The New Hampshire Financial Responsibility Act: An Amendment That Reaches Across Borders
Financial responsibility statutes govern automobile insurance coverage in each state. The purpose of such statutes is to protect the public and provide compensation for innocent victims of negligence on the roadways. In the vast majority of states, financial responsibility laws are essentially compulsory insurance statutes. In other words, most states require that an individual must obtain automobile insurance in order to register a vehicle in that state. In fact, New Hampshire is the only state in which automobile insurance is currently not required by statute. See 1 Auto. Liability Ins. 4th § 2:9 (2021). New Hampshire does not mandate insurance, if a consumer purchases insurance in this state, the New Hampshire Financial Responsibility requires that each policy contain specific minimum requirements. See RSA 264.
Since at least 1958, it has been clear that the New Hampshire Financial Responsibility Act does not apply to accidents that occur outside of New Hampshire. However, a July 2021 amendment to RSA 264:18 appears to have changed that rule and broadened the reach of the statute.
Prior to the amendment, the statute read as follows: “A motor vehicle liability policy, except as to coverage providing protection against uninsured motor vehicles required by RSA 264:14 shall be subject, with respect to accidents occurring in New Hampshire and within limits of liability required by this chapter, to the following provisions.” The statute then provides a list of additional provisions which automobile policies issued in this state must contain.
In 1958, the United States District Court of New Hampshire issued an opinion in which it confirmed that the meaning of the “with respect to accidents occurring in New Hampshire” language limits the Financial Responsibility Act’s requirements to accidents in New Hampshire. See Sierra v. Rompney, 165 F. Supp. 483 (D.N.H. 1958). In that case, the insured driver was in a car accident in Massachusetts, while driving a new vehicle that had not yet been insured. The Court suggested that the requirements of the Financial Responsibility Act may have aided the driver in obtaining coverage but concluded that, “by its express terms its application [the Financial Responsibility Act] is limited to accidents occurring within the state.” The Sierra Court thus declined to extend the protections and requirements of the Act to an accident occurring outside New Hampshire’s borders.
Insurance practitioners in this State have long relied on the language of the statute and Sierra to argue that the Act does not extend to accidents that occur outside New Hampshire. Effective July 24, 2021, however, the legislature amended the statute to remove the “with respect to accidents occurring in New Hampshire” language. The legislature has provided little commentary on this amendment, noting only that it was made upon request of the insurance department and that its intent is to clarify certain responsibilities of the insurance department.
New Hampshire courts have not yet had the opportunity to comment on the scope of this July 2021 amendment. It appears, however, that the practical effect of the amendment is to expand the Financial Responsibility Act’s requirements to accidents that occur outside New Hampshire. The amendment further suggests that Sierra is likely no longer good law.
Practically, it is important for insurance practitioners to be aware of this amendment and to keep its implications in mind when dealing with an accident that has occurred outside our borders. More broadly, one must wonder whether this amendment raises any conflict of laws issues. There is no clear majority rule in the insurance field with respect to which state’s law should apply where multiple states’ insurance laws may be implicated. See 110 A.L.R. 5th 465 (2003). Some states apply the law of the state where the policy was made, others have applied the law of the state where the accident occurred, while others have applied the law of the state where the vehicle was garaged. See id. Though New Hampshire has not dealt directly with the applicability of the Financial Responsibility Act, in light of the amendment, our courts would likely apply the Act to accidents involving New Hampshire residents with New Hampshire policies even if the accident occurs outside New Hampshire. Courts in this state have adopted the “most significant relationship” test to determine which state’s laws govern a contract. See Glowski v. Allstate Ins. Co., 134 N.H. 196 (1991). With respect to insurance contracts, our courts have found that the state which is the “principal location of the insured risk” bears the most significant relationship to the contract. See id.
Though these issues have yet to come to fruition, I suspect that New Hampshire courts will be charged with interpreting this amendment in the near future. Our courts will ultimately have to clarify whether this amendment does in fact permit New Hampshire’s Financial Responsibility Act to reach across New Hampshire’s borders.