Policyholders in Arlington, Aledo, Farmers Branch, Grand Prairie, De Soto, Lancaster, Fort Worth, Mansfield, Weatherford, or any other town in Texas might have the following question. What happens if I am in an accident when I am out of state? Or they might ask, what happens when someone from out of state has an accident with me in Texas when they are at fault?
Let’s consider the last question first. What happens when someone from out of state has an accident in Texas when that out of state person is at fault in the accident? The only part of an extensive answer to this question that is relevant is this:
In a state like Oklahoma, who has minimum policy limits that are less than the minimum limits in Texas, what happens. The Texas Transportation Code, Section 601.001 et seq. sets the minimum liability limits in Texas at $25,000 per person or $50,000 per incident on the bodily injury portion of an automobile policy. The State of Oklahoma has limits as low as $15,000 per person. When someone is driving in Texas with an automobile insurance policy issued from some state other than Texas, the minimum limits in Texas apply. This is the case regardless of the fact that the Oklahoma policy clearly says the minimum limits are $15,000. Other differences are not relevant or, are not going to arise very often.
So now lets get back to the first question from above. What happens if I am in an accident when I am out of state?
First, start from the premise that the law of the state where a policy is issued generally governs coverage issues. Texas has a provision in the Insurance Code that spills Texas law into some out of state policies. From a legal standpoint, Texas follows the “most significant relationship rule” articulated in the Texas Supreme Court case, Duncan v. Cessna Aircraft Company, issued in 1984, in applying a particular state’s law to an insurance contract. This is detailed and discussed in the case, and basically looks at issues regarding where the insurance contract was entered into, where it was payable, where acts were to be performed, etc.
For Texas residents the answer to the question is found in Texas Insurance Code, Section 21.42. It says:
Any contract of insurance payable to any citizen or inhabitant of this State by any insurance company or corporation doing business within this State shall be held to be a contract made and entered into under and by virtue of the laws of this State relating to insurance, and goverened thereby, notwithstanding such policy or contract of insurance may provide that the contract was executed and the premiums and policy (in case it becomes a demand) should be payable without this State, or at the home office of the company or corporation issuing the same.
In the case, Scottsdale Insurance Company v. National Emergency Services, Inc., the Texas Court of Appeals, Houston [1st Dist.], in 2004, said that the above Insurance Code section mandates that Texas law will apply to the contract if, (1) the proceeds are payable to a Texas citizen or inhabitant, (2) the policy is issued by a carrier authorized to do business in Texas, and (3) the policy is issued in the course of the carrier’s Texas business.
Much of this can be confusing and even the courts have different ways of ruling, depending on the facts of each particular situation. This is yet another example of why an experienced Insurance Law Attorney should be consulted when someone finds themselves in this type of situation. Often times the wording in the contract of insurance is improper and unenforceable.
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