A "special multi-peril" was issued by a Pennsylvania-licensed insurer to business owners who resided in Pennsylvania. The policy covered ten extensive business properties, eight in Pennsylvania and two in New Jersey. The coverage was arranged in the insureds' Philadelphia office by a Pennsylvania brokerage firm. Legal action followed serious damage by fire to one of the New Jersey properties.

At issue was whether Pennsylvania or New Jersey law was applicable. The policy provided, in accordance with both Pennsylvania and New Jersey statutes, that no suit or action was sustainable against the insurer "unless commenced within twelve months next after inception of the loss." It was noted that Pennsylvania case law had fixed the suit limitation period as running from the date of the casualty. The New Jersey Supreme Court had held that the period of limitation "is tolled from the time an insured provides notice until liability is formally declined."

Prompt notice of the fire, set by vandals, was given by the insureds to the insurer. The investigation of the matter was a long one. The problem was compounded by fire officials requiring that the remainder of the damaged structure be raised. The insurer formally denied coverage on various counts approximately 15 months after the fire. The insureds brought action against the insurer two months later to recover the policy proceeds. The insurer filed a motion for summary judgment on the basis that the suit limitation period had ended. It was granted, and the insureds appealed.

The trial court had followed the Pennsylvania guidelines, concluding that "Pennsylvania had the greatest interest in governing the issue." The insureds' office and most of their properties were there; the insurance company and insurance brokerage firm were domiciled there; insurance arrangements were made in and the policy was issued in Pennsylvania.

The appeal court disagreed with the trial court, citing the following general principles in Restatement Conflict of Laws, 193: "The validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship. . . ." The court concluded that New Jersey's contacts with the policy, with respect to property in the state, "predominate over those of Pennsylvania."

The court said that "New Jersey's well-settled interpretation of its mandated provision must be applied when the situs of the risk insured is located here." Citing precedent, it stated that New Jersey's statutes become an element of an insurance contract when property located in the state is covered. "The limitation provision integrated into the contract by force of a New Jersey statute, as a matter of public policy, must be interpreted and given effect in accordance with the intention of the Legislature, as construed by our Supreme Court."

The court determined that the lawsuit by the insureds against the insurer was brought in a timely manner. The judgment of the trial court was reversed.

(BELL ET UX., Plaintiffs, Appellants v. MERCHANTS AND BUSINESSMEN'S MUTUAL INSURANCE COMPANY. New Jersey Superior Court, Appellate Division. No. A- 157-89T2. June 14, 1990. CCH 1990 Fire and Casualty Cases, Paragraph 2680.)