Key Takeaway
New York court applies Pennsylvania law to auto insurance dispute, finding PA's protection for innocent third parties prevents policy rescission against assignor.
Choice of law issues frequently arise in multi-state insurance disputes, particularly when accidents occur in one state but the insurance policy originates from another. These cases require courts to determine which state’s laws should govern the dispute, often leading to significantly different outcomes depending on the applicable legal framework.
In this case, the Appellate Term faced a scenario where an insurance company sought to rescind a policy, potentially leaving an injured party without coverage. The court’s analysis demonstrates how choice of law principles can protect innocent parties even when insurers attempt to void coverage after the fact.
Jason Tenenbaum’s Analysis:
Optimal Well-Being Chiropractic, P.C. v Infinity Ins. Co., 2013 NY Slip Op 52065(U)(App. Term 2d Dept. 2013)
“Defendant issued the automobile insurance policy in Pennsylvania to the insured, who [*2]purportedly resided in Pennsylvania, for a vehicle which was purportedly garaged in Pennsylvania. The only connection between the policy and New York State is that plaintiff’s assignor was injured while riding in the insured’s vehicle in New York. Consequently, we find that Pennsylvania law is controlling under New York’s conflict of law rules”
“Although Pennsylvania law provides for a common law right by the insurer to rescind a policy of insurance, in Erie Ins. Exchange v Lake (543 Pa 363, 375, 671 A2d 681, 687 ), the Pennsylvania Supreme Court held that an automobile insurance policy cannot be retroactively rescinded with respect to third parties who were harmed through no fault of their own. Therefore, any rescission of the insurance policy in question did not affect the rights of the innocent assignor.”
(1) PA law applies because the policy was issued in PA and only connection to NY was the fact the MVA occurred in NY
(2) PA law disallows rescission of policy regarding innocent assignor
Key Takeaway
Pennsylvania’s robust protection for innocent third parties prevented the insurance company from escaping liability through retroactive rescission. Even though the accident occurred in New York, the policy’s Pennsylvania origins meant Pennsylvania law controlled, ultimately benefiting the injured assignor who had no involvement in any alleged policy violations.
