The Unpredictability Of Florida’s Supposedly Predictable Choice-Of-Law Test – Corporate/Commercial Law

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For purposes of determining contract interpretation, Florida
courts apply the lex loci contractus choice-of-law rule.
The Supreme Court of Florida observed that lex loci
is an “inflexible rule” that exists
“to ensure stability in contract arrangements.” Under
lex loci contractus, a contract (other than one for the
performance of services) is governed by the law of the state in
which the contract is made, i.e., where the last act necessary to
complete the contract is done. But what’s the “last
act?” That’s a good question to which the courts have
failed to provide a clear answer.

According to the Eleventh Circuit Court of Appeals, the
determination of where a contract was executed is “fact
intensive,” and “requires a determination of where the
last act necessary to complete the contract was done.”

Courts have supplied different definitions of the “last
act.” For instance, some courts have considered delivery as
the last act, so where the policy was delivered determines what law
applies. On the other hand, the Eleventh Circuit Court of Appeals
found that “[t]he last act necessary to complete a contract is
the offeree’s communication of acceptance to the offeror.”
Under that construction, the insurer’s communication of the
oral binder to its insured constituted acceptance of the
insured’s offer to purchase insurance and, therefore, was the
last act necessary to complete the contract. Indeed, a growing
number of courts have considered the policy to have been executed
in the place where the binder was issued, reasoning that the
issuance of the binder was the last act. Determining where the
binder was issued typically requires an examination of the
insurer’s underwriting file.

In a recent case, ACP Peachtree Center, LLC v. Great
Insurance Co.
, a Florida federal district court in the
Southern District did not mention the “last act” in its
choice-of-law analysis regarding a commercial general liability
policy. Moreover, the court did not discuss the issuance of the
binder at all. Instead, the court listed a number of factors to
support its conclusion that Florida law applied to the policy. The
court noted that the insurer issued the policy to a Florida entity,
which negotiated the policy in Florida through its Florida-based
insurance broker, and the insurer delivered the policy in Miami,
Florida. Additionally, the court noted that the policy contained
Florida-specific terms and their application to several Florida
properties beyond the Peachtree Center in Georgia.

Interestingly, another federal district court in CNL Hotels
& Resorts, Inc. v. Houston Casualty Co.
had previously
remarked that factors such as:

  • a business’s principal place of
    business in Florida,

  • the delivery of the policy in Florida
    because the insurer was licensed in Florida, and

  • Florida-specific riders in the

were not relevant to the issue of where the last act necessary
to complete the contract occurred. Rather, the CNL court,
seemed to lean toward the issuance of the binder as the “last
act.” However, the court did not formally endorse it as the
“last act,” noting that “whether one looks at the
issuance or delivery of the binder or issuance and delivery of the
policy as the ‘last step’ needed to complete the contract
of insurance…these events occurred in New York, not

Subsequent to the ACP Peachtree decision, a Florida
federal district court in the Middle District examined the
“last act” and joined the growing number of courts that
have examined where the binder was issued. The court in
Riverside Apartments Cocoa, LLC v. Landmark American Insurance
concluded that the last act was the issuance of the
binder, so the contract was executed in Georgia.

Even though the lex loci contractus rule is supposed to
be a rigid test designed to produce predictable results, a review
of Florida cases shows that the results under the test can be
anything but predictable. In practice, sometimes even the most
seasoned insurance attorney cannot predict which state’s law
applies under lex loci contractus. Ultimately, if the
parties cannot agree on the substantive law in an insurance
coverage dispute, then the diligent practitioner should examine
what factors a particular court will employ to define the
“last act.”

Originally Published by Butler Weihmuller, March

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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