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 contractus 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 policy,
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 Florida.”
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 Co. 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.”