Sunshine Auto Coverage

Florida’s warm climate draws visitors from all over the northern United States and Canada. More than 3 million Canadian citizens visited Florida in 2010.¹ When your Canadian insured is involved in a Florida auto accident, one of the first items of business is determining whether coverage exists.

What if your insured is sued for the accident in a Florida court, and your policy contains an exclusion expressly forbidden by Florida law? Does the mere fact that the accident happened in Florida mean your exclusion is void and you now must afford coverage?

The answer is: “It depends.” Florida courts adhere to a doctrine called lex loci contractus. Under this doctrine, the law of the state in which the contract was executed is applied to coverage analyses.² So in general, the exclusion would apply to a Florida accident assuming the exclusion is permitted under Canadian law.

But Florida courts have established an exception to the lex loci doctrine. Under this exception, Florida law can invalidate an exclusion when needed to (1) protect a Florida citizen and (2) further a paramount Florida public policy.³

Fortunately, this exception has been applied very narrowly thus far. On only one reported occasion, a Florida court has applied the public policy exception to the interpretation of a non-Florida auto insurance contract.  That case was Gillen v. USAA.⁴ In Gillen, the insureds bought auto policies in New Hampshire and then moved to Florida. The court noted that although New Hampshire law ordinarily applied to the interpretation of the contract, the public policy exception mandated the application of Florida law.

The court outlined three main reasons for this ruling.  First, the insurance policy contained an “other insurance” clause in violation of Florida public policy. Second, the insureds were in the process of becoming permanent Florida citizens. And third, the insureds notified the insurer of their move to Florida.

Only once did a Florida court analyze the public policy exception in relation to a Canadian insurance policy. Although that occasion did not involve auto insurance, an examination of the court opinion is nevertheless instructive. Ultimately, the court decided Canadian law applied (i.e., the public policy exception was not applicable).

In CAE USA Inc. v. XL Ins. Co. Ltd.⁵, a worker sued his employer for injuries resulting from the employer’s intentional conduct, and the employer made a claim to its Canadian insurance company. The insurer denied coverage “because Canadian law provides that an insurer is never liable to compensate for injury resulting from the insured’s intentional fault.” In the resulting declaratory judgment lawsuit, the employer sought application of Florida law, which presumably would have been more favorable to the employer. In ruling Canadian law applied, the court found the employer “has not shown that the application of Canadian law will result in an inequitable insurance contract that is contrary to some specific public policy of Florida.”

Canadian auto insurers should not be scared off by Florida’s public policy exception to the lex loci contractus doctrine. But they would do well to obtain a periodic update of Florida law on this issue to be sure the courts have not expanded the scope of the exception.

1VISITFLORIDA.org, Research (visited June 13, 2011) http://media.visitflorida.org/research.php>.
2State Farm Mut. Auto. Ins. Co. v. Roach, 945 So. 2d 1160, 1163 (Fla. 2006) (“[T]he law of the jurisdiction where the contract was executed governs the rights and liabilities of the parties in determining an issue of insurance coverage.”); Mid-Continent Cas. Co. v. Basdeo, 742 F. Supp. 2d 1293, 1321-22 (S.D. Fla. 2010); Kenneth Cole Prods., Inc. v. Mid-Continent Cas. Co., No. 10–21732–CIV, 2010 WL 5684403, at *2 (S.D. Fla. Nov. 30, 2010); Valiant Ins. Co. v. Progressive Plumbing, Inc., No. 5:06-cv-410-Oc-10GRJ, 2007 WL 2936241, at *3-4 (M.D. Fla. Oct. 9, 2007). 
3State Farm, 945 So. 2d at 1168-69; U.S. Fidelity & Guar. Co. v. Liberty Surplus Ins. Corp., 555 F.3d 1031, 1033 (11th Cir. 2008). 
4300 So. 2d 3 (Fla. 1974). 
5No. 8:11–cv–64–T–24 TBM, 2011 WL 1878160, at *2 (M.D. Fla. May 17, 2011).