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Layne Christensen Co. v. Zurich Canada

Citation. 30 Kan.App.2d 128 (2002)
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Brief Fact Summary.

Plaintiffs filed a declaratory judgment action against Defendants seeking declaration that the full settlement amount should be paid in United States dollars. All parties filed motions for summary judgment.

Synopsis of Rule of Law.

Under the choice of law principle lex loci contractus, a dispute involving the coverage limit of an insurance policy is governed by the law where the policy issued and delivered.


In 1995, Layne Christensen Co., a United States company, bought Elgin Exploration Co., a Canadian company (Plaintiffs). Plaintiffs were covered by three automobile insurance policies from Zurich Canada, TIG Insurance, and Reliance National Indemnity Co. (Defendants). In 1996, Plaintiff was working on a project in California, and an employee driving a truck struck a six-year-old. The child and his mother filed suit in California against Plaintiffs and settled for $2 million United States dollars. All three Defendants contributed to the settlement, Zurich paying $2 million in Canadian dollars. Plaintiffs then brought a claim for declaratory judgment against Defendants, arguing Zurich’s policy covered the full settlement amount in United States dollars. All parties filed motions for summary judgment.


Under the principle of lex loci contractus, should Canadian law be used to interpret Zurich’s insurance policy with the Plaintiffs?


Yes, Canadian law should be used to interpret the insurance policy. The district court is affirmed.


Applying the principle of lex loci contractus, the Court concluded that the issue of coverage limits was a substantive matter governed by the law where the contract was made. The Court then determined that the contract was made in Canada, where the insurance policy was issued and delivered. Looking to Canadian common law, the Court was persuaded by the intent of the parties to the contract and the fact that the majority of risks covered by the policy were located in Canada. The Court concluded that the policy limit was stated in Canadian dollars.

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