Modroo v. Nationwide Mutual Fire Insurance

August 5 2008
DA 07-0096

IN THE SUPREME COURT OF THE STATE OF MONTANA

2008 MT 275

MARY J. MODROO, individually and as Personal
Representative of the Estate of Mamie J. Hardy,
deceased, ESTATE OF MAMIE J. HARDY, and
CASSIUS H. HARDY,

Plaintiffs and Appellants,

v.

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY,
NATIONWIDE AGRIBUSINESS INSURANCE COMPANY,
FARMLAND MUTUAL INSURANCE COMPANY, and
MAX LEMAIRE,

Defendants and Appellees.

APPEAL FROM: District Court of the Fourth Judicial District,
In and For the County of Missoula, Cause No. DV 03-620
Honorable John W. Larson, Presiding Judge

COUNSEL OF RECORD:

For Appellants:

James L. Jones, Kyle A. Gray; Holland & Hart LLP; Billings, Montana
(for Mary J. Modroo & Estate of Mamie J. Hardy)

David R. Paoli, Heather M. Latino, John A. Kützman; Paoli, Latino
& Kutzman, P.C.; Missoula, Montana (for Cassius H. Hardy)

For Appellees:

Gary L. Graham, David C. Berkoff; Garlington, Lohn & Robinson, PLLP;
Missoula, Montana (for Nationwide Mutual Fire Insurance Company)

Submitted on Briefs: January 16, 2008

Decided: August 5, 2008
Filed:

__________________________________________
Clerk
Justice W. William Leaphart delivered the Opinion of the Court.

¶1 Mary J. Modroo, the Estate of Mamie J. Hardy (collectively, Modroo), and

Cassius H. Hardy appeal from the District Court’s rulings on several motions for

summary judgment and motions to dismiss. We reverse and remand.

¶2 We restate the issues as follows:

¶3 Did the District Court err when it concluded that Mamie was not an “insured”

under the Farmowners policy?

¶4 Did the District Court err when it determined that Hardy lacked standing to pursue

his negligence claims against Nationwide?

¶5 Did the District Court err when it determined that Modroo was not entitled to

medical payments coverage under the Farmowners policy?

¶6 Did the District Court err when it applied Ohio law to deny the stacking of

coverages and to allow offsets under the personal auto policy?

¶7 Did the District Court err when it applied the forum non conveniens doctrine to

dismiss Modroo’s negligence claim in favor of Ohio proceedings?

BACKGROUND

¶8 On February 15, 2003, Mamie Hardy (Mamie) suffered fatal injuries in a single-

vehicle accident in Mineral County, Montana. Max Lemaire was driving the vehicle, and

Mamie was a passenger in the vehicle. Mamie died the next day at St. Patrick’s Hospital

in Missoula. At the time of the accident, Mamie, an Ohio resident, attended the

University of Montana.

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¶9 The District Court appointed Mamie’s mother, Mary Modroo, an Ohio resident, as

the Personal Representative of Mamie’s estate in Missoula. Following the appointment,

Modroo received Lemaire’s policy limits of $50,000 from Allstate Insurance Company,

without releasing Lemaire from liability. Modroo then filed a lawsuit in the District

Court against Lemaire and against Modroo’s underinsured-motorist (UIM) coverage

carriers: Nationwide Mutual Fire Insurance Company, Nationwide Agribusiness

Insurance Company, and Farmland Mutual Insurance Company (collectively,

Nationwide). Nationwide then filed two declaratory actions against Modroo in the

Geauga County Court of Common Pleas in Ohio. The Ohio court stayed those actions

pending the disposition of the current Montana litigation.

¶10 Modroo’s second amended complaint included a survival action, a wrongful death

claim, a negligent infliction of emotional distress claim, a breach of contract claim, a

claim for violations of the Unfair Claims Settlement Practices Act, and a negligence

claim against Nationwide concerning the production and assembly of its policies and

endorsements. Mamie’s father, Cassius H. Hardy (Hardy), filed a motion to intervene in

the litigation. The District Court granted Hardy’s motion, but denied Hardy the right to

participate in the wrongful death and survivorship claims.

¶11 Modroo’s complaint asserted UIM coverage from Nationwide under two different

policies: a commercial package policy (Farmowners policy) and a personal auto policy.

Among other items, the Farmowners policy covered farm equipment, personal property,

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dwellings, and vehicles. The policy’s Business Auto Coverage Form Declarations listed

the Named Insured as:

CASSIUS H & MARY J HARDY &
HARRY MODROO
DBA MODROO FARM
15571 HEMLOCK RD
CHAGRIN FALLS OH 44022

On the same page as the Named Insured block, the policy contained the language,

“FORM OF BUSINESS: PARTNERSHIP.” The Farmowners auto policy contained a

schedule of “covered autos” and provided those vehicles with liability coverage, medical

payments coverage, UIM coverage, uninsured motorist (UM) coverage, and

comprehensive and collision physical damage coverage.

¶12 The Farmowners policy’s UIM endorsement provided that Nationwide would pay

compensatory damages that “the ‘insured’ is legally entitled to recover . . . from the

owner or operator” of an underinsured motor vehicle. The policy provided a limit of

$1,000,000 of UIM coverage per accident. An anti-stacking provision limited the UIM

coverage to $1,000,000 “[r]egardless of the number of covered ‘autos’, ‘insureds’, [or]

premiums paid . . . .” The Farmowners UIM endorsement also provided that the UIM

limits would be offset by any amounts paid “by or on behalf of anyone who is legally

responsible.” The Farmowners auto policy contained no choice of law provision.

¶13 The UIM endorsement stated, “THIS ENDORSEMENT CHANGES THE

POLICY.” The UIM endorsement contained a Named Insured block that identified

“CASSIUS H & MARY J HARDY &” as the Named Insured. The UIM endorsement

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also provided a definition for “insureds” that varied depending on the designation of the

Named Insured.

¶14 Modroo also claimed UIM coverage under a personal auto policy issued by

Nationwide. The personal auto policy listed Mary Modroo as the Named Insured and

provided that Nationwide would pay compensatory damages that “you or a relative are

legally entitled to recover from the owner or driver” of an underinsured motor vehicle

“under the tort law of the state where the motor vehicle accident occurred . . . .” The

personal auto policy limited the amounts recoverable under UIM coverage to $300,000

per person, and the policy stated that the “per person policy limit shall be enforceable

regardless of the number of . . . vehicles or premiums shown in the Declarations or policy

. . . .” At the time of the accident, Modroo insured two vehicles under the personal auto

policy. The personal auto policy also provided that any amounts available under UIM

coverage would be offset by any amounts “available for payment by or on behalf of any

liable parties . . . .” The personal auto policy stated that Ohio’s contract law governed the

insurance contract’s interpretation.

¶15 In a series of rulings on partial summary judgment motions, the District Court

concluded that Modroo was entitled to UIM coverage under the personal auto policy;

however, after conducting a conflicts-of-law analysis, the District Court applied Ohio law

and determined that the personal auto policy allowed offsets and precluded the stacking

of UIM coverage.

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¶16 The District Court granted partial summary judgment to Nationwide and ruled that

no UIM coverage was available to Modroo under the Farmowners policy. The court

determined that the Farmowners policy designated the Named Insured as a partnership,

and thus, no coverage extended to Mamie under the Farmowners policy. The District

Court reasoned that no coverage existed because Mamie was injured in Lemaire’s

vehicle, which was not a covered auto under the Farmowners policy. The District Court

conducted no conflicts-of-law analysis of the Farmowners policy, except to note that the

policy contained no choice-of-law provisions. The District Court determined that the

Farmowners policy contained no ambiguity regarding whom the policy insured or what

constituted a covered auto. In light of its determination that coverage was clearly

excluded under the Farmowners policy, the District Court dismissed Modroo’s and

Hardy’s claims for bad faith and breach of contract.

¶17 The District Court also granted Nationwide’s summary judgment motion on

Hardy’s negligence claims. The court concluded that Hardy lacked standing to pursue a

negligence claim because Hardy possessed no ownership interest in Modroo Farm and

possessed no insurable interest in Mamie’s life. The District Court also denied Modroo’s

summary judgment motion for medical payments coverage under the Farmowners policy

based on its conclusion that the partnership constituted the only Named Insured.

¶18 After the District Court’s several rulings, Modroo’s only remaining claims against

Nationwide consisted of the bad-faith claim relating to the personal auto policy and the

negligence claim relating to the production and assembly of Nationwide’s policies and

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endorsements. The District Court bifurcated Modroo’s claims against Lemaire and,

under the doctrine of forum non conveniens, dismissed Modroo’s negligence claim

against Nationwide in favor of the stayed proceedings in Ohio. To obtain a final

judgment, Modroo moved to dismiss the unfair claims settlement practices claim relating

to Nationwide’s initial denial of coverage under the personal auto policy. Modroo and

Hardy now appeal from the District Court’s rulings.

STANDARD OF REVIEW

¶19 We review de novo a district court’s grant or denial of summary judgment,

applying the same criteria as the district courts. Wendell v. State Farm Mut. Auto. Ins.

Co., 1999 MT 17, ¶ 9, 293 Mont. 140, ¶ 9, 974 P.2d 623, ¶ 9. Summary judgment is

appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on

file,” together with any affidavits demonstrate that no genuine issue exists as to any

material fact and that the party moving for summary judgment is entitled to judgment as a

matter of law. M. R. Civ. P. 56(c). We view the evidence in the light most favorable to

the party opposing summary judgment, and we draw all reasonable inferences in favor of

the party opposing summary judgment. Oliver v. Stimson Lumber Co., 1999 MT 328,

¶ 22, 297 Mont. 336, ¶ 22, 993 P.2d 11, ¶ 22.

DISCUSSION

¶20 I Did the District Court err when it concluded that Mamie was not an

“insured” under the Farmowners policy?

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¶21 In its initial ruling, the District Court determined that Mamie was not an “insured”

under the Farmowners policy because the partnership, Modroo Farm, constituted the

Named Insured. The District Court concluded that, because the Named Insured was

designated as a partnership, the Farmowners policy limited “insureds” to individuals who

occupied a covered auto. The District Court based many of its subsequent rulings on this

determination.

¶22 Modroo challenges the District Court’s conclusion and asserts that Mary Modroo

and Hardy are individual Named Insureds under the plain language of the UIM

endorsement. Modroo alternatively argues that the District Court erred when it ignored

numerous ambiguities within the Farmowners policy. Modroo maintains that the

ambiguities require that the policy be construed against Nationwide and in favor of

Modroo and Hardy. Modroo and Hardy contend that if Mary Modroo and Hardy are

individually Named Insureds, then Mamie also is an insured as a “family member.”

Nationwide responds that the District Court correctly determined that no ambiguity

existed regarding the identity of the Named Insured as the partnership and that it correctly

ruled that Mamie was not insured under the policy.

¶23 The District Court conducted no conflict-of-law analysis when it interpreted the

Farmowners policy. Our review of Ohio law regarding contract interpretation reveals no

conflict with Montana law, and thus, we apply contract interpretation principles under

Montana law. The interpretation of an insurance contract presents a question of law.

Wendell, ¶ 10. We examine insurance contracts as a whole, with no special deference to

8
specific clauses. Mitchell v. State Farm Ins. Co., 2003 MT 102, ¶ 26, 315 Mont. 281, ¶

26, 68 P.3d 703, ¶ 26. We accord the usual meaning to the terms and the words in an

insurance contract, and we construe them using common sense. Mitchell, ¶ 26. An

insurance contract is ambiguous if i t is “reasonably subject to two different

interpretations.” Mitchell, ¶ 26. We determine whether an ambiguity exists from the

viewpoint of a consumer with average intelligence, but untrained in the law or the

insurance business. Mitchell, ¶ 26. We construe ambiguities in an insurance contract

against the insurer and in favor of extending coverage. Mitchell, ¶ 26.

¶24 The first page of the UIM endorsement states, “THIS ENDORSEMENT

CHANGES THE POLICY.” The endorsement provides that, with respect to UIM

coverage, the Coverage Form provisions apply “unless modified” by the UIM

endorsement. Like the Business Auto Coverage F o r m Declarations, the UIM

endorsement contains a block entitled “Named Insured.” The UIM endorsement lists the

Named Insured as “CASSIUS H & MARY J HARDY &[.]” The UIM endorsement

further states that “[i]f no entry appears above, information required to complete this

endorsement will be shown in the Declarations as applicable to this endorsement.”

¶25 The second page of the UIM endorsement provides a definition for “insureds” that

varies depending on the designation of the Named Insured. If the Declarations designate

the Named Insured as an individual, then “insured” includes the Named Insured and the

Named Insured’s family members. If the Named Insured is designated as a partnership,

then “insured” includes only those occupying a covered auto. No UIM coverage extends

9
to anyone occupying an auto that is not a covered auto if the Named Insured is designated

as a partnership. UIM coverage, however, does not hinge on whether a Named Insured

and the Named Insured’s “family members” are occupying a covered auto if the Named

Insured is designated as an individual.

¶26 Modroo asserts that no reason exists to look to the Declarations to determine how

the Named Insured is designated because the UIM endorsement’s Named Insured block

contains an entry: “CASSIUS H & MARY J HARDY &[.]” According to Modroo, a

reasonable interpretation is that the UIM Named Insureds are Hardy, Mary Modroo, “‘&’

someone or something else.” Looking to prior UIM endorsements, Modroo suggests the

“someone else” is Harry Modroo, Mary Modroo’s uncle and a partner in Modroo Farm.

Prior UIM endorsements listed “CASSIUS H & MARY J HARDY & HARRY

MODROO” as Named Insureds. Modroo points out that the UIM endorsement’s Named

Insured block never included the partnership. Modroo further asserts that the Named

Insured block contained in the Business Auto Coverage Form Declarations is ambiguous

and that a form of business description does not constitute a designation of a Named

Insured.

¶27 Nationwide responds that the language in the UIM endorsement’s Named Insured

block is irrelevant because the endorsement’s “Who is an Insured” section unequivocally

directs a reader to the “Declarations” to determine whether the Named Insured is

designated as an individual or as a business entity. According to Nationwide, the

Declarations identify the Named Insured as a partnership. Thus, Nationwide asserts that

10
the “Who is an Insured” section excludes UIM coverage for persons not occupying a

“covered auto” at the time they are injured. According to Nationwide, no UIM coverage

is available because Mamie did not suffer her injuries in a “covered auto.” Nationwide

asserts that the Business Auto Coverage Form Declarations listing the Named Insured as

“CASSIUS H & MARY J HARDY & HARRY MODROO DBA MODROO FARM”

and the designation “FORM OF BUSINESS: PARTNERSHIP” refute Modroo’s claims

of ambiguity.

¶28 Nationwide presents a reasonable interpretation of the policy; Nationwide’s

interpretation, however, is not the only reasonable interpretation. Modroo’s contention

that the UIM coverage applied to Mary Modroo and Hardy as individuals finds support

from the disparity between the UIM Named Insured block and the Business Auto

Coverage Form block, in addition to the customary listing of only three individuals in the

UIM endorsement’s Named Insured block.

¶29 Further, even if we accepted Nationwide’s argument that the UIM endorsement’s

Named Insured block is irrelevant and looked only to the Business Auto Coverage Form

Declarations to ascertain the Named Insured’s designation, a reasonable interpretation

still grants Mary Modroo and Hardy coverage as individuals. The UIM endorsement

directs one to the Declarations to determine the manner in which the Named Insured is

designated. Common sense dictates that any such designation would be included in the

Named Insured block, not, as Nationwide contends, in a form-of-business section. The

Named Insured block does not designate the Named Insured as a partnership. The

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Named Insured block does, however, include the names of three individuals – Hardy,

Mary Modroo, and Harry Modroo – who are doing business together as Modroo Farm. A

reasonable reading of the Named Insured block is that the Named Insureds include

Hardy, Mary Modroo, and Harry Modroo, as individuals, and Modroo Farm, as some

form of entity.

¶30 Nationwide argues that, even if the Farmowners policy granted UIM coverage to

the individual partners, the policy did not “designate” the partners as “individuals,” and

thus, Mamie still would not be entitled to coverage as a “family member.” According to

Nationwide, the FORM OF BUSINESS section would have designated “Individuals” if

the Named Insured was intended to be an individual.

¶31 Nationwide burdens the words “designate” and “individuals” with more weight

than they were intended to carry. The Farmowners policy provides no definition for

either the word “designate” or the word “individual”; thus, we accord them their usual

meaning, and we construe them using common sense. Mitchell, ¶ 26. The usual meaning

of the verb “designate” means “1. To indicate or specify; point out. 2. To give a name or

title to; characterize. 3. To select and set aside for a duty, an office, or a purpose.”

American Heritage Dictionary of the English Language 492 (4th ed. Houghton Mifflin

Co. 2000). The usual meaning of “individual” is “[a] single human considered apart from

a society or community . . . . A person.” American Heritage Dictionary of the English

Language at 893. If Nationwide intended to insure only Modroo Farm, it could have

listed the Named Insured as simply, “Modroo Farm” or “Modroo Farm, a partnership

12
entity only.” No reason existed for Nationwide to include the individuals Hardy, Mary

Modroo, and Harry Modroo in the Named Insured block unless Nationwide intended the

UIM coverage to apply to them as individuals. By specifically naming the individual

partners as separate persons in the Named Insured block, a reasonable interpretation of

the policy is that Nationwide designated Mary Modroo and Hardy as individuals for the

purposes of defining coverage.

¶32 Viewing the Farmowners policy from the perspective of a consumer of average

intelligence, but untrained in the law or the insurance business, we conclude that the

policy is subject to more than one reasonable interpretation and is ambiguous. Mitchell,

¶ 26. We construe ambiguities in an insurance contract against the insurer and in favor of

extending coverage. Mitchell, ¶ 26. Thus, we construe the Farmowners policy as

designating Mary Modroo and Hardy as individual Named Insureds, and we conclude

that the Farmowners UIM coverage extends to Mamie as Hardy’s and Mary Modroo’s

“family member.”

¶33 II Did the District Court err when it determined that Hardy lacked

standing to pursue his negligence claims against Nationwide?

¶34 Hardy asserts that the District Court erred when it determined that Hardy

possessed no insurable interest in Mamie’s life and thus lacked standing to pursue

negligence claims against Nationwide. The District Court ruled that Hardy lacked

standing based on Hardy’s admission that he had relinquished his interest in Modroo

Farm prior to Mamie’s accident and Hardy’s inability to demonstrate an insurable interest

13
in Mamie’s life. Also underlying the District Court’s ruling was its determination that

Hardy was not a Named Insured under the Farmowners policy. Our conclusion under

Issue I, that Hardy was an individual Named Insured, makes resolution of this issue

unnecessary.

¶35 III Did the District Court err when it determined that Modroo was not

entitled to medical payments coverage under the Farmowners policy?

¶36 Modroo argues that the District Court ignored ambiguities in the Farmowners

policy’s medical payments endorsement and erroneously denied Modroo medical

payment benefits.

¶37 The interpretation of an insurance contract presents a question of law, which we

review for correctness. Wendell, ¶ 10. The medical payments endorsement defines

“Insured” as “1. You while ‘occupying’ or while a pedestrian, when struck by any ‘auto.’

2. If you are an individual, any ‘family member’ . . . . 3. Anyone else ‘occupying’ a

covered ‘auto’ . . . .” The policy states that “you” refers to the Named Insured. The

District Court concluded that Mamie was not entitled to individual medical payment

coverage because “no ambiguity arises from the use of the term ‘you’ in the Auto

Medical Payments Coverage Endorsement, as the policy clearly identifies the named

insured as a partnership.” Based on our conclusion under Issue I, that the Named Insured

included the individual partners and designated them as individuals, we conclude that the

District Court erred when it determined that Modroo was not entitled to medical payment

benefits.

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¶38 IV Did the District Court err when it applied Ohio law to deny the

stacking of coverages and to allow offsets under the personal auto policy?

¶39 The District Court conducted a conflicts-of-law analysis and determined that Ohio

law governed Modroo’s entitlement to damages under the personal auto policy’s UIM

coverage. Modroo has not appealed the District Court’s determination that Ohio law

constitutes the applicable law, but argues that the District Court misapplied Ohio law.

According to Modroo, when a choice-of-law provision is ambiguous, Ohio law directs

courts to apply the laws of the state that most favors the insured. Modroo argues that the

personal auto policy contains several choice-of-law provisions and that most of the

provisions invoke the laws of the place of the accident. Modroo claims that these

multiple provisions result in a choice-of-law ambiguity; accordingly, Modroo asserts that

under Ohio law, the District Court should have applied Montana law and allowed

stacking and prohibited offsets. Alternatively, Modroo argues that the District Court

erred in enforcing language from the personal auto policy that contravenes Montana’s

public policy regarding offsets and stacking.

A. Did the District Court misapply Ohio law to allow offsets and preclude stacking?

¶40 Ohio and Montana share similar principles of contract interpretation. The

interpretation of an unambiguous insurance contract presents a question of law.

Nationwide Mut. Fire Ins. v. Guman Bros. Farm, 652 N.E.2d 684, 686 (Ohio 1995).

Provisions in an insurance contract that are “reasonably susceptible of more than one

15
interpretation” are “construed strictly against the insurer and liberally in favor of the

insured.” King v. Nationwide Ins. Co., 519 N.E.2d 1380, 1383 (Ohio 1988).

¶41 The personal auto policy listed Mary Modroo as the Named Insured and provided

that Nationwide would pay compensatory damages that “you or a relative are legally

entitled to recover from the owner or driver” of an underinsured motor vehicle “under the

tort law of the state where the motor vehicle accident occurred . . . .” The personal auto

policy also provides that the “contract law of the State of Ohio governs the interpretation

of this contract.” Modroo asserts that Ohio law holds that policies containing ambiguous

choice-of-law language “i.e., some language saying Ohio law applies, some suggesting

otherwise . . . must be construed to apply whatever law is most favorable to the insured.”

Modroo relies on Csulik v. Nationwide Mut. Ins. Co., 723 N.E.2d 90 (Ohio 2000)

(plurality) to support its proposition.

¶42 In Csulik, the Ohio Supreme Court held that language requiring Nationwide to pay

compensatory damages, “which are due by law to you or a relative from the owner or

driver of an uninsured motor vehicle” was ambiguous because the phrase “due by law”

was subject to more than one interpretation. Csulik, 723 N.E.2d at 91-92 (plurality). The

insureds argued that Pennsylvania law, the law of the state where the accident occurred,

should govern UIM recovery; Nationwide argued that the law of Ohio applied. Csulik,

723 N.E.2d at 91 (plurality).

¶43 The court determined that the “due by law” language was ambiguous because it

was unclear “whether Nationwide must pay what is due by the law of the state where the

16
accident occurred or due by Ohio law.” Csulik, 723 N.E.2d at 91 (plurality). Csulik’s

policy required an insured to sue for UIM coverage within the time limits provided by the

state in which the accident occurred, and the court reasoned that this language could lead

one to “logically conclude” that the laws of the accident state also determined the rights

of the insured under the policy. Csulik, 723 N.E.2d at 92 (plurality). Based on its

practice of strictly construing ambiguities “against the insurer and liberally in favor of the

insured[,]” the court declined to conduct a choice-of-law analysis and held that

Pennsylvania law, which more favored the insured, applied to the insurance contract.

Csulik, 723 N.E.2d at 92-93 (plurality).

¶44 Modroo asserts that the personal auto policy’s multiple choice-of-law provisions

result in an ambiguity. Under Csulik, Modroo argues that Montana law should apply to

determine Modroo’s rights because Montana law prohibits offsets and allows stacking of

coverage; thus, Montana law favors Modroo. We disagree.

¶45 The personal auto policy provides that Nationwide will pay compensatory

damages that “you or a relative are legally entitled to recover from the owner or driver”

of an underinsured motor vehicle “under the tort law of the state where the motor vehicle

accident occurred . . . .” This policy language unambiguously invokes Montana tort law.

The personal auto policy also provides that the “contract law of the State of Ohio governs

the interpretation of this contract.” This policy language unambiguously designates that

Ohio law governs the interpretation of the insurance contract. The presence of two

choice-of-law provisions, however, does not necessarily create an ambiguity. Contrary to

17
Modroo’s assertion, Csulik does not hold that a policy is ambiguous because different

state’s laws apply to different provisions. In fact, the Ohio Supreme Court specifically

discussed Nationwide’s ability to designate different state’s laws to the policy provisions,

and the court implied that Nationwide could have “clarified the ‘due by law’ language”

by following this practice. Csulik, 723 N.E.2d at 92 (plurality). In short, the provisions

in the personal auto policy are not ambiguous because they are not “susceptible of more

than one interpretation . . . .” King, 519 N.E.2d at 1383. Thus, under the personal auto

policy, Montana tort law determines Modroo’s entitlement to compensatory damages,

and Ohio contract law governs the interpretation of the insurance contract.

¶46 The personal auto policy limits the amounts recoverable under UIM coverage to

$300,000 per person, and the policy contains anti-stacking language, which states that the

“per person policy limit shall be enforceable regardless of the number of . . . vehicles or

premiums shown in the Declarations or policy . . . .” At the time of the accident, Modroo

insured two vehicles under the personal auto policy with Nationwide. The personal auto

policy also provides that any amounts available under UIM coverage will be offset by

any amounts “available for payment by or on behalf of any liable parties . . . .”

¶47 The issue presented by Modroo does not concern the amount of damages from

Mamie’s accident; rather, it concerns the amount of coverage that Nationwide must

provide under the personal auto policy. The amount of coverage available under a UIM

provision is defined under principles of contract law, not tort law. State Farm v. Estate of

Braun, 243 Mont. 125, 128, 793 P.2d 253, 255 (1990). Whether Modroo may recover

18
under multiple UIM coverages thus presents a question of contract law, and Ohio law

applies to determine the amount of coverage that Modroo may recover under the personal

auto policy. Ohio law allows an insurance contract to “include terms and conditions that

preclude any and all stacking” of UIM coverages. Ohio Rev. Code Ann. § 3937.18(F).

Ohio law also states that UIM policy limits “shall be reduced by those amounts available

for payment under . . . insurance policies covering persons liable to the insured.” Ohio

Rev. Code Ann. § 3937.18(C). Based on these statutory provisions, we conclude that the

District Court did not misapply Ohio law when it denied the stacking of coverages and

allowed offsets under the personal auto policy.

B. Did the District Court err in allowing offsets and precluding stacking under the

personal auto policy, in violation of Montana public policy?

¶48 Modroo asserts that Montana courts refuse to enforce an insurance policy’s

language that violates Montana public policy, regardless of the state in which the policy

was issued. Modroo maintains that the personal auto policy violates Montana public

policy because it allows offsets and precludes stacking of coverages.

¶49 In Youngblood v. American States Ins. Co., we held that we will enforce an

unambiguous contract term unless the term violates Montana public policy or is against

good morals. 262 Mont. 391, 395, 866 P.2d 203, 205 (1993). In Youngblood, we refused

to enforce an insurance contract’s clear choice-of-law provision that allowed subrogation

of medical payments under Oregon law. 262 Mont. at 400, 866 P.2d at 208. We held

that subrogating medical payment benefits in Montana is void as against public policy,

19
and we concluded that, “[b]ecause such subrogation violates Montana’s public policy,

that term of the insurance contract” is unenforceable. Youngblood, 262 Mont. at 400, 866

P.2d at 208.

¶50 In Casarotto v. Lombardi, we recognized that, when faced with a choice-of-law

conflict in contract disputes, we follow the “most significant relationship” approach

contained in the Restatement (Second) of Conflict of Laws to determine the applicable

state law. 268 Mont. 369, 373-74, 886 P.2d 931, 934 (1994), rev’d on other grounds,

Doctor’s Assocs. Inc. v. Casarotto, 517 U.S. 681, 116 S. Ct. 1652 (1996). In Casarotto,

we expanded on the Youngblood rule, and we applied the Restatement (Second) of

Conflict of Laws § 187 and § 188 (1971) to determine the effectiveness of a choice-of-

law provision that potentially violated Montana public policy. 268 Mont. at 374-75, 886

P.2d at 934-35. We again applied the Restatement to determine the validity of a choice-

of-law provision that potentially violated Montana policy in Keystone, Inc. v. Triad

Systems Corp., 1998 MT 326, ¶¶ 10-14, 292 Mont. 229, ¶¶ 10-14, 971 P.2d 1240, ¶¶ 10-

14.

¶51 In Swanson v. Hartford Ins. Co. of Midwest, we refused to enforce an insurance

policy’s choice-of-law provision that designated Colorado law as governing the insurer’s

rights to subrogation. 2002 MT 81, ¶ 33, 309 Mont. 269, ¶ 33, 46 P.3d 584, ¶ 33. We

determined that application of Colorado law would allow the insurer to subrogate before

the insured had been “made whole.” We concluded that the provision violated Montana’s

“made whole” doctrine, and thus, was void as against Montana public policy. Swanson, ¶

20
32. For reasons unstated in the opinion, we applied the original Youngblood rule without

addressing the Restatement factors. Though Youngblood and Swanson both addressed

subrogation provisions, and Casarotto and Keystone, Inc. both addressed arbitration

provisions, we did not limit the respective holdings to those particular types of

provisions.

¶52 In this case, the District Court applied the Restatement (Second) of Conflict of

Laws and conducted a conflicts-of-law analysis to the personal auto policy. The District

Court determined that Montana did not have a materially greater interest in the case and

that Ohio law governed Modroo’s entitlement to UIM coverage. The District Court’s

approach approximated that set forth in Casarotto and Keystone, Inc. As discussed in ¶

39, Modroo has not appealed the District Court’s determination that Ohio law applied to

the personal auto policy. Relying on Swanson, however, Modroo contends that the

personal auto policy’s language violates Montana public policy, and thus is

unenforceable.

¶53 Montana does not recognize a public-policy exception to the “most significant

relationship” analysis because the purpose of the analysis is to resolve conflicts between

different states’ competing policies; thus, such an exception would be “redundant.”

Phillips v. General Motors Corp., 2000 MT 55, ¶ 75, 298 Mont. 438, ¶ 75, 995 P.2d

1002, ¶ 75. Nevertheless, though Modroo’s argument more appropriately would be

raised as a challenge to the District Court’s choice-of-law determination, we can see how

our analysis in Swanson could create confusion regarding the analysis we apply to

21
determine whether Montana public policy will invalidate a choice-of-law provision.

Thus, we will review whether application of the personal auto policy’s choice-of-law

provision is effective under Montana law. We reiterate that the Restatement (Second) of

Conflict of Laws governs whether to give effect to parties’ contractual choice-of-law

provisions. Keystone, Inc., ¶ 10.

¶54 Under the Restatement, we will apply the “law of the state chosen by the parties to

govern their contractual rights” unless

application of the law of the chosen state would be contrary to a
fundamental policy of a state which has a materially greater interest than
the chosen state in the determination of the particular issue and which,
under the rule of § 188, would be the state of the applicable law in the
absence of an effective choice of law by the parties.

Restatement (Second) of Conflict of Laws § 187(2)(b). Stated differently, we will not

apply the law of the state chosen by the parties if three factors are met: (1) if, but for the

choice-of-law provision, Montana law would apply under § 188 of the Restatement; (2) if

Montana has a materially greater interest in the particular issue than the state chosen by

the parties; and (3) if applying the state law chosen by the parties would contravene a

fundamental policy of Montana.

¶55 Section 188 of the Restatement governs situations in which the contracting parties

fail to select an effective choice of law:

(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 [Choice-of-Law Principles].

22
Section 6(1) of the Restatement provides that a court, “subject to constitutional

restrictions, will follow a statutory directive of its own state on choice of law.” Montana

law provides that a “contract is to be interpreted according to the law and usage of the

place where it is to be performed . . . .” Section 28-3-102, MCA.

¶56 In Mitchell v. State Farm Ins. Co., we considered a case similar to Modroo’s. In

that case, Mitchell was insured under his parents’ California insurance policies and

suffered injuries in Montana while a passenger in a vehicle. Mitchell sued his parents’

insurance company and claimed that he was entitled to UIM coverage for five vehicles

that his parents owned and insured in California. The District Court determined that

California law, rather than Montana law, applied and that Mitchell was not entitled to

UIM coverage. Mitchell, ¶ 11. In reversing the District Court, we determined that

Montana was an anticipated place of performance because the policy provided that

“coverages you choose apply (1) in the United States of America . . . .” Mitchell, ¶ 19.

We further reasoned that a contract’s place of performance is the place “where an insured

is entitled to receive benefits, has incurred accident related expenses, or is entitled to

judgment.” Mitchell, ¶ 20. We ultimately concluded that Montana was the place of

performance, and thus, under § 28-3-102, MCA, Montana law applied to determine

whether Mitchell was entitled to stack UIM coverage. Mitchell, ¶ 23. We determined

that Montana was the place of performance because

Mitchell was working and living in Montana at the time of the accident; the
underinsured tort-feasor’s vehicle was insured in Montana; Mitchell’s
medical expenses were incurred in Montana; Mitchell settled with the [car-
owner’s] insurers for the policy limit giving rise to the underinsured
23
 motorist claim in Montana; and judgment concerning the accident will be
rendered and paid in Montana.

Mitchell, ¶ 22.

¶57 In this case, Modroo’s policy provided that Nationwide would pay damages that

“you or a relative are legally entitled to recover from the owner or driver of an uninsured

motor vehicle under the tort law of the state where the motor vehicle accident occurred . .

. .” Based on our reasoning in Mitchell, we conclude that Montana constitutes an

anticipated place of performance. Moreover, at the time of the accident, Mamie attended

the University of Montana in Missoula; she lived and worked in Montana; she paid taxes

in Montana; Mamie’s medical expenses were incurred in Montana; Modroo settled with

Lemaire’s insurer for the policy limit, which gave rise to the underinsured motorist claim

in Montana; and any judgment concerning the underlying accident will be rendered and

paid in Montana. Mitchell, ¶ 22. We conclude that, under Mitchell and § 28-3-102,

MCA, Montana constitutes the place of performance for the personal auto policy. Thus,

setting aside the parties’ contractual choice-of-law provision, Montana law would apply

under § 188 of the Restatement.

¶58 Under Montana law, the law of the place of performance governs a contract’s

interpretation unless the terms of the insurance contract provide otherwise. Mitchell, ¶

20. When insurance policies contain no choice-of-law provisions, we need not consider

whether Montana possesses a materially greater interest in the contract issue than another

state. Restatement (Second) of Conflict of Laws § 188. In Mitchell, the insurance policies

did not include a choice-of-law provision. Thus, once we determined that Montana
24
constituted the place of performance, we next considered whether Mitchell was entitled

to recover UIM damages under Montana law, without analyzing whether Montana had a

materially greater interest than California. Mitchell, ¶¶ 22-24; accord Wamsley v. Nodak

Mut. Ins. Co., 2008 MT 56, ¶¶ 42-44, 341 Mont. 467, ¶¶ 42-44, 178 P.3d 102, ¶¶ 42-44.

In this case, however, in light of the parties’ choice-of-law provision specifying that Ohio

law governs the interpretation of the personal auto policy, we must determine whether

Montana has a materially greater interest in the issue than Ohio. If we determine that

Montana has a materially greater interest, we then analyze whether applying Ohio law

would violate Montana public policy. Restatement (Second) of Conflict of Laws §§ 187-

188.

¶59 To determine whether Montana has a materially greater interest in an issue than

the parties’ chosen state, we have focused on the contacts enumerated in § 188(2) of the

Restatement: “(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

domicil, residence, nationality, place of incorporation and place of business of the

parties.” Keystone, Inc., ¶ 10. We evaluate these contacts according to the relative

importance they bear on the particular issue. Restatement (Second) of Conflict of Laws

§ 188(2).

¶60 Modroo purchased her personal auto policy in Ohio from the Skala Insurance

Agency, which sold Nationwide insurance. Ohio thus constitutes the place of

contracting. Further, Modroo is an Ohio resident and Nationwide is headquartered in

25
Ohio. The comments to the Restatement clarify that these contacts bear little significance

when considered separately, but gain importance based on their relationship to the

contract issue involved and the other contacts. Restatement (Second) of Conflict of Laws

§ 188 cmt. e. The location of the subject matter bears no significance to the present case

because the subject matter of the insurance contract does not constitute a specific

physical thing or a localized risk. Restatement (Second) of Conflict of Laws § 188 cmt. e.

¶61 The comments to the Restatement indicate that the place of the contract’s

negotiation and the place of performance bear greater significance to determine the

applicable law. Restatement (Second) of Conflict of Laws § 188 cmt. e. The Restatement

accords weight to the place of negotiation because such a state “has an obvious interest in

the conduct of the negotiations” and the subsequent agreement. Restatement (Second) of

Conflict of Laws § 188 cmt. e. If any negotiations occurred regarding Modroo’s personal

auto policy, they would have taken place in Ohio. Unlike most contracts, however, an

insurance policy’s terms are not the result of negotiation and bargaining by the parties;

insurance policies occupy the same status as “take-it-or-leave-it” adhesion contracts.

McAlear v. Saint Paul Insurance Companies, 158 Mont. 452, 458-59, 493 P.2d 331, 335

(1972). Thus, due to the parties’ unequal bargaining status, we accord this contact little

weight.

¶62 As discussed in ¶ 57, Montana constitutes the place of performance for Modroo’s

personal auto policy. The Restatement accords weight to the place of performance

because such a state “has an obvious interest in the nature of the performance and in the

26
party who is to perform.” Restatement (Second) of Conflict of Laws § 188 cmt. e. The

comments offer the caveat, however, that the place of performance bears little weight in

choice-of-law determinations when the place of performance is uncertain or unknown at

the time of contracting. Restatement (Second) of Conflict of Laws § 188 cmt. e. In the

present case, Montana constituted an anticipated place of performance because

Nationwide agreed to pay UIM damages “under the tort law of the state where the motor

vehicle accident occurred . . . .” Montana did not become the place of performance,

however, until Mamie’s accident occurred and the underlying claims arose. Thus, we

accord this contact little weight because Montana’s status as the place of performance

was uncertain or unknown at the time of contracting. Restatement (Second) of Conflict of

Laws § 188 cmt. e.

¶63 Analyzing the contacts from the Restatement (Second) of Conflict of Laws § 188,

we conclude that, although Montana has an interest in the particular issue based on its

status as the place of performance, Montana does not possess a materially greater interest

that would warrant applying Montana law over the parties’ express choice-of-law

provision selecting Ohio as the governing law for contract interpretation. In light of this

conclusion, we do not reach the question whether applying Ohio law would contravene a

fundamental public policy of Montana.

¶64 The dissent cautions that we “should be wary of a reflexive and rote application”

of the § 188(2) factors when analyzing the “materially greater interest” factor, and the

dissent suggests that we should abandon the Restatement analysis set forth in Casarotto

27
and Keystone, Inc. The dissent cites to a Ninth Circuit opinion for the proposition that

Montana courts conflate the Restatement analysis so that “whichever state has a

materially greater interest under § 188 is also the state whose law would apply absent an

effective choice of law provision.” Ticknor v. Choice Hotels Intl., Inc., 265 F.3d 931,

937 (9th Cir. 2001). Though both Keystone, Inc. and Casarotto lacked analysis regarding

which state’s law would apply absent the parties’ express choice, neither case set forth

the rule applied by the Ninth Circuit. On the contrary, both Keystone, Inc. and Casarotto

expressed the three-factor inquiry from the Restatement (Second) of Conflict of Laws

§ 187(2)(b) as the rule Montana courts apply to determine whether the parties’ chosen

state’s law will apply. Keystone, Inc., ¶ 10; Casarotto, 268 Mont. at 374-75, 886 P.2d at

934-35. As this case illustrates, we do not conflate the Restatement factors as suggested

in Ticknor.

¶65 After pointing out Montana’s apparent “anomaly” of conflating the Restatement

factors, the dissent then provides its own Restatement analysis and conflates the

“materially greater interest” factor with the “violates fundamental public policy” factor,

concluding that “Montana’s interest is materially greater than Ohio’s, because anti-

stacking provisions are against public policy here as a matter of constitutional principle.”

(Emphasis added.) The District Court applied § 188(2) of the Restatement and Keystone,

Inc. to determine that Montana did not have a materially greater interest. Neither party

has proposed that we overrule our precedent. With no briefing on this issue, we decline

28
to use this case to announce a change in our conflicts-of-law principles and to overrule

Keystone, Inc. and Casarotto.

¶66 Moreover, the dissent’s assumption that applying Ohio law would violate Montana

public policy is questionable. Anti-stacking provisions violate Montana public policy if

they allow an insurer to charge separate premiums for multiple UIM coverages but limit

the amount an insured may recover to the limits available under a single UIM coverage.

Hardy v. Progressive Specialty Ins. Co., 2003 MT 85, ¶¶ 40-42, 315 Mont. 107, ¶¶ 40-42,

67 P.3d 892, ¶¶ 40-42. Such provisions violate Montana public policy because they

contravene the insured’s reasonable expectation that he or she has purchased UIM

coverage. Hardy, ¶ 45. Consistent with this underlying principle, the number of

premiums paid determines the number of coverages an insured is entitled to stack.

Chaffee v. U.S. Fid. and Guar. Co., 181 Mont. 1, 7, 591 P.2d 1102, 1105 (1979) (citation

omitted). In this case, Modroo’s personal auto policy lists two vehicles in the

declarations. The declarations indicate that, although Nationwide charged separate

premiums for each vehicle’s liability coverage, Nationwide charged only a single

premium for UM/UIM coverage. Modroo received UIM benefits for a single vehicle.

Thus, i t is unlikely that the personal auto policy’s language defeated Modroo’s

reasonable expectations and thereby violated Montana public policy.

¶67 V Did the District Court err when it applied the forum non conveniens

doctrine to dismiss Modroo’s negligence claim in favor of Ohio proceedings?

29
¶68 Modroo and Hardy assert that the District Court erroneously applied the forum

non conveniens doctrine to dismiss Modroo’s negligence claim. Modroo and Hardy

argue that this Court repeatedly has declined to adopt the doctrine and that the doctrine is

inapplicable to the present case.

¶69 Nationwide responds that the District Court properly dismissed the negligence

claim under the forum non conveniens doctrine because the insurance contract is an Ohio

contract, the agents who sold the policy reside in Ohio, and most of the allegedly

negligent acts occurred in Ohio. Further, Nationwide asserts that, with the exception of

FELA cases, the forum non conveniens doctrine has never been rejected in Montana and

the doctrine properly was applied in this case.

¶70 We have stated that § 25-2-201, MCA, codifies the doctrine of forum non

conveniens to allow a court to change venue from one Montana county to another

Montana county. Rule v. Burlington Northern and Santa Fe, 2005 MT 6, ¶ 19, 325

Mont. 329, ¶ 19, 106 P.3d 533, ¶ 19; Haug v. Burlington Northern R. Co., 236 Mont.

368, 374-75, 770 P.2d 517, 521 (1989). We have not, however, construed § 25-2-201,

MCA, to authorize a district court to dismiss a case because it can be tried more

conveniently in another state. State v. Dist. of Eighth Jud. Dist. Ct., 270 Mont. 146, 154,

891 P.2d 493, 499 (1995). This case does not require that we resolve the extent of the

forum non conveniens doctrine in Montana. In light of our conclusions under Issues I

and III, we must reverse and remand this case to the District Court. Thus, a primary

rationale underlying the District Court’s application of the forum non conveniens

30
doctrine no longer exists: the negligence claim no longer constitutes “the only remaining

claim.” As the District Court continues to provide a convenient forum for the claims

presented in this case, we reverse the District Court’s ruling that dismissed Modroo’s

claims in favor of the Ohio proceedings.

CONCLUSION

¶71 We conclude that the District Court erred when it determined that the Farmowners

policy designated the Named Insured as a partnership. Construing ambiguities against

Nationwide, we conclude that the policy designates Mary Modroo and Hardy as

individuals and that Mamie Hardy qualifies as an “insured” based on her relationship as a

“family member” of Mary Modroo and Hardy. The District Court’s opposite conclusion

formed the basis for its rulings denying coverage under the UIM endorsement and the

medical payments endorsement. Thus, we reverse the District Court’s September 13,

2004 order granting summary judgment to Nationwide and denying summary judgment

to Modroo and Hardy regarding coverage under the Farmowners policy, and we reverse

the District Court’s April 4, 2006 order denying summary judgment to Modroo on

medical payments coverage. We further conclude that the District Court continues to

provide a convenient forum for the claims presented in this case, and we reverse the

District Court’s ruling dismissing Modroo’s claims under the forum non conveniens

doctrine.

¶72 We conclude that the District Court properly applied Ohio law to the personal auto

policy to allow offsets and preclude stacking. Based on our analysis of the Restatement

31
(Second) of Conflict of Laws §§ 187 and 188, we conclude that Montana does not possess

a materially greater interest that would warrant applying Montana law over the parties’

express choice of law. Thus, we do not reach whether enforcement of the personal auto

policy’s provisions would violate Montana public policy.

¶73 We reverse and remand for further proceedings.

/S/ W. WILLIAM LEAPHART

We concur:

/S/ KARLA M. GRAY
/S/ JOHN WARNER
/S/ BRIAN MORRIS
/S/ JIM RICE

Justice Patricia O. Cotter dissents.

¶74 I respectfully dissent from the Court’s holding under Issue 4B. I can accept the

Court’s decision to apply the conflict of laws analysis from § 187(2)(b) of the

Restatement to determine if Montana law should apply to the insurance policy in this

case. (Opinion, ¶ 54.) However, I disagree with the conclusion that Montana’s interest

in the dispute before use is not “materially greater” than Ohio’s.

¶75 The Court correctly notes that the Nationwide insurance contract states that Ohio

law will apply. Thus, under § 187(2)(b) of the Restatement, Ohio law will apply unless

the following three factors are met: (1) if, but for the choice-of-law provision in the
32
contract, Montana law would apply under § 188 of the Restatement; (2) if Montana has a

materially greater interest in the particular issue than the state chosen by the parties; and

(3) if applying the state law chosen by the parties would contravene a fundamental policy

of Montana. (Opinion, ¶ 54.) The Court easily concludes that factor (1) is satisfied in

favor of Montana, and I agree with its analysis.

¶76 Under factor (2), however, the Court concludes that Montana does not have a

“materially greater interest” in this dispute, and thus concludes that Ohio law will apply.

I disagree with this conclusion and the Court’s analysis. The Court follows Keystone,

Inc., and begins its analysis under factor (2) by noting that the determination of whether

Montana has a materially greater interest than Ohio will depend on an analysis on the

contacts described in § 188(2) of the Restatement. (Opinion, ¶ 59.) If an analysis under

these contacts shows that Montana has a materially greater interest than Ohio’s, then

Montana law would presumably apply to override the contractual provision choosing

Ohio law. These contacts include the following: (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 domicil, residence, nationality, place of

incorporation and place of business of the parties. In its analysis, the Court concludes

that all of the factors are either neutral or of little weight; thus, Montana’s interest is not

materially greater than Ohio’s.

¶77 While I understand the Court’s strict application of the § 188(2) factors to

determine whether Montana has a materially greater interest in this dispute has its genesis

33
in our decision Keystone, Inc., I think we should be wary of a reflexive and rote

application of those factors to determine which state has materially greater interest in the

dispute before us. In the first instance, I would bring to the Court’s attention that in

Keystone, Inc., we continued the practice of merging the “materially greater interest”

inquiry with a somewhat mechanical application of the § 188(2) factors without any

analysis or explanatory rationale—a practice which is inconsistent with the plain

language of the Restatement itself, which posits the “materially greater interest” inquiry

as separate and apart from the § 188(2) factors analysis. (See ¶ 54 of the Opinion for text

of § 187(2)(b)). In Ticknor v. Choice Hotels Intl, Inc., 265 F.3d 931 (9th Cir. 2001), the

Ninth Circuit noted this anomaly in our application of § 187(2)(b) of the Restatement

when it was called upon to apply Keystone, Inc. in analyzing a choice-of-law question

under Montana law. The Ninth Circuit noted: “Montana courts conflate the latter two

inquiries [under § 187(2)(b)] and find that whichever state has a materially greater

interest under § 188 is also the state whose law would apply absent an effective choice of

law provision.” Ticknor, 265 F.3d at 937. In my judgment, the fact that the Ninth Circuit

has recognized this anomaly in our application of § 187(2)(b) of the Restatement should

give us pause before we perpetuate this practice further.

¶78 I would further suggest that the Keystone, Inc. approach of merging these two

inquiries is out of step with the vast majority of jurisdictions which have analyzed the

“materially greater interest” question under § 187(2)(b). In Blalock v. Perfect

Subscription Co., 458 F. Supp. 123 (S.D. Ala. 1978), aff’d 599 F.2d 743 (5th Cir. 1979),

34
for instance, an Alabama federal district court applied § 187(2)(b) of the Restatement to

consider whether an express contractual provision to apply Pennsylvania law in an

employment agreement would be enforced in Alabama. In that case, the employment

agreement contained a covenant against competition which was permitted under

Pennsylvania law, but expressly forbidden by statute in Alabama. Blalock, 458 F. Supp.

at 126-27. The federal district court looked to § 187(2)(b) to resolve the question of

which state’s law should apply, and concluded that Alabama had a “materially greater

interest” in determining the issue than Pennsylvania, even in the face of an express

contractual provision to apply Pennsylvania law. Blalock, 458 F. Supp at 127; see also

Benchmark Med. Holdings, Inc. v. Rehab Solutions, LLC, 307 F. Supp. 2d 1249, 1260

(M.D. Ala. 2004).

¶79 In Barnes Group, Inc. v. C & C Prods., Inc., 716 F.2d 1023 (4th Cir. 1983), the

Fourth Circuit reached a similar conclusion under § 187(2)(b) in considering whether to

apply Ohio law to the interpretation of multi-state employment agreements which

expressly called for the application of Ohio law. In that case, an Ohio-based company

(Bowman, Inc.), which sold fungible parts used in the production and repair of vehicles

and machinery, contracted with salesmen in a variety of states, including Alabama,

Louisiana, Maryland, and South Carolina, to sell its products there. Barnes Group, Inc.,

716 F.2d at 1026-27. The contracts all had restrictive covenants, which were permitted

under Ohio law, forbidden in Alabama, but allowed under some circumstances in

Louisiana, Maryland, and South Carolina. Barnes Group, Inc., 716 F.2d at 1031-32.

35
Another company subsequently hired some of Bowman, Inc.’s salesmen, and Bowman,

Inc. sued the company in Ohio federal district court based on the restrictive covenants

contained in the agreements. Barnes Group, Inc., 716 F.2d at 1027. The Fourth Circuit

was called upon to decide which state’s law should apply to the dispute. The Fourth

Circuit applied § 187(2)(b) of the Restatement to resolve this question, noting that

A basic principle under contemporary choice-of-law doctrine is that
parties cannot by contract override public policy limitations on contractual
power applicable in a state with materially greater interests in the
transaction than the state whose law is contractually chosen. See
Restatement (Second) of Conflicts § 187(2)(b) (1971). While
contemporary doctrine recognizes a sphere of party autonomy within
which contractual choice-of-law provisions will be given effect, it also
limits the extent to which deft draftsmanship will be allowed to bypass
legislative judgments as to basic enforceability or validity. This is implicit
in the Restatement (Second) of Conflicts § 187(2)(b), which provides that a
contractual choice-of-law clause will not be given effect on matters such
as “capacity, formalities and substantial validity,” id. comment d, when
application of the law of the chosen state would be contrary to a
fundamental policy of a state which has a materially greater interest than
the chosen state in the determination of the particular issue and which . . .
would be the state of the applicable law in the absence of an effective
choice of law by the parties.

Barnes Group, Inc., 716 F.2d at 1029 (footnotes and other citations omitted).

¶80 In assessing the interests of the various states involved, the Fourth Circuit noted

that Maryland, Louisiana, South Carolina and Alabama all had “interests at two levels in

applying their own law on the enforceability of restrictive covenants: to protect

employee-residents from contractually abrogating their ability to earn a livelihood, and to

control the degree of free competition in the local economy.” Barnes Group, Inc., 716

F.2d at 1030. The Fourth Circuit concluded that the interests of these states “in

36
regulating business relationships with the states outweigh any generalized interest Ohio

might have in applying its own law to protect the interstate contracts of its

domiciliary . . . .” Barnes Group, Inc., 716 F.2d at 1030.

¶81 Another case I find instructive in this regard is DeSantis v. Wackenhut Corp., 793

S.W.2d 670 (Tex. 1990). There, the Texas Supreme Court considered whether to apply

Texas or Florida law to enforce a covenant not to compete between Wackenhut

Corporation (an entity which provides security services throughout the United States) and

its former employee, Edward DeSantis; Florida law permitted the enforcement of such

covenants, while Texas law did not. In that case, DeSantis resigned from Wackenhut

after working there for three years, and then formed a rival company called Risk

Deterrence, Inc. (RDI). DeSantis, 793 S.W.2d at 675. Wackenhut subsequently sued

DeSantis under the restrictive covenant, and DeSantis sought to have Texas law govern

the interpretation of the contract, in spite of the express provision to apply Florida law.

DeSantis, 793 S.W.2d at 676-77. The Texas Supreme Court applied § 187(2)(b) of the

Restatement test and concluded that Texas’ interest in the matter was materially greater

than Florida’s. In reaching this conclusion, the Texas Supreme Court reasoned as

follows:

Texas has a materially greater interest than does Florida in determining
whether the noncompetition agreement in this case is enforceable. At
stake here is whether a Texas resident can leave one Texas job to start a
competing Texas business. Thus, Texas is directly interested in DeSantis
as an employee in this state, in Wackenhut as a national employer doing
business in this state, in RDI as a new competitive business being formed
in the state, and in consumers of the services furnished in Texas by
Wackenhut and RDI and performed by DeSantis. Texas also shares with
37
 Florida a general interest in protecting the justifiable expectations of
entities doing business in several states. Florida’s direct interest in the
enforcement of the noncompetition agreement in this case is limited to
protecting a national business headquartered in that state. Although it is
always problematic for one state to balance its own interests fairly against
those of another state, the circumstances of this case leave little doubt, if
any, that Texas has a materially greater interest than Florida in deciding
whether the noncompetition agreement in this case should be enforced.

DeSantis, 793 S.W.2d at 679; see also O’Brien v. Shearson Hayden Stone, Inc., 586 P.2d
830, 833-34 (Wash. 1978); Stickney v. Smith, 693 F.2d 563, 565 (5th Cir. 1982).

¶82 The comments to the Restatement, upon which the Court has placed some weight

(Opinion, ¶¶ 60-62), do not commend the approach employed by the Court in this case,

but instead exhort reviewing courts to look primarily to their own legal principles when

determining whether one state has a materially greater interest than another. “The forum

will apply its own legal principles in determining whether a given policy is a fundamental

one within the meaning of the present rule and whether the other state has a materially

greater interest than the state of the chosen law in the determination of the particular

issue.” Restatement (Second) of Conflict of Laws § 187 cmt. g (emphasis added). Thus,

there is no reason to assume, as the Court does, that a mechanical application of the §

188(2) factors is contemplated by the Restatement itself, given that the choice-of-law

rules contained in the Restatement “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.” Restatement (Second) of Conflict of Laws § 2 cmt.

a(3). While the prime objective of the § 188(2) factors analysis is to ensure that the

justified expectations of the contracting parties are protected, the Restatement comments

38
also clearly contemplate that the various interests of the forum states are always to be

balanced against these justified expectations.

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 law 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.

Restatement (Second) of Conflict of Laws § 188 cmt. b (emphasis added).

¶83 In her dissent in Ohayon v. Safeco Ins. Co. of Ill., 747 N.E.2d 206 (Ohio 2001),

Justice Resnick of the Ohio Supreme Court referred to some of these sections from the

Restatement in making the argument that a rote application of the § 188(2) factors makes

little sense in the context of UIM coverage issues. Justice Resnick concluded that an

application of the Restatement’s choice-of-law principles in the context of UIM coverage

issues should lead reviewing courts to consider “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.” Ohayon, 747 N.E.2d at 226 (Resnick, J., dissenting). I believe this is

the approach that the comments to the Restatement actually commend, and the one that

should be followed in this case.

¶84 I would also argue that the Court’s analysis with respect to the “place of

performance” under the § 188(2) factors, is not necessarily supported by the comments

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themselves. The Court begins its analysis under this factor by correctly concluding that

Montana is, in fact, the place of performance of Nationwide’s insurance contract.

(Opinion, ¶ 62.) This conclusion is consistent with our holding in Mitchell. The Court

then observes that this contact would normally be accorded significance because “such a

state ‘has an obvious interest in the nature of the performance and in the party who is to

perform.’ ” (Opinion, ¶ 62 (quoting Restatement (Second) of Conflict of Laws § 188 cmt.

e). The Court then cautions as follows: “[t]he comments [to the Restatement] offer the

caveat, however, that the place of performance bears little weight in choice-of-law

determinations when the place of performance is uncertain or unknown at the time of

contracting.” (Opinion, ¶ 62, citing Restatement (Second) of Conflict of Laws § 188 cmt.

e). Accordingly, the Court concludes that this factor is accorded little weight because

“Montana’s status as the place of performance was uncertain or unknown at the time of

contracting.” (Opinion, ¶ 62.) This leads the Court to then conclude that Montana’s

interest in this dispute is not materially greater than Ohio’s, and that Ohio law will apply.

¶85 I have two problems with Court’s analysis of this specific issue. First, based on

my reading of the comments, and not just one small snippet of them, I do not believe that

comments in the Restatement, without any other case citations, should constitute the be-

all and end-all of our analysis and discussion. The comments can certainly provide

courts with invaluable guidance when they are confronted with difficult questions for

which no clear precedent exists. However, the comments are not authoritative; instead of

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being the end of a discussion, they should be the beginning of one. More importantly, it

is my view that the comments encourage such a discussion.

¶86 With that said, I would also submit that the Court’s characterization of comment e

in ¶ 62 of the Opinion is not entirely accurate. The portion of the comments referred to

by the Court reads in full as follows:

On the other hand, the place of performance can bear little weight in
the choice of the applicable law when (1) at the time of contracting it is
either uncertain or unknown, or when (2) performance by a party is to be
divided more or less equally among two or more states with different local
law rules on the particular issue.

Restatement (Second) of Conflict of Laws § 188 cmt. e (emphasis added).

¶87 I believe use of the word “can,” as opposed to “will” or “must” in the comment is

significant. The word “can” simply connotes that prospect that the place of performance

could be afforded little weight in certain circumstances, but not that it necessarily will.

The language of the comment leaves open the question as to whether the place of

performance should be accorded weight, but does not definitively and authoritatively

provide an answer.

¶88 Accordingly, I believe that when we undertake an analysis of the “materially

greater interest” inquiry in a manner consistent with the comments, we will conclude that

while the place of performance factor can bear little weight, in this case i t bears

significant weight when considered in light of our “own legal principles” as the

comments to the Restatement commend. In Montana, UIM coverage is considered to be

portable and personal, and by definition “stackable”; thus under the legal principles set

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forth in the Montana Constitution, prohibitions on stacking violate Montana public

policy. Hardy v. Progressive Specialty Ins. Co., 2003 MT 85, ¶ 45, 315 Mont. 107, ¶ 45,

67 P.3d 892, ¶ 45. The primary reason for this is because anti-stacking provisions violate

the insured’s reasonable consumer expectations that she has actually purchased UIM

coverage which she can use. At the time of the accident, Mamie was a named insured,

attending the University of Montana, and protected under the laws of this state and the

Montana Constitution. Assuming that she was lawfully covered by the UIM policy,

Montana’s interest in protecting her reasonable consumer expectations if she was

required to invoke UIM coverage in Montana was significant.

¶89 On the other hand, Ohio’s interest in this matter is limited to the general need to

protect the justified expectations of Nationwide. Ohayon, 747 N.E.2d at 212. The

Restatement comments clearly recognize that this interest can yield. Thus, the question

of whether Montana or Ohio has a “materially greater interest” in this dispute should be

considered in the context of UIM coverage and in light of the policy questions invoked

when states like Montana seek to prohibit the enforcement of anti-stacking provisions in

UIM insurance contracts which are to be performed within its borders. This inquiry

invariably requires a balancing of the interests embodied in the forum state’s policy, and

the interests in protecting the justified expectations of the parties. As the comments to

the Restatement state, “[f]ulfillment of the parties’ expectations is not the only value in

contract law; regard must also be had for state interests and for state regulation. The

chosen law should not be applied without regard for the interests of the state which

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would be the state of the applicable law with respect to the particular issue involved in

the absence of an effective choice by the parties.” Restatement (Second) of Conflict of

Laws § 187 cmt. g (emphasis added). In this regard, I believe Justice Resnick correctly

summarized some of these interests as follows:

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 significant
role in choice of law than the parties’ presumed expectations . . . .

Ohayon, 747 N.E.2d at 223 (Resnick, J., dissenting).

¶90 Here, it must be borne in mind that the UIM coverage provision designated place

of performance as anywhere within the area of coverage. The UIM coverage before us is

considered portable under Montana law. Moreover, as the Court notes at ¶ 62,

Nationwide even agreed that it would pay UIM damages according to “the tort law of the

state where the motor vehicle accident occurred . . . .” In short, while Nationwide may

not have expected the insurance contract to be interpreted according to Montana law, I

would argue that at a minimum its justified expectations in this regard were not very

strong. On the other hand, Mamie was living and working in Montana, paying taxes in

Montana, and protected under the laws and Constitution of this state. I believe that under

these circumstances Mamie deserved the protection of the laws of this State and that,

consequently, Montana’s interest is materially greater than Ohio’s, because anti-stacking

provisions are against public policy here as a matter of constitutional principle.
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Assuming that the policy permitted Mamie to reside in Montana and still retain coverage,

then Nationwide, with its national base of customers, should not automatically expect that

its self-interest should trump Montana’s important public policy.

¶91 Thus, I would hold that Montana has a materially greater interest than Ohio, and

proceed with further analysis of Modroo’s claims under Montana law. In my view, the

mechanical application of the § 188(2) factors to determine whether one state has a

“materially greater interest” overlooks the forest for the trees and is fundamentally at

odds with the approach commended by the Restatement. While there will undoubtedly be

areas where the laws and public policies of two states will not differ—and thus their

material interests will be identical—that is not the case with respect to the issue before

the Court now. By focusing only on the factors as if they were a part of a rote checklist,

and not considering the policy concerns and questions which the factors are designed to

explore, we misconstrue the meaning of the “materially greater interest” inquiry and

arrive at a situation where Montana’s interest can be trumped by foreign insurers at the

stroke of a pen. I do not believe that such an approach is consistent with the Restatement

and “our own legal principles.” Therefore, I dissent.

/S/ PATRICIA COTTER

Justice James C. Nelson joins in the Dissent of Justice Patricia O. Cotter.

/S/ JAMES C. NELSON

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