The Indiana Supreme Court recently held that, in an insurance dispute regarding defense and indemnification of environmental liability, the uniform approach (a single state’s law governing the entire contract) should be applied, and the state with the “most intimate contacts” will have its law pertain to the contract.
Standard Fusee Corporation (“SFC”) previously operated factories manufacturing emergency signaling flares in Maryland, Indiana, New Jersey, Ohio, California and Pennsylvania while maintaining its headquarters in Maryland. SFC purchased comprehensive general liability policies from two different brokers, holding all communication and discussions regarding the policies in Maryland. After a toxic chemical used in manufacturing its flares was detected in the groundwater near its California facility, SFC was subject to lawsuits which were eventually dismissed because it was determined that SFC didn’t emit the chemical. Afterwards, it voluntarily tested its Indiana facility and found that the chemical may have been emitted at the Indiana location. SFC was granted inclusion into the Indiana Department of Environmental Management’s Voluntary Remediation Program. SFC requested defense and indemnification from the insurers, who denied an obligation.
SFC sought a declaratory judgment against the insurers and filed for summary judgment that Indiana law governed the policy’s interpretation and also that the insurers had a duty to defend, which the trial court granted. The insurers sought application of Maryland law, as its interpretation would be more beneficial to their position. The Court of Appeals sided with neither party and reversed the trial court’s holding, determining that a site-specific approach should apply to the policy. In National Union Fire Insurance Co. v. Standard Fusee Corporation, No. 49S04-1006-CV-318, the Indiana Supreme Court held that Indiana has long applied the uniform approach to multistate insurance policies. The Court went on to hold that, in order to determine which state’s law governed the contract, a “most intimate contacts” test should be used. Because a single event is not determinative as to which state has the most intimate contacts with the transaction, several factors must be weighed together. Because SFC was located in Maryland, all of the correspondence regarding the insurance took place in Maryland, and because the policies were retained and the premiums were paid in Maryland, the Court held that Maryland law should uniformly apply to the dispute.