons'
reliance on Csulik, 88 Ohio St.3d 17, 723 N.E.2d 90, "make no sense other than to artificially limit
its holding." This is a flawed contention, given that both the majority and the dissent find the
Ohayons' reliance on Csulik "misplaced" on the very same basis--that the contractual language at
issue here, unlike the contractual language at issue in Csulik, is simply not ambiguous. Compare
the majority's statement, "this provision differs on its face from the one addressed in Csulik and is
18

January Term, 2001

For the foregoing reasons, the judgment of the court of appeals is
affirmed.
Judgment affirmed.

MOYER, C.J., PFEIFER and LUNDBERG STRATTON, JJ., concur.

DOUGLAS, RESNICK and F.E. SWEENEY, JJ., dissent.
__________________

ALICE ROBIE RESNICK, J., dissenting. Plaintiff-appellant Jonathon
Ohayon is the son of plaintiffs-appellants Jacob and Brenda Ohayon. On August
6, 1996, Jonathon, a minor at the time, was seriously injured when he was struck
by an underinsured motorist while standing on a sidewalk at a shopping center in
Sharon, Pennsylvania. It is undisputed that Jonathon's claim against the
tortfeasor, Mary Welch, an Ohio resident, was settled for $100,000, which was
the full per-person liability limits of Welch's insurance coverage.

At the time of the accident, the Ohayons were insured under an Ohio
Personal Automobile Policy issued by defendant-appellee, Safeco Insurance
Company of Illinois ("Safeco"). The policy covered three vehicles and provided
the Ohayon family uninsured/underinsured motorist ("UM/UIM") coverage in the
amount of $100,000 per person and $300,000 per occurrence. Appellants applied
for UIM coverage, but Safeco denied their claims on the basis of the policy's
setoff and antistacking provisions.

There are three issues that ultimately need to be resolved in this case: (1)
whether a tort or a contract choice-of-law analysis is to be followed in
determining choice-of-law questions involving coverage under a UM/UIM
insurance policy; (2) whether the selected choice-of-law analysis favors the
application of Ohio or Pennsylvania substantive law; and (3) whether the law of
the chosen state enforces setoff and antistacking clauses in a UM/UIM policy.

not ambiguous" with the dissent's statement, "the Safeco policy in this case contains no such
ambiguity."
19

SUPREME COURT OF OHIO

The trial court addressed all three issues and held that, under a tort choice-
of-law analysis, Pennsylvania law applied to invalidate the setoff and antistacking
clauses in the Safeco policy. The court of appeals addressed only the first two
issues, holding that, under a contract choice-of-law analysis, Ohio law applies to
determine whether the setoff and antistacking provisions are enforceable. As to
the third issue, the court of appeals remanded the cause to the trial court for a
determination of whether, at the time of contracting, Ohio law treated these
provisions as valid.

On appeal to this court, however, appellants identify "[t]he essential issue
in this action [as] whether the governing law is to be determined by tort conflict-
of-law analysis, or by contract conflict-of-law analysis," while conceding that
"under contract law analysis, Ohio law prevails." Thus, only the first issue is
properly before this court.

Accordingly, the court should characterize or classify the conflicts
question in this case, and no more. In order to determine which choice-of-law
rules apply in this case, we need only to assign the present factual situation to its
appropriate legal category and the body of law that governs it. 1 Restatement of
the Law 2d, Conflict of Laws (1971) 18, Section 7, Comment b. In other words,
the only issue before this court is "whether the problem presented to [the trial
court] for solution relates to torts, contracts, property, or some other field." 16
American Jurisprudence 2d (1998) 12, Conflict of Laws, Section 3.

This issue can be, and should be, resolved quite simply. Since a contract
of insurance is just that, a contract, this court did not hesitate in applying a
contract choice-of-law analysis to a question involving liability insurance
coverage in Nationwide Mut. Ins. Co. v. Ferrin (1986), 21 Ohio St.3d 43, 21 OBR
328, 487 N.E.2d 568. This court has not yet specifically applied a contract
choice-of-law analysis to a coverage question arising under a UM/UIM provision
in an automobile insurance policy. However, this should also be accomplished
20

January Term, 2001
with little difficulty, since "[t]he right to recover under an uninsured motorist
insurance policy is on the contract, not in tort." Motorists Mut. Ins. Co. v.
Tomanski (1971), 27 Ohio St.2d 222, 223, 56 O.O.2d 133, 134, 271 N.E.2d 924,
925. See, also, Landis v. Grange Mut. Ins. Co. (1998), 82 Ohio St.3d 339, 341,
695 N.E.2d 1140, 1141; Kraly v. Vannewkirk (1994), 69 Ohio St.3d 627, 632, 635
N.E.2d 323, 327; Miller v. Progressive Cas. Ins. Co. (1994), 69 Ohio St.3d 619,
624, 635 N.E.2d 317, 321. Thus, a contract choice-of-law analysis applies to
determine which state's law will govern an issue of insurance coverage.

Appellants' reliance on Kurent v. Farmers Ins. of Columbus, Inc. (1991),
62 Ohio St.3d 242, 581 N.E.2d 533, and Mayse v. Watson (Sept. 27, 1985), Erie
App. No. E-85-8, unreported, 1985 WL 7613, is misplaced. In both cases, an
Ohio insured was injured in an automobile accident that occurred in a state with
no-fault insurance laws. Both courts employed a tort choice-of-law analysis to
determine which state's law would apply to the underlying issue of whether the
insured has a right to recover noneconomic damages. In so doing, both courts
characterized this issue as sounding in tort because it involves the insured's right
to recover against the tortfeasor. Thus, contrary to appellants' assertions, Kurent
and Mayse do not stand for the proposition that tort principles govern the
respective rights and liabilities of the parties to a UM/UIM claim. Instead, they
stand for the proposition that tort principles govern the respective rights and
liabilities of the parties to the accident.

In contrast, the underlying issues in this case--whether setoff and
antistacking provisions in a UM/UIM policy are valid and enforceable--have
nothing to do with the insured's right to recover against the tortfeasor. Instead,
these issues relate solely to the respective rights and liabilities of the parties to the
insurance contract. Thus, a contract choice-of-law analysis applies.

Appellants' alternative reliance on Csulik v. Nationwide Ins. Co. (2000),
88 Ohio St.3d 17, 723 N.E.2d 90, is also misplaced. In Csulik, we found that the
21

SUPREME COURT OF OHIO
substantive law of Pennsylvania, where the accident occurred, rather than the law
of Ohio, where the accident victims' insurance contract was executed, applied to
determine the validity of a UM/UIM setoff provision. In so doing, however, we
declined to "employ a choice-of-law analysis to determine whether Pennsylvania
or Ohio law applies in this case." Id. at 20, 723 N.E.2d at 92. Instead, we
employed the law governing ambiguous contract language to make this
determination because several provisions in the Nationwide policy had actually
specified that the laws of the accident state will govern the time limit for filing a
legal action to recover UM/UIM benefits.

Despite appellants' assertions to the contrary, the Safeco policy in this
case contains no such ambiguity. Nothing in the Safeco policy suggests that any
issue of UM/UIM coverage is to be determined under the substantive law of the
accident state. Thus, unlike the parties in Csulik, the parties in this case are bound
not by the law for construing ambiguous policy language but by those contract
choice-of-law principles that apply in the absence of a choice-of-law provision.

Having determined that this case presents issues in contract, and since
appellants concede that "under contract law analysis, Ohio law prevails," our
inquiry should end here. The only remaining issue is whether Ohio law in effect
at the time of contracting upheld or prohibited setoff and antistacking provisions
in a UM/UIM policy, Ross v. Farmers Ins. Group of Cos. (1998), 82 Ohio St.3d
281, 695 N.E.2d 732, and this issue should be remanded to the trial court for
determination.

Nevertheless, the majority has chosen to go beyond the process of
characterization to determine whether the Restatement's contract choice-of-law
principles actually favor the application of Ohio law over that of Pennsylvania in
the present factual situation. In so doing, the majority relies exclusively on the
factors listed in Restatement of Conflicts Section 188(2). Thus, the majority
concludes that Ohio law should apply to determine the underlying issues in this
22

January Term, 2001
case because "[t]he insurance contract was executed and delivered in Ohio by
Ohio residents and an Ohio-licensed insurance agent [and] insured vehicles
principally garaged in Ohio."

The majority's myopic and mechanical approach fails to consider other
relevant contacts and state interests that, given their appropriate weight, favor the
application of Pennsylvania law in this case. For these and the following reasons,
and because the majority has chosen to vitiate rather than distinguish our decision
in Csulik, I must respectfully dissent.2

In determining choice-of-law questions involving contracts, this court has
abandoned the outmoded traditional lex loci rules in favor of the more factor-

2.
In addressing appellants' alternative argument, the majority appears more concerned with
devaluing our decision in Csulik than with legitimately distinguishing it from the matter before us.
The majority notes, "[a]s a threshold matter," that "only three justices of this court joined the lead
opinion in Csulik." However, as relevant here, the viability of our decision in Csulik is not
diminished by the fact that one of the four justices comprising the majority concurred "only on a
very limited basis." Id., 88 Ohio St.3d at 20, 723 N.E.2d at 93 (Douglas, J., concurring). Justice
Douglas's obvious concern in Csulik was that certain portions of the lead opinion may have given
the impression that the Nationwide policy was ambiguous merely because it failed to include a
particular choice-of-law clause. However, all four members of the majority in Csulik agreed that
the policy was in fact ambiguous with respect to choice of law and, therefore, should be construed
most strongly against the insurer. Thus, Csulik stands solidly for the proposition that when an
insurance policy is ambiguous as to choice of law, as opposed to merely lacking a choice-of-law
directive, the insurer will be bound by the rules for construing ambiguous policy language rather
than by those choice-of-law principles that govern in the absence of an effective choice-of-law
provision. Simply put, an insurer may not escape its own contractual ambiguity by resorting to
choice-of-law rules.

The majority's remaining stated reasons for rejecting appellants' reliance on Csulik make
no sense other than to artificially limit its holding. As in this case, the plaintiffs in Csulik brought
their declaratory judgment action after they had been paid the limits of the tortfeasor's insurance.
Thus, as here, the Csuliks' ability to prove the elements of their claim and recover damages
against the tortfeasor was not at issue. Instead, just as in this case, the issue in the Csuliks'
declaratory judgment action was the amount of coverage, if any, that the insurer must provide
under the contract it executed with the insureds. Moreover, it can hardly be said that "Csulik did
not displace this court's traditional contract choice-of-law principles," considering that it
substituted the rules for resolving contractual ambiguity for those principles. Perhaps what the
majority means is that Csulik did not displace choice-of-law principles beyond the context of an
ambiguous insurance contract. But in any event, it is inconceivable that the majority would
actually find Csulik to be distinguishable from this case on the basis that the very circumstances
presented in Csulik are now repeated in this case.
23

SUPREME COURT OF OHIO
driven "significant relationship" approach set forth at Sections 187 and 188 of the
Restatement of Conflicts. Ferrin, 21 Ohio St.3d 43, 21 OBR 328, 487 N.E.2d
568; Gries Sports Ent., Inc. v. Modell (1984), 15 Ohio St.3d 284, 15 OBR 417,
473 N.E.2d 807; Schulke Radio Prod., Ltd. v. Midwestern Broadcasting Co.
(1983), 6 Ohio St.3d 436, 6 OBR 480, 453 N.E.2d 683.

Section 188 provides:

"(1) The rights and duties of the parties with respect to an issue in contract
are determined by the local law of the state which, with respect to that issue, has
the most significant relationship to the transaction and the parties under the
principles stated in § 6.

"(2) In the absence of an effective choice of law by the parties (see § 187),
the contacts to be taken into account in applying the principles of § 6 to determine
the law applicable to an issue include:

"(a) the place of contracting,

"(b) the place of negotiation of the contract,

"(c) the place of performance,

"(d) the location of the subject matter of the contract, and

"(e) the domicile, residence, nationality, place of incorporation and place
of business of the parties.

"These contacts are to be evaluated according to their relative importance
with respect to the particular issue.

"(3) If the place of negotiating the contract and the place of performance
are in the same state, the local law of this state will usually be applied, except as
otherwise provided in §§ 189-199 and 203." Id. at 575.

In many, and perhaps even in a majority of cases involving contracts, the
evaluating court would be justified in relying exclusively on the contacts listed in
Section 188(2) to choose the applicable rule of law. Oftentimes, the presence of
one or more of these contacts will reveal the state with the most significant
24

January Term, 2001
relationship to the transaction and the parties. In these cases, it is unnecessary to
give independent significance to the general principles that underlie all fields of
choice-of-law rules because those principles are already given expression through
the relevant contacts listed in Section 188(2).

But this is not true in all cases, and Section 188(2) was never intended to
be the exclusive determinant in all cases involving contracts. The drafters of the
Restatement of Conflicts recognized that "[c]ontracts is one of the most complex
and most confused areas of choice of law," id. at 557, Contracts, Introductory
Note 1, and that "the difficulties and complexities involved have as yet prevented
the courts from formulating a precise rule, or series of rules, which provide a
satisfactory accommodation of the underlying factors in all of the situations which
may arise." Id. at 13, Section 6, Comment c. Hence, the contacts listed in Section
188(2) are intended to identify only those "states which are most likely to be
interested" in deciding a particular issue of contracts. (Emphasis added.) Id. at
579, Section 188, Comment e.

As the majority correctly observes, "the Restatement's contractual choice-
of-law rules seek to protect the justified expectations of the contracting parties."
This is because "[p]rotection of the justified expectations of the parties is the
basic policy underlying the field of contracts." Id. at 577, Section 188, Comment
b. But there are some relatively rare cases in which a local invalidating rule
applies despite the expectations of the contracting parties. In these cases, it
becomes necessary for the evaluating court to look beyond Section 188(2) and
consider other relevant contacts and state interests. Otherwise, Section 188(2)
would possess a false economy, for its continued application in these cases would
result in subordinating important substantive interests to an unrealistic notion of
"justified expectations."

The situation that is now before us is a prime example of this kind of case.
As explained in Comment b to Section 188:
25

SUPREME COURT OF OHIO

"Protection of the justified expectations of the parties is a factor which
varies somewhat in importance from issue to issue. * * * Parties entering a
contract will expect at the very least, subject perhaps to rare exceptions, that the
provisions of the contract will be binding upon them. Their expectations should
not be disappointed by application of the local rule of a state which would strike
down the contract or a provision thereof unless the value of protecting the
expectations of the parties is substantially outweighed in the particular case by
the interest of the state with the invalidating rule in having this rule applied. The
extent of the interest of a state in having its rule applied should be determined in
the light of the purpose sought to be achieved by the rule and by the relation of
the transaction and the parties to that state (see Comment c)." (Emphasis added.)
Id. at 577.
Comment
c explains:

"Whether an invalidating rule should be applied will depend, among other
things, upon whether the interest of the state in having its rule applied to strike
down the contract outweighs in the particular case the value of protecting the
justified expectations of the parties and upon whether some other state has a
greater interest in the application of its own rule." Id. at 578.

Thus, even if the place of negotiation and the place of performance are in
the same state, the local law of this state will not be applied "when the principles
stated in § 6 require application of some other law. As stated in Comment c, the
extent of a state's interest in having its contract rule applied will depend upon the
purpose sought to be achieved by that rule." (Emphasis added.) Id. at 583,
Section 188, Comment f.

In addition, Section 205, Comment c states:

"The situation is essentially the same in those relatively rare situations
which involve the applicability of a local law rule which requires that the contract
give rise to certain rights and duties or which provides that the parties may not
26

January Term, 2001
limit the extent of their obligations by a certain provision. Application of such a
rule may defeat the expectations of the parties. On the other hand, the rule is
likely to represent a strongly-felt policy which the forum would be hesitant to
override if the state with the rule involved was the state with the dominant interest
in the issue to be decided." (Emphasis added.) Id. at 662.

This view also carries over to Section 193, which 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 with respect to the particular issue, some other state has
a more significant relationship under the principles stated in § 6 to the transaction
and the parties, in which event the local law of the other state will be applied."
(Emphasis added.)

In quoting Section 193, the majority carefully omits the foregoing
italicized language, but this language reveals that the factors upon which the
majority relies will not necessarily determine every choice-of-law issue involving
insurance contracts. Indeed, Comment c to Section 193 provides:

"Whether there is such another state should be determined in the light of
the choice-of-law principles stated in § 6. For a general discussion of the
application of these principles to the contracts area and of the principle favoring
application of a law that would sustain the validity of the contract, see § 188,
Comments b-d. What is said in those Comments is applicable here." (Emphasis
added.) Id. at 612.

More important, it is questionable whether the principal location of the
insured risk under Section 193, or the location of the subject matter of the contract
in Section 188(2)(d), enjoys any determinative significance in the case of an
ambulatory insurance policy. For the most part, these factors are important where
the insurance covers a static physical thing, an immovable object, or a localized
27

SUPREME COURT OF OHIO
risk. See Section 188, at 580-581, Comment e; Section 193, at 611, Comment b.
However, in most cases " `[i]nsurance companies * * * do not confine their
contractual activities and obligations within state boundaries. They sell to
customers who are promised protection in States far away from the place where
the contract is made.' " Clay v. Sun Ins. Office, Ltd. (1964), 377 U.S. 179, 182,
84 S.Ct. 1197, 1199, 12 L.Ed.2d 229, 232, quoting Clay v. Sun Ins. Office, Ltd.
(1960), 363 U.S. 207, 221, 80 S.Ct. 1222, 1230, 4 L.Ed.2d 1170, 1181 (Black, J.,
dissenting). Thus, an insurance contract issued and delivered in Massachusetts,
for example, can be held subject to Louisiana's "legitimate interest in
safeguarding the rights of persons injured there." Watson v. Employers Liab.
Assur. Corp., Ltd. (1954), 348 U.S. 66, 73, 75 S.Ct. 166, 170, 99 L.Ed. 74, 82. As
the high court explained:

"Some contracts made locally, affecting nothing but local affairs, may
well justify a denial to other states of power to alter those contracts. But, as this
case illustrates, a vast part of the business affairs of this Nation does not present
such simple local situations. Although this insurance contract was issued in
Massachusetts, it was to protect * * * against damages on account of personal
injuries that might be suffered * * * anywhere in the United States." Id. at 71, 75
S.Ct. at 169, 99 L.Ed. at 81.

These principles apply with even greater force in cases involving policies
for automobile insurance. Interstate travel by automobile is simply too
foreseeable and too common a phenomenon to be ignored. Moreover, as
evidenced by the extensive regulation in this area, an automobile insurance
contract is for the benefit of the public as well as for the benefit of the named or
additional insured. Thus, when the issue presented involves the validity or
enforceability of a provision that purports to limit coverage, the interest of the
state where damage occurred may, along with other factors, play a more
28

January Term, 2001
significant role in choice of law than the parties' presumed expectations or where
the vehicle is principally garaged.

This is especially true in cases involving exclusions or limitations on
UM/UIM coverage, as this kind of coverage is not only ambulatory in nature, but
portable as well. As explained by the Supreme Court of Connecticut:

" `[Uninsured motorist] coverage is portable: The insured and family
members * * * are insured no matter where they are injured. They are insured
when injured in an owned vehicle named in the policy, in an owned vehicle not
named in the policy, in an unowned vehicle, on a motorcycle, on a bicycle,
whether afoot or on horseback or even on a pogo stick'; Bradley v. Mid-Century
Ins. Co., 409 Mich. 1, 24, 38, 294 N.W.2d 141 [145, 152] (1980); or in a `rocking
chair on [one's] front porch.' Motorists Mutual Ins. Co. v. Bittler, 14 Ohio Misc.
23, 33 [43 O.O.2d 64, 69], 235 N.E.2d 745 [751] (1968)." Harvey v. Travelers
Indemn. Co. (1982), 188 Conn. 245, 250, 449 A.2d 157, 160.

Or, for that matter, while standing on a sidewalk at a shopping center in
Sharon, Pennsylvania.

Accordingly, courts have relied upon factors not listed in Sections 188(2)
and 193 in choosing the state whose local substantive law should determine the
validity or enforceability of provisions that seek to limit or exclude liability or
UM/UIM coverage in an automobile insurance policy, including provisions that
prohibit stacking.
In
Hime v. State Farm Fire & Cas. Co. (Minn.1979), 284 N.W.2d 829, the
Minnesota Supreme Court was asked to determine whether Florida or Minnesota
law should govern the enforceability of a household immunity clause in an
automobile liability policy. The clause was valid in Florida but unenforceable in
Minnesota. The contract was issued in Florida to a Florida resident on a vehicle
principally garaged in Florida, and the court presumed that the insurance
premiums were paid in Florida. Nevertheless, the court concluded that
29

SUPREME COURT OF OHIO
"Minnesota law should govern resolution of this controversy." Id., 284 N.W.2d at
834.

In reaching its conclusion, the court explained:

"[T]he unplanned nature of automobile accidents lessens the importance
of predictability of results in automobile insurance cases. Nevertheless, we note
that the insured's protection has no geographical boundaries, at least not under the
policy before us, and it is foreseeable that the insured may meet his misfortune
out of the state of issuance. It was neither unusual nor unpredictable that the
insured in this case, a former Minnesota resident, returned to visit his former
home and that his vehicle was involved in an accident there. * * * The transaction
was not planned to have predictable results, and the insurer is not now justified in
expecting Florida law to govern absolutely in light of the extra-territorial effect
and unique nature of the automobile insurance contract." Id., 284 N.W.2d at 833.

The court also recognized that "[p]roviding recovery to those injured and
treated within our borders is a legitimate state interest," and that the application of
Florida law to deny recovery in this case "offends our idea of fairness and defies
our concern for the welfare of visitors to this state." Id., 284 N.W.2d at 833-834.
At the same time, the court noted that the sanctity of a contractual relationship
between insured and insurer "is already diminished by the relative absence of free
negotiation, perhaps approaching the nature of a contract of adhesion." Id. at 834.
See, also, Restatement Section 187, at 562, Comment b ("Common examples [of
adhesion contracts] are tickets of various kinds and insurance policies").
In
Abramson v. Aetna Cas. & Sur. Co. (C.A.9, 1996), 76 F.3d 304, the
Ninth Circuit Court of Appeals was asked to determine whether New Jersey or
Hawaii law should govern the validity and enforceability of an antistacking
provision in a UIM policy. The provision was apparently valid in New Jersey but
unenforceable in Hawaii. The insurance contract was executed in New Jersey and
insured a New Jersey resident, but the insured was killed by an underinsured
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January Term, 2001
motorist while bicycling in Hawaii. The court concluded that "the district court
correctly applied Hawaii law [and] that under such law anti-stacking provisions
are invalid as to persons injured on Hawaii streets and highways, regardless of
whether the insured owns and insures a vehicle licensed in Hawaii." Id. at 306.
In so doing, the Ninth Circuit agreed with the district court:

"New Jersey's interests in the insurance contract did not control the
choice-of-law analysis because of the lack of any negotiation over the terms of the
contract and [because of] the parties' expectations that the contract would cover
the insured as he travelled throughout the United States and Canada." Id. at 305.
In
Natl. Union Fire Ins. Co. v. Watts (C.A.6, 1992), 963 F.2d 148, the
Sixth Circuit Court of Appeals was asked to determine whether, under Ohio
choice-of-law rules, the district court correctly held that Florida law, rather than
Indiana or Texas law, governed the insured's right to recover UM benefits for
injuries resulting from being forced off a Florida road by an unidentified vehicle,
without physical contact. Indiana and Texas law would have denied coverage in
this situation, while Florida law favored coverage. The insurance contract was
issued through an Indiana broker to an Indiana corporation. At the time of the
accident, the insured, a truck driver, was transporting property pursuant to a
hauling contact with the Indiana corporation. The insured was a resident of Texas
at the time of contracting with the Indiana corporation, a resident of Florida at the
time of the accident, and a resident of Ohio at the time suit was filed.

The majority cites this case for the proposition that "Ohio's choice-of-law
rules derive from Gries, Ferrin, and Section 188," citing Watts, 963 F.2d at 150.
However, on the very next page of its opinion, the court in Watts specifically
rejected the insurer's argument that Ohio's contract choice-of-law analysis is
limited to the factors listed in Restatement of Conflicts Section 188, and found
that the district court properly considered the principles stated in Section 6 as
well. Id. at 151. Accordingly, the court found that Florida, as the situs of the
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SUPREME COURT OF OHIO
truck driver's accident with the unknown vehicle, had the most significant
relationship to the insurance contract, reasoning as follows:

"In its detailed opinion, the district court concluded [that] the interest of
Florida, to provide compensation for its residents injured by hit-and-run drivers,
and the interest of the insured, to be compensated by the insurance policy, appear
to provide the most significant relationship to the contract. Further, Florida's
public policy interest in the outcome seems to outweigh the less substantive
relationships of Texas and Indiana as places of business for the truck driver and
corporation. In addition, the court noted in its opinion that though the insurance
coverage extended to the corporation's agents and employees anywhere in the
United States, the policy failed to provide that any particular state's law must be
applied. The district court interpreted this omission to mean that the insurer
intended its coverage to be governed by the state in which the claimant was using
his vehicle. We find this is bolstered by the general Ohio choice of law rule that
the law of the state where the contract will be performed should govern. Gries
[supra], 15 Ohio St.3d at [286, 15 OBR at 419], 473 N.E.2d at 810, quoting
Schulke [supra], 6 Ohio St.3d [at] 438 [6 OBR at 481], 453 N.E.2d [at 685].
Thus, we conclude that Ohio choice of law rules mandate that the law of Florida
governs the instant dispute." Id., 963 F.2d at 152.

In other cases presenting choice-of-law questions involving insurance
coverage, but where the interpretation or enforceability of a particular contractual
provision between insurer and insured is not directly at issue, the courts have at
least recognized the relevance of certain non-Section 188(2) contacts and
accompanying state interests. See Cox v. Nichols (Ind.App.1998), 690 N.E.2d
750, 752 ("The contract examination reveals [that] * * * the plaintiffs are
residents of Michigan [and that] the place where Allstate and the plaintiffs'
relationship is centered is Michigan. However, the collision [in Indiana] is not
insignificant, and the alleged tortfeasor, Nichols, is a resident of Indiana. The
32

January Term, 2001
factors weigh in favor of employing Indiana law."); First City Acceptance Corp.
v. Gulf Ins. Co. (1997), 245 A.D.2d 649, 650, 665 N.Y.S.2d 114, 115 (agreeing
with the trial court that "New York law was the applicable law since First City not
only instituted its action in New York but the accident occurred in New York,"
while rejecting First City's argument that Massachusetts should apply because it
"purchased the policy in Massachusetts, the agent who sold the policy and First
City maintain their principal places of business in that state, and the policy was
also delivered there"); Nationwide Mut. Ins. Co. v. Perlman (1983), 187
N.J.Super. 499, 504, 455 A.2d 527, 529-530 (Although insurance policy was
issued in New York, the court applied the law of New Jersey, where the accident
occurred, to determine the question of interspousal immunity, reasoning in part
that "since an automobile is by self-definition mobile, an insurer might reasonably
expect that it will be taken to another state, especially a neighboring one, * * *
that does not provide interspousal immunity"); Fed. Ins. Co. v. Nationwide Mut.
Ins. Co. (W.D.Va.1978), 448 F.Supp. 723, 726 (law of Virginia, where accident
occurred, chosen over law of Tennessee, where contract was made, in part
because Virginia "has manifested a legitimate interest in safeguarding the rights
of persons injured within her boundaries"); Clough v. Liberty Mut. Ins. Co.
(E.D.Wis.1968), 282 F.Supp. 553, 554 (Wisconsin rather than Indiana law held
applicable to household exclusion clause, partially on the basis that while
"Indiana might well desire that automobile insurance contracts entered into
between its residents and insurance companies licensed to do business in that state
will be honored, regardless of where an accident occurs[,] * * * Wisconsin is
likewise interested in preserving its policy of providing compensation to the
injured, irrespective of their residence").

The purpose of the foregoing is not to establish a choice-of-law rule under
which questions of insurance coverage are to be determined by the law of the state
that affords the most coverage. Nor is it my intent to persuade anyone that any of
33

SUPREME COURT OF OHIO
the foregoing cases present situations that are precisely equivalent to the situation
presented by the record in the present case. Instead, the foregoing analysis is
meant only to illustrate that in cases involving the validity or enforceability of
automobile insurance provisions that seek to exclude or limit coverage, the forum
court must look to other contacts besides those listed in Section 188 of the
Restatement. These other contacts include the place of injury, the place of
medical treatment, the proximity of the insured's residence to the accident state,
and the foreseeability of his or her presence there, while bearing in mind the
adhesory, ambulatory, and portable nature of automobile insurance contracts and
coverage. The court must also consider whether the interests of the state with the
invalidating rule in having its rule applied outweigh the insurer's expectation that
the contractual provision at issue will be binding upon the parties. Thus, the court
must focus some of its attention on the purposes, policies, aims, and objectives
that underlie the invalidating state's rule. Only then can a full determination be
made as to which state "has the most significant relationship to the transaction
and the parties under the principles stated in § 6." Restatement Section 188(1).

In determining whether Ohio or Pennsylvania has the most significant
relation in this case, the following facts are relevant. The Ohayons live in Akron,
Ohio, and have family in Pittsburgh, Pennsylvania. Jacob Ohayon testified at
deposition that he visits his Pittsburgh relatives "[t]hree [or] four times a year,
maybe five times a year." This court can take judicial notice that eastern Ohio,
where Akron is located, borders western Pennsylvania, where both Pittsburgh and
Sharon are located. On the day of the accident, Jonathon was in Pennsylvania for
the purpose of meeting his relatives.

Following the accident, Jonathon was taken to the Sharon Regional
Hospital and from there taken by helicopter to Allegheny General Hospital in
Pittsburgh. Jonathon remained at Allegheny General for over a month, where he
underwent numerous surgical and other procedures to repair the significant
34

January Term, 2001
damage to his right leg. Since then, Jonathon has received all of his medical care
in Pennsylvania, requiring frequent trips to Pennsylvania, and within ten months
of the accident had incurred in excess of $250,000 in medical bills.

In "PART F--GENERAL PROVISIONS," the instant Safeco insurance
policy provides that coverage will be afforded for accidents and losses that occur
in:

"1. The United States of America, its territories or possessions;

"2. Puerto Rico; or

"3. Canada."

Yet there is no specific or general provision in the policy or any of the
amendatory endorsements that purports to define or identify the substantive law
of Ohio as being determinative of any matter of coverage under "PART C--
UNINSURED/UNDERINSURED MOTORISTS COVERAGE."

In addition, Pennsylvania courts, as well as other courts applying
Pennsylvania law, have recognized Pennsylvania's uncommonly strong interest in
protecting innocent victims of uninsured or underinsured motorists from insurers
who attempt to limit their recovery by setoff and antistacking provisions. Indeed,
these cases provide that any attempt by the insurer to circumscribe the availability
of coverage in derogation of Pennsylvania's statutory scheme will be considered
void and contrary to public policy. In invalidating these kinds of provisions, the
courts invariably observe that Pennsylvania has a firm public policy to afford the
maximum amount of protection to those innocent victims who suffer loss at the
hands of irresponsible drivers. See New Jersey Mfrs. Ins. Co. v. MacVicar
(1998), 307 N.J.Super. 507, 513-515, 704 A.2d 1343, 1347; N. River Ins. Co. v.
Tabor (C.A.3, 1991), 934 F.2d 461; Erie Indemn. Co. v. McGaughey (1991), 409
Pa.Super. 177, 597 A.2d 718; Nationwide Mut. Ins. Co. v. Swisher (E.D.Pa.1989),
731 F.Supp. 691; State Farm Mut. Auto. Ins. Co. v. Williams (1978), 481 Pa. 130,
392 A.2d 281; Sands v. Granite Mut. Ins. Co. (1974), 232 Pa.Super. 70, 80-82,
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SUPREME COURT OF OHIO
331 A.2d 711, 716-717; Harleysville Mut. Cas. Co. v. Blumling (1968), 429 Pa.
389, 241 A.2d 112.

With these considerations in mind, it is readily apparent that Pennsylvania
has the most significant relationship to the transaction and the parties in this case,
and that Pennsylvania's strong interest in striking down setoff and antistacking
provision in UM/UIM insurance policies substantially outweighs the value of
protecting Safeco's expectations that these provisions, which were not negotiated
for, would be binding upon the Ohayons. Accordingly, under a contract choice-
of-law analysis, Pennsylvania law should apply to determine the substantive
issues in this particular case and that the provisions in the Safeco policy that
provide for setoff and prohibit stacking are invalid and unenforceable under
Pennsylvania law.
Therefore,
I
dissent.

DOUGLAS and F.E. SWEENEY, JJ., concur in the foregoing dissenting
opinion.
__________________
Nicholas
Swyrydenko,
for appellants.

James A. Sennett and Adam E. Carr, for appellee.
__________________
36