The opinion of the Court was delivered by

STEIN, J.

The world is composed of territorial states having separate and differing systems of law. Events and transactions occur, and issues arise, that may have a significant relationship to more than one state, making necessary a special body of rules and methods for their ordering and resolution.

[ Restatement (Second) of Conflict of Laws § 1 (1971).]

The choice-of-law issue before the Court requires us to decide which of the two involved states, New York or New Jersey, has the most significant relationship to the underlying occurrence, an automobile accident in New York involving only New Jersey residents. The narrow question presented is whether to invoke New Jersey's common law rule that shields an automobile owner from vicarious liability in the absence of an agency or employment relationship, or Section 388 New York Vehicle and Traffic Law, which imposes vicarious liability on automobile owners for the negligence of permissive users.

In resolving that question, we must consider whether a foreign state's interest in compensating a New Jersey plaintiff, combined with its interest in deterring irresponsible lending of automobiles, may outweigh New Jersey's interest in shielding a resident defendant from liability for events occurring in the foreign state and for which that state would hold the defendant liable.

I

The facts of this case are virtually undisputed. On July 18, 1993, plaintiffs Xiao Kang Su and Kuide Chen rented a car in Lawrenceville, New Jersey from defendant Freedom River, Inc. of Philadelphia, doing business as Budget Rent-A-Car (Freedom River). Plaintiffs rented the car for a family trip to Cornell University in Ithaca, New York, to attend an academic seminar, after which they intended to go on, perhaps as far as Wisconsin, for further sightseeing. Su and his wife Li Fu, their child Daniel Su, and Chen and his wife defendant Hong Fu, and their child Michelle Chen, wanted to travel in one car. Although Su and Chen each owned a vehicle, neither car was large enough to comfortably accommodate six people on a long drive.

The rental contract identified Su and Chen as the individuals who would be driving the vehicle; however, the Freedom River agent assured the men that their wives were also permitted to drive the car. Chen, in particular, was concerned and sought the agent's assurance that the wives could drive because his friend Su was a poor driver who had been involved in three previous accidents. The rental agent assured Su and Chen that there was "no problem" and that the wives could drive. The agent offered Su and Chen extra property damage insurance, which they declined. The contract called for the car to be returned to Lawrenceville on July 27, 1993.

On July 19, 1993, having concluded an overnight visit to Cornell and while in transit to the Midwest, the group was involved in a one-car accident while passing through Hamburg, New York. Chen's wife, Hong Fu, was driving. According to the accident report, Hong Fu's view became distorted when it began to rain and Hong Fu, due to her unfamiliarity with the vehicle, could not locate the windshield wiper. As Hong Fu felt the vehicle beginning to leave the pavement and veer onto the left shoulder, she over-corrected to the right, crossed both lanes of traffic, rolled over once and struck an earthen embankment. All five passengers were severely injured and all were conveyed to area hospitals in the Hamburg vicinity. Chen and his daughter Michelle were released after receiving emergency room treatment. The other passengers were admitted for varying lengths of time in New York hospitals: Su remained hospitalized for eight days; Su's son Daniel for three days; and Su's wife Li Fu, who suffered the most serious injuries, remained in a New York hospital for thirty days.

The plaintiffs received personal injury protection through their personal insurance policies, but the amount available was insufficient to provide for all the injured claimants, particularly for Li Fu, the most seriously injured of the passengers. As a result of the accident, Li Fu suffered a severe traumatic brain injury. Li Fu was comatose upon her hospital admission and remained in a coma until August 1993. She continued to receive inpatient medical care through April 1994. She was unable to walk and suffered from impaired memory and cognitive functioning. For instance, despite having worked for ten years as a cardiologist in China, Li Fu could not recall the college she had gone to or the details of her medical training.

Following her discharge from the hospital in April 1994, Li Fu continued a course of outpatient treatment including occupational therapy three to five times a week, treatment with Ritalin to arouse cognitive function, and multiple nerve blocks to correct "a severely spastic gait." A progress report dated June 12, 1995, indicated that Li Fu continued to make slow progress but that "it is unlikely that the patient will ever become independent." Li Fu continues to require constant assistance with daily living and, although she is now able to ambulate with the aid of a cane, for the most part, she remains wheelchair bound.

Due to the severity of her injuries, Li Fu's $250,000 personal injury protection cap has long since been exhausted. She incurred medical expenses in excess of $150,000 in connection with her initial hospitalization alone and her total medical expenses to date are nearly $400,000, and continuing.

Freedom River, a Delaware corporation with its principal place of business in Philadelphia, is a sub-franchisee of Freedom River, Inc., a Delaware corporation with its principal place of business in Lisle, Illinois. Freedom River maintains offices in both Philadelphia, Pennsylvania, and Lawrenceville, New Jersey. The rental vehicle was registered in Pennsylvania. The driver, defendant Hong Fu, and all five passenger-plaintiffs are residents of New Jersey.

In July 1994, all the injured passengers filed a complaint for damages against the driver, Hong Fu, and the owner, Freedom River. In May 1997, all five plaintiffs' claims were arbitrated pursuant to Rule 4:21A-1, at which time Chen was awarded $15,000, Chen's daughter Michelle was awarded $7500, Su was awarded $100,000, Su's son Daniel was awarded $25,000 and Su's wife Li Fu was awarded $3,750,000. The arbitrators, as part of their award, found that Section 388 of the New York Vehicle and Traffic Law (Section 388) was the appropriate choice of law, and held Freedom River vicariously liable for the negligence of the driver, Hong Fu.

Because the award to Li Fu exceeded the individual $100,000 limit of the $100,000/$300,000 split limit coverage afforded Hong Fu through her personal policy with the Market Transition Facility (MTF), defendant Hong Fu moved for a trial de novo pursuant to Rule 4:21A-6(b)(1). Eventually, all plaintiffs except Li Fu agreed to settle with Hong Fu and their agreements were reduced to judgment. Thus, only Li Fu's claim and Su's derivative claim for loss of consortium remain outstanding. MTF, on behalf of its insured, Hong Fu, has offered its individual policy limit of $100,000 in settlement of Li Fu's claim. That offer has not been accepted. In August 1997, the trial court entered an order allowing MTF to deposit its policy with the court pursuant to Rule 4:47-1.

In April 1997, Freedom River moved for summary judgment on the basis of New Jersey common law, which holds that the owner of a motor vehicle is not liable for the negligence of the vehicle's operator unless the operator is acting as the owner's agent or employee. Plaintiffs opposed the motion, contending that the matter was controlled by Section 388 of the New York Vehicle and Traffic Law. Section 388 imposes vicarious liability on a vehicle's owner for the negligence of the vehicle's operator:

Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, expressed or implied, of such owner.

[N.Y. Vehicle and Traffic Law § 388 (1) (McKinney 1996).]

The trial court initially granted Freedom River's motion, concluding that all of the significant relationships in this case were with New Jersey and that it was a "happenstance" that the accident occurred in New York. After hearing additional oral arguments on plaintiffs' motion for reconsideration, the trial court reversed its initial ruling, vacated the summary judgment granted in favor of Freedom River, and ordered that the matter proceed in accordance with New York law. The trial court then certified its judgment as final pursuant to Rule 4:42-2, allowing Freedom River to appeal as of right.

The Appellate Division reversed and held that New Jersey law applied. 309 N.J. Super. 435, 442-43 (App.Div. 1998). We granted plaintiffs' motion for leave to appeal.

II

The issue before the Court is whether to apply New Jersey's common-law vicarious liability rule or Section 388 of the New York Vehicle and Traffic Law. Because New Jersey is the forum state, the issue must be determined in accordance with this State's choice-of-law rules. Gantes v. Kason Corp., 145 N.J. 478, 484, 679 A.2d 106 (1996). In tort cases, New Jersey has rejected the traditional rule of lex loci delicti, pursuant to which the local law of the place where the wrong occurred governed all substantive issues. Veazey v. Doremus, 103 N.J. 244, 247 (1986). Instead, we now apply a more flexible "governmental-interest" test that seeks to apply the law of the state with the greatest interest in governing the specific issue in the underlying litigation. Id. at 247-48; Gantes, supra, 145 N.J. at 484.

A

The first prong of the governmental-interest analysis requires a determination that an actual conflict exists between the laws of New York and New Jersey. Gantes, supra, 145 N.J. at 484. That inquiry is conducted on an issue-by-issue basis. Ibid. Indisputably, the two states' laws governing the issue to be resolved in this case — whether an automobile owner is vicariously liable for negligent permissive use of that owner's vehicle — are fundamentally different. New Jersey adheres to the common-law rule that the owner of a motor vehicle is not liable for the negligence of a permissive user unless the driver is acting as the owner's agent or employee. Haggerty v. Cedeno, 279 N.J. Super. 607, 609 (App.Div.), certif. denied, 141 N.J. 1995); Doran v. Thomsen, 76 N.J.L. 754 (E. A. 1908); Mauren v. Brown, 106 N.J.L. 284 (Sup.Ct. 1930)). That plaintiffs' action against Freedom River is precluded by virtue of an owner's immunity for vicarious liability under New Jersey law is not contested.

New York, in contrast, has by statute abrogated the common law in its enactment of Section 388 of the Vehicle and Traffic Law, which imposes liability on an automobile owner for injuries resulting from a permissive driver's negligent use or operation of that owner's car. Under that rule, Freedom River's liability would be co-extensive with that of the driver, Hong Fu.

B

The second prong of the governmental-interest analysis requires the Court to determine which state has the most significant relationship to the occurrence and the parties with respect to the issue of vicarious liability. Veazey, supra, 103 N.J. at 248. In doing so, we must "identify the governmental policies underlying the law of each state and how those policies are affected by each state's contacts to the litigation and to the parties." Ibid. The relevant factors set forth in sections 6, 145 and 174 of the Restatement (Second) of Conflict of Laws (1971) guide our evaluation of the governmental interests at stake.

1.

New York has a well-articulated, two-fold policy underlying Section 388. First, the statute was designed to "ensure access by injured persons to a financially responsible insured person against whom to recover for injuries." Morris v. Snappy Car Rental, Inc., 637 N.E.2d 253, 255 (N.Y. 1994) (internal quotations omitted). Section 388 achieves that compensatory purpose by "remov[ing] the hardship which the common-law rule visited upon innocent persons by preventing an owner from escaping liability" because of the lack of an employment or agency relationship with the driver. Ibid. Although New York's compensatory purpose is especially strong when the victim is a New Yorker, see Aboud v. Budget Rent A Car Corp., 29 F. Supp.2d 178, 182 (S.D.N.Y. 1998), the "innocent victim class has not been limited to New Yorkers." Haggerty, supra, 279 N.J. Super. at 610 (quoting Klippel v. U-Haul Co. 759 F.2d 1176, 1180 (4th Cir. 1985)). When the accident occurs in New York, the compensation of the victim serves a related governmental interest in "assuring that New York vendors who furnish medical and hospital care to injured parties are compensated." Bray v. Cox, 333 N.Y.S.2d 783 , 785 (App.Div. 1972).

In enacting Section 388 New York also intended to regulate the conduct of automobile owners by "discourag[ing] owners from lending their vehicles to incompetent or irresponsible drivers." Haggerty, supra, 279 N.J. Super. at 609 (quoting Report of the New York Law Revision Commission at 593 (1958)). We note that despite Section 388's explicitly stated purpose to deter irresponsible lending, the Appellate Division characterized Section 388 solely as a loss-allocating rule because it "does not purport to regulate the conduct of the operator on the road." 309 N.J. Super. at 441-42 (citing Buglioli v. Enterprise Rent-A-Car, 811 F. Supp. 10-5, 108 (E.D.N.Y.), aff'd, 999 F.2d 536 (2d Cir. 1993)). At the same time, that court acknowledged that Section 388 was intended to operate "as an incentive to lessors of motor vehicles to lease only to competent individuals." 309 N.J. Super. at 442. That deterrent policy has been construed by New York as having particular application to car rental agencies, "who clearly make no investigation of the capacity or sense of responsibility of the lessee other than the production of the driver's license." Platt v. Hertz Corp., 315 N.Y.S.2d 780 , 784 (Civ.Ct. 1970), rev'd on other grounds, 321 N.Y.S.2d 613 (App. Term. 1971).

The policy supporting New Jersey's common-law vicarious liability law was described in Haggerty, supra, 279 N.J. Super. at 611-12, 653 A.2d 1166:

New Jersey's common law rule regarding owner liability is not designed to protect the injured party . . . or to protect the driver. It is designed to shield an owner from liability in cases in which the owner has not been negligent and in which the culpable driver is not related to the owner in a way that will justify the imposition of vicarious liability under traditional principles of the law of agency or master servant. That shield is consistent with the principle that tort liability in the context of automobile-related personal injuries is based on fault.

New Jersey's rule serves neither a deterrent nor a compensatory purpose. Rather, it simply adheres to the well-established, common-law principle that liability for automobile negligence should be allocated solely on the basis of fault.

Plaintiffs suggest that New York's law, because it exists by affirmative legislation, demonstrates a stronger policy than does New Jersey's law, which continues only by legislative default. That New Jersey's common-law vicarious liability law exists without implementing legislation does not, in itself, dilute the importance of the law's underlying goals. See Restatement, supra, § 6(2) comment e (noting that in resolving a conflict of laws courts consider purpose of each state's local law "whether embodied in a statute or a common law rule").

Where, however, the purpose of a longstanding common-law rule appears to be at odds with the aim of more recent affirmative acts by the legislature governing the same field of law, it may be reasonable to conclude that the historical rule has lost some of its vitality as a statement of public policy. In the field of automobile negligence law, this State's method of allocating liability has shifted in recent years from a purely fault-based system, whereby compensation for injuries is obtained through tort remedies and/or third party insurance, toward a system of first-party coverage. Specifically, the no-fault insurance law has partially removed the fault system from New Jersey's automobile negligence law by requiring every automobile insurance policy issued in this state to provide "for the payment of [medical] benefits without regard to negligence, liability or fault of any kind," N.J.S.A. 39:6A-4, to the named insured, family members, and other persons injured as a result of an automobile accident. See also Newcomb Hosp. v. Fountain, 141 N.J. Super. 291, 294 (Law Div. 1976) ("`No fault' legislation was designed to partially remove the fault system from automobile negligence law.").

In addition, N.J.S.A. 39:6B-1, the mandatory insurance law, requires this State's individual automobile owners to carry insurance coverage consistent with requirements imposed by the Commissioner of Insurance that includes the obligation to provide coverage for liability arising out of the permissive use of their vehicles. That requirement obviously reflects a legislative purpose to ameliorate the effect of New Jersey's common-law rule against vicarious liability by requiring car owners to pay the cost of liability coverage for permissive users to assure that compensation is available for their injured victims. Insofar as N.J.S.A. 39:6B-1 aims to effectuate the overriding legislative policy of assuring financial protection for the innocent victims of motor vehicle accidents, in part by requiring coverage for injuries arising out of permissive automobile use, that policy would appear to be congruent with New York's direct imposition of vicarious liability on automobile owners arising out of the negligent permissive use of their vehicles.

2.

With each state's domestic policies in mind, we must next consider "whether those concerns will be furthered by applying that law to the multi-state situation." Pfizer, Inc. v. Employers Ins. of Wausau, 154 N.J. 187, 198 (1998). Section 6 of the Restatement identifies the general considerations germane to our governmental-interest analysis:

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be applied.

[ Restatement, supra, § 6; see also Gilbert Spruance v. Pennsylvania Manufacturers' Ass'n, 134 N.J. 96, 103 (1993).]

For purposes of an issue arising out of tort law, those factors may be grouped into five categories of interests: (1) the interests of interstate comity; (2) the interests of the parties; (3) the interests underlying the field of tort law; (4) the interests of judicial administration; and (5) the competing interests of the states. See Restatement, supra, § 145 comment b; cf. Pfizer, supra, 154 N.J. at 197-98 (adopting similar grouping of interests for purposes of issue in contract).

(1) The interests of interstate comity require courts to consider whether application of a competing state's law would frustrate the policies of other interested states. Restatement, supra, § 145(1) comment b. "If a strong state policy or interest will be neither fostered by applying that state's law, nor frustrated by the failure to apply it, it is highly unlikely that that state has any interest whatsoever in blanketing that particular issue with its law." White v. Smith, 398 F. Supp. 130, 134 (D.N.J. 1975).

(2) The interests underlying the field of tort law require courts to consider the degree to which deterrence and compensation, the fundamental goals of tort law, would be furthered by the application of a state's local law. Restatement, supra, § 145 comment c. When the tort rule primarily serves a deterrent purpose, the state where the harmful conduct took place will likely have the dominant interest with respect to that rule. Ibid. When the tort rule is designed primarily to compensate a victim for his or her injuries, the state where the injury occurred, which is often where the plaintiff resides, may have the greater interest in the matter. Ibid. Because every tort rule, to some extent, is designed both to deter and to compensate, it is necessary to evaluate on a case-by-case basis the relative weight of those underlying purposes with respect to a specific rule. Ibid.

Rules such as New Jersey's that deny liability are entitled to equal consideration in choice-of-law determinations as are rules imposing liability, although discerning the underlying purpose of a liability-denying rule often is difficult. Ibid. At a minimum, when a defendant has justifiably relied on the shelter afforded by New Jersey law, this state does have "a substantial interest in shielding car owners from such unforeseeable liability." Aboud, supra, 29 F. Supp.2d at 182.

(3) The interests of parties "require courts to focus on their justified expectations and their needs for predictability of result." Pfizer, supra, 154 N.J. at 199. The protection of the parties' justified expectations, a factor of extreme importance in the field of contracts, ordinarily plays little or no part in a choice-of-law question in the field of torts. Restatement, supra, § 145 comment b. That is so because persons who cause unintentional injury "usually act without giving thought to the law that may be applied to determine the legal consequences of this conduct." Ibid.

Commercial lessors such as defendant Freedom River, however, unlike individual car owners, evaluate their potential liability under the laws of the various states in which they operate, and purchase insurance in anticipation of any identified risks. Freedom River argues that it justifiably relied on N.J.S.A. 45:21-1 to -3, the mandatory insurance law applicable to car rental agencies, in assessing its potential exposure to vicarious liability under New Jersey law. That law requires commercial bailors to purchase and provide proof of insurance with a policy limit of $10,000/$20,000 for bodily injury or death, and $5000 for property damage. N.J.S.A. 45:21-2 and -3. The purpose of the policy is to "insur[e] such owner against loss from the liability imposed by law upon such owner for damages . . . arising out of the negligent maintenance, use or operation" of the owner's vehicle. General Accident Group of Ins. Co. v. Liberty Mut. Ins. Co., 191 N.J. Super. 530, 534 (App.Div. 1983). Because the mandatory insurance law does not abrogate the owner's common-law immunity from vicarious liability for permissive use, see Schimek v. Gibb Truck Rental Agency, 69 N.J. Super. 590, 592 (App.Div. 1961), Freedom River contends that it reasonably relied on the statute as defining the outer limits of its liability exposure, at least in a rental transaction with a New Jersey lessee. Nevertheless, the record reveals that in addition to providing statutorily required liability coverage for plaintiffs in the minimum amount of $20,000 for a single accident, Freedom River also carried a policy to cover its personal liability in the amount of up to $500,000 for a single accident, as well as an excess policy with coverage up to $2,000,000.

(4) The interests of judicial administration require the courts to consider the relative ease in determination and application of the choice of law regarding a specific issue, a factor that in turn furthers the values of uniformity and predictability of result. See Restatement, supra, § 145 comment b. Those considerations, however, are of lesser importance and must yield to a strong state interest implicated by the remaining factors. Ibid.

(5) The competing interests of the states, the most significant factor in the tort field, requires

courts to consider whether application of a competing state's law under the circumstances of the case "will advance the policies that the law was intended to promote." The "law" can be either the decisional or statutory law of a state. Thus, the initial focus should be on "what [policies] the legislature or court intended to protect by having that law apply to wholly domestic concerns, and then, whether those concerns will be furthered by applying that law to the multi-state situation." This is another way of saying that "[i]f a state's contacts [with the transaction] are not related to the policies underlying its law, then that state does not possess an interest in having its law apply. Consequently, the qualitative, not the quantitative, nature of a state's contacts ultimately determines whether its law should apply."

[ Pfizer, supra, 154 N.J. at 198 (citations omitted) (brackets in original).]

Section 145(2) of the Restatement specifies the contacts that are most significant to that analysis: the place where the injury occurred; the place where the conduct causing the injury occurred; the domicile, residence, nationality, place of incorporation and place of business of the parties; and the place where the relationship, if any, between the parties is centered. Those contacts are "considered, however, only to the extent that they are relevant to the purposes of the particular laws in conflict." White, supra, 398 F. Supp. at 134.

New York's sole contact with this controversy is as the place of the accident. That New York has numerically fewer contacts with the transaction than does New Jersey is not dispositive, because it is the qualitative, not the quantitative, nature of that state's contacts that ultimately determines whether its law should apply. Pfizer, supra, 154 N.J. at 198; see also White, supra, 398 F. Supp. at 134 (noting that applying local law of state with numerically greatest contacts would be as mechanical and unjust as automatic application of lex loci delicti rule).

In personal injury cases, "the place where the injury occurred is a contact that, as to most issues, plays an important role in the selection of the state of the applicable law." Restatement, supra, § 145 comment e. When both conduct and injury occur in a single jurisdiction, with only "rare exceptions, the local law of the state where conduct and injury occurred will be applied" to determine an actor's liability. Id. § 145 comment d. That is so because "a state has an obvious interest in regulating the conduct of persons within its territory and in providing redress for injuries that occurred there." Ibid. The place of injury becomes less important where it is simply fortuitous. Ibid.

"[I]f a state's contacts [with the transaction] are not related to the policies underlying its law, then that state does not possess an interest in having its law apply." Pfizer, supra, 154 N.J. at 198 (quoting Veazey, supra, 103 N.J. at 248). In this case, the Appellate Division found that New York had no interest in this transaction because that state's contact as the place of the accident was unrelated to the policy underlying its vicarious liability law. Specifically, relying on Haggerty, supra, 279 N.J. Super. 607, the court below found that New York intended its law to apply only to New York owners and New York-licensed drivers.

In Haggerty, supra, the Appellate Division held that the Dollar car rental agency was liable under Section 388 to a New Jersey resident injured after being struck in Elizabeth, New Jersey, by a Dollar-owned automobile that had been rented by a Florida resident at Newark Airport. Haggerty, supra, 279 N.J. Super. at 609. The court placed great emphasis on New York's contacts as the agency's principal place of business and as the state of the vehicle's registration. Id. at 612. The court noted that "New York has determined that its vehicle owners shall be liable for the negligence of persons operating their automobiles," and that New York "occupies a unique and critical position for the regulation of the owner's legal obligations arising out of the ownership and use of the vehicle." Ibid.

Specifically, the court in Haggerty found it fair to hold Dollar liable because New York residents are required to purchase insurance to cover permissive use of their vehicles, and are therefore on notice regarding their potential exposure to vicarious liability. Ibid.; see also Fried v. Seippel, 599 N.E.2d 651, 655 (N.Y. 1992) (noting "linkage of an owner's vicarious liability to an owner's obligation to maintain adequate insurance coverage" in New York suggests that legislature intended to ensure that owners of vehicles subject to regulation in New York "act responsibly"). Thus, Haggerty held that the New York registration of the vehicle and the owner's residing principally in New York for business purposes provided an adequate connection between the vehicle, its owner and the state of New York to invoke New York law. Id. at 612; cf. Butkera v. Hudson River Sloop "Clearwater," Inc., 300 N.J. Super. 550, 555 (App.Div. 1997) (noting that defendant that had incorporated under New York law after charitable immunity was abrogated did so "with full knowledge and acceptance of the tort consequences flowing from its negligent actions"). Citing Haggerty, the Appellate Division in this case found that in the absence of a similar connection, New York law should not be invoked.

Section 174 of the Restatement provides specific guidance on whether another state's vicarious liability law should apply. That section requires a court to determine whether there is a reasonable relationship between the defendant and the state whose local law is to be applied. Restatement, supra, § 174 comment a. Generally, a reasonable relationship between the state where the conduct and injury occurred and a person sought to be held vicariously liable may be found where that person instructed or authorized the tortfeasor to enter the state, or even if it was reasonably foreseeable that the tortfeasor would enter the state. Id. § 174 comment c; cf. Bedwell Sons v. Geppert Bros., 280 N.J. Super. 391, 396 (App.Div.) (applying New Jersey law to indemnification action where both parties were Pennsylvania corporations in view of New Jersey's compelling interest in determining availability of funds for hazardous waste cleanup within its border and foreseeability of Pennsylvania's waste materials coming to rest in New Jersey), certif. granted, 142 N.J. 451, appeal dismissed, 143 N.J. 481 (1995). Here, Freedom River knew of plaintiffs' itinerary and specifically authorized plaintiffs to drive the vehicle to New York, plaintiffs' intended destination.

Of course, when the underlying conduct and injury do not occur in the state whose law would impose vicarious liability, some other "connection" must be found to establish "a reasonable relationship between the defendant and the state whose local law is to be applied." Restatement, supra, § 174 comment a. In cases involving accidents outside New York, an owner's status as a New York resident or the vehicle's New York registration have frequently been cited as establishing an adequate tie to hold an owner vicariously liable under New York law. See McKinney v. S S Trucking, Inc., 885 F. Supp. 105 (D.N.J. 1995) (holding New York law applied to permit recovery by New Jersey plaintiff injured in New Jersey accident after being struck by New York-registered rental vehicle that was owned by corporation with primary business situs in New York); White, supra, 398 F. Supp. 130 (holding New York law applied to permit recovery by Pennsylvania plaintiffs injured in New Jersey accident, after being struck by New York-registered vehicle that was operated by Michigan resident and owned by corporation with primary business situs in New York); Haggerty, supra, 279 N.J. Super. 607 (holding New York law applied to afford remedy to New Jersey resident struck in New Jersey by automobile registered in New York and operated by Florida resident).

This case does not involve the extraterritorial application of Section 388. Rather, this matter concerns a wholly domestic application of the statute, which on its face regulates accidents arising from the negligent use and operation of a vehicle within the State of New York. In the context of a New York accident, New York courts have unwaveringly applied Section 388, notwithstanding the absence of any additional "contacts" with the transaction. In Kell v. Henderson, 263 N.Y.S.2d 647 (Sup.Ct. 1965), aff'd, 270 N.Y.S.2d 552 (App.Div. 1966), the court found that Section 388 applied to a single-car accident in New York in which the vehicle was registered in Ontario, the parties were all Ontario residents, and the trip originated and was to end in Ontario.

The law is well established that in the State of New York the owner of a motor vehicle used on New York State highways with permission is liable for damages to a person injured as the result of any negligence by the operator. [Section 388] provides substantially that every owner of a vehicle used or operated in this State shall be liable and responsible for death or injuries to the person or property resulting from negligence in the use or operation of such vehicle in the business of such owner or otherwise by any person using or operating the same with the permission, express or implied, of such owner. This section of the law is not limited to New York State residents, and, consequently, out of state owners and operators who elect to use the highways of our state subject themselves to this statute. The law makes no distinction between residents and non-residents, people in transit or otherwise. The law does not provide for any exceptions. It does not permit defendants in the type of case before the court to plead the defense of a foreign guest statute, which is in direct conflict with one of our statutes governing travel upon our highways in which we have a keen interest.

[ Id. at 650-51 (citations omitted).]

In Bray v. Cox, supra, a New York appellate court expressly held that New York has strong governmental interests in applying Section 388 to an accident within its borders even when none of the parties is a New York resident:

Foremost among New York's identifiable interests is supervision over the conduct of drivers using its highways. The civil remedy of damages for the negligent infliction of personal injuries is a sanction used by this state to induce careful driving. Another recognized and accepted interest is in assuring that New York vendors who furnish medical and hospital care to injured parties are compensated. A proper inquiry into governmental interests requires consideration of the fact that in this case and indeed in most similar cases there is the likelihood of the existence of New York vendors. Finally, New York has a public fiscal interest in assuring that indigent non-resident accident victims do not become public charges and that if they do, New York State can recoup its welfare expense from the victim's recovery. In summary, New York's identifiable interests are highway safety, economic protection of New York vendors, and State public fiscal interests.

[ Bray, supra, 333 N.Y.S.2d at 785-86 (citations omitted].

Similarly, in Himes, supra, the court held that Section 388 applied and that Pennsylvania's vicarious liability law could not be interposed as a defense where the plaintiff, a Pennsylvania resident, was seriously injured in an accident in the State of New York while she was traveling to her house in Pennsylvania. Himes, supra, 416 N.Y.S.2d at 987. At the time, Himes was driving a vehicle that was registered and insured in Pennsylvania. Ibid. The vehicle that struck Himes was driven by Harry L. Stalker, Jr., a resident of Pennsylvania. Stalker's vehicle was owned by his parents, also residents of Pennsylvania. The Stalker's vehicle was registered and insured in the state of Pennsylvania. Ibid.

At least one New York court explicitly has held that because an accident in New York arising from negligent permissive use is the very underlying conduct Section 388 is designed to regulate, the statute does not implicate a choice-of-law question for accidents occurring in New York; instead those circumstances simply create a substantive cause of action against an owner by any person injured by the permissive use of that owner's automobile. Rye v. Kolter, 333 N.Y.S.2d 96, 97 (App.Div. 1972).

The foregoing authorities suggest that New York has a strong interest in applying Section 388 to an accident within its borders. Nevertheless, New York's interests in deterrence and compensation must be compared and weighed against any governmental interest that New Jersey has in applying its vicarious liability law based on New Jersey's contacts with the litigation and the parties.

New Jersey's contacts with this matter are several. New Jersey is the forum state, the domicile of the injured plaintiffs, the domicile of the defendant-driver, the place where Freedom River transacts its business, and the place where the underlying rental transaction was executed. Because a choice-of-law analysis does not involve a mere counting of heads, that New Jersey has numerically greater contacts with the transaction than does New York is not a sufficient basis to invoke New Jersey law. Each of this State's contacts must be considered in turn to assess the relation of those contacts, if any, to New Jersey's governmental interests.

New Jersey's status as the forum state is irrelevant to the choice of law. O'Connor v. Busch Gardens, 255 N.J. Super. 545, 549 (App.Div. 1992). Also irrelevant is the fact that, for its own affairs, New Jersey prefers its rule of vicarious liability, as "it is the forum state's duty to disregard its own substantive preference" regarding the competing rules of law. Id. at 550; see also Restatement, supra, § 174 comment b (stating that fact that forum state's law would not impose vicarious liability is not decisive if relationship between defendant and other person "affords a fair and reasonable basis for the imposition of such liability").

That the underlying rental transaction, including the execution of the rental contract, occurred in New Jersey also appears to have minimal significance to the issue of vicarious liability. The event giving rise to vicarious liability was not the rental transaction, but the automobile accident, which occurred in New York. Moreover, the contract itself is unrelated to the issue of vicarious liability, as it did not specify a forum state to govern any disputes in the event of an accident. Cf. Black v. Walker, 295 N.J. Super. 244 (App.Div. 1996) (holding that New York's contact as location where child support agreements were drafted and executed not essential to choice-of-law analysis in dispute over obligation to pay for child's college expenses, as agreements did not address and were therefore not relevant to issue of child's college expenses); see also Haggerty v. Cedeno, 267 N.J. Super. 114, 121 (Law. Div. 1993) ("It is not the place where the relationship originates which governs the choice of law, but the state which has the most compelling interest in the application of the law.").

Injured plaintiff Li Fu is a resident of New Jersey. Compensation being one of the underlying purposes of the tort field, New Jersey's compensation interest is implicated whenever the plaintiff is a New Jersey domiciliary. See Schum v. Bailey, 578 F.2d 493, 496 (3d Cir. 1978) (noting that compensation goal reflects underlying governmental interest that injured domiciliary not become charge on society and be restored, if possible, to productivity); Henry v. Richardson-Merrell, Inc., 508 F.2d 28, 33 (3d Cir. 1975) (noting that primary purpose of tort law is to compensate plaintiffs for their injuries); Mellk v. Sarahson, 49 N.J. 226 (1967) (holding New Jersey's strongly declared policy favoring compensation of its domiciliaries for tortious conduct of others, regardless of where that conduct occurs, prevails over Ohio's policy of preventing collusive suits); Pine v. Eli-Lilly Co., 201 N.J. Super. 186, 192-93 (App.Div. 1985) (holding New Jersey's interest in compensating its domiciliaries is paramount and outweighs its policy discouraging forum-shopping).

New Jersey's interest in compensation is not related to the issue of Freedom River's vicarious liability, however, because New Jersey's vicarious liability law has no compensatory purpose. Rather, this state would disallow the sought-after recovery. See Haggerty, supra, 279 N.J. Super. at 612 ("[I]t would indeed be anomalous to apply foreign law solely to gain access to a deep pocket when local law denies that access."). Moreover, New Jersey has an interest in the uniform application of its law to assure that victims of automobile accidents "are treated fairly and uniformly and that some of those victims not be granted extraordinary rights and preferences." Aboud, supra, 29 F. Supp. 2 d at 182 (quoting Klippel, supra, 759 F.2d at 1182). Accordingly, New Jersey would not invoke New York law solely to afford its injured resident a remedy. Conversely, that New York would afford Li Fu a remedy does not preclude the application of New York law if that state is found to have the dominant interest in this case.

New Jersey is also the residence of the defendant-owner, Freedom River. That contact is directly related to New Jersey's policy of shielding automobile owners from vicarious liability. Plaintiffs argue, however, that New Jersey has a diminished interest in shielding Freedom River from liability by virtue of its status as a non-domiciliary resident corporation. Specifically, Freedom River is a Delaware corporation with its principal place of business in Pennsylvania. See generally American Employers' Ins. Co. v. Elf Atochem North America, Inc., 157 N.J. 580, 590-94 (1999) (noting that corporation is domiciled only in state of its incorporation and although corporation may be considered resident of several states, for purposes of diversity jurisdiction, a corporation may be considered citizen only of state by which it has been incorporated or in which it has its principal place of business); State v. Garford Trucking, Inc., 4 N.J. 346, 351-53 (1950) (noting that corporation is domiciled only in legal jurisdiction of its origin and may not migrate to another jurisdiction, although it may have one or several residences elsewhere for transaction of its business). The domicile, residence, place of incorporation, and place of business of a defendant corporation are relevant, although not dispositive, considerations in a choice-of-law determination. Restatement, supra, § 145(2)(c); cf. Performance Motorcars of Westchester, Inc. v. KPMG Peat Marwick, 274 N.J. Super. 56, 62 (App.Div.) (noting that domicile is but one factor to be considered in the overall qualitative analysis), certif. denied, 139 N.J. 183 (1994).

In Haggerty, supra, 279 N.J. Super. at 612, the Appellate Division found that New Jersey's interest in shielding a defendant-rental agency from vicarious liability was substantially diluted when the defendant, Dollar, was a Delaware corporation with its principal place of business in New York. See also Greenfeder v. Jarvis, 302 N.J. Super. 153, 161 (App.Div. 1997) (noting that New Jersey has no interest in shielding out-of-state owner or lessor from liability).

In addition, plaintiffs contend that New Jersey's governmental interest is highly attenuated where, as here, the accident occurred in a foreign jurisdiction. In other contexts, this State's courts have readily deferred to the local law of the foreign jurisdiction in which the underlying misconduct and injury occurred. See Moye v. Palma, 263 N.J. Super. 287, 294-95 (App.Div. 1993) (holding that New York, as locus of automobile accident, had greater interest in application of its comparative negligence law to litigation than did New Jersey, as forum state and residence of all parties); O'Connor, supra, 255 N.J. Super. at 549 (noting that New Jersey's comparative negligence laws do not "follow" New Jersey resident plaintiffs, supplanting local liability laws wherever they go); Van Slyke v. Worthington, 265 N.J. Super. 603, 614 (Law Div. 1992) (noting that although New Jersey may have interest in affording architects and builders protection of statute of repose for work performed within New Jersey, it has no interest in protecting such activity out of state).

III

We hold, on balance, that considering the interests of interstate comity, the interests of the parties, the policies of deterrence and compensation, the interest in predictability and uniformity of result, and the competing interests of the states, the relevant factors point toward application of New York law to determine the issue of vicarious liability.

With respect to interstate comity, New Jersey's governmental interests in this matter are the uniform application of its vicarious liability law to New Jersey automobile owners and, relatedly, the protection of those owners' justified expectations in conforming their conduct to this State's laws. We do not find that those "wholly domestic concerns," Pfizer, supra, 154 N.J. at 198, would be significantly advanced by the application of New Jersey's law to shield a non-domiciliary lessor from liability arising from an accident in another state. See Greenfeder, supra, 302 N.J. Super. at 161 (noting that New Jersey has no interest in shielding out-of-state owner or lessor from liability); Haggerty, supra, 279 N.J. Super. at 612 (noting New Jersey's diminished interest in shielding non-domiciliary rental agency from vicarious liability); O'Connor, supra, 255 N.J. Super. at 549-50 (noting that New Jersey's comparative negligence laws do not apply to action by resident plaintiffs for injuries sustained in another state); Van Slyke, supra, 265 N.J. Super. at 614.

In contrast, both New York's goal of promoting highway safety and its intent to provide compensation for innocent victims injured on New York highways by permissive users of borrowed, and specifically of rented, vehicles, see Platt, supra, 315 N.Y.S.2d at 784, would be vindicated if New York's law, rather than New Jersey's, were applied to the issue of vicarious liability. We accord enhanced weight to New York's interest in the application of its law because a car rental company owned the vehicle involved in the accident.

Concerning the interests of the parties, New Jersey's interest in protecting Freedom River's justified expectations also does not favor the application of New Jersey law. We recognize that New Jersey has a substantial interest in protecting the justified expectations of its resident car owners by shielding them from unforeseeable liability. That interest may be diminished, but is not eliminated, when the automobile owner is a non-domiciliary resident corporation doing business in several states. However, to the extent that Freedom River relied on the minimum policy limits and this state's common-law vicarious liability rule to limit its potential tort exposure for events occurring out of state, we find that reliance to have been unreasonable. First, neither under New Jersey nor New York law are the minimum policy limits established by the mandatory insurance laws coextensive with a policyholder's exposure to liability under common-law or statutory causes of action in tort. Beyond this, however reasonable may be a rental agency's reliance on New Jersey's vicarious liability laws for purposes of an accident in this State, any blanket reliance on this State's law as a defense to conduct occurring in a foreign jurisdiction could not be justified. If, for instance, a New Yorker had been injured in this same accident, Section 388 unquestionably would have applied. See Shafarman v. Ryder Truck Rental, 100 F.R.D. 454 (S.D.N.Y. 1984). Thus, given the not unlikely possibility that a car rented from a New Jersey agency for the purpose of traveling to New York might be involved in an accident there, New Jersey car rental agencies reasonably should anticipate potential exposure to liability under New York's motor vehicle laws.

We surmise that Freedom River was not blindsided by its potential liability in New York. Despite its providing statutorily required liability coverage for plaintiffs in the minimum amount of $20,000, Freedom River acknowledges that it also carried a policy to cover its personal liability in the amount of up to $500,000 for a single accident, as well as an excess policy with coverage up to two million dollars. That acquisition of additional insurance protection by Freedom River obviously reflects its informed understanding that a car rental business must anticipate the likelihood that the law of other jurisdictions may affect its liability for injuries caused by accidents involving one of its rental vehicles.

Concerning the interests in judicial administration, the predictability and uniformity of result and the ease in determination and application of the choice of law, we note that those interests might be furthered by adopting a mechanical rule that New Jersey has the paramount interest in applying its law to any controversy involving parties who are all residents of this State. However, in a choice-of-law determination involving the field of tort, the interests in predictability and uniformity are of minimal importance and must yield to the more critical concerns that focus on the governmental policies of the two states.

In considering the extent to which each state's laws further the goals of deterrence and compensation, that factor points to the application of New York's vicarious liability law. Because New York's law has both a deterrent and a compensation objective, those underlying governmental interests outweigh the interests of New Jersey, whose law seeks neither to compensate victims nor to deter irresponsible behavior.

Finally, focusing on the competing interests of the states, we find that New York's underlying goals of compensation and deterrence bear a closer relationship to an accident in that state than does New Jersey's goal of shielding its residents from liability without fault. New York has demonstrated an unwavering policy that "innocent plaintiffs should have a financially responsible source from which to recover . . . [and] that automobile ownership per se carries a heavy burden of responsibility." White, supra, 390 F. Supp. at 137. New York's governmental interests are compelling in this instance because both the conduct giving rise to liability and the injury occurred in that state. Restatement, supra, § 145(1) comment d. New York "has an obvious interest in regulating the conduct of persons within its territory and in providing redress for injuries that occurred there." Ibid. New York's interests in highway safety and the compensation of New York health care providers are directly related to its contacts with this accident, as a result of which plaintiff Li Fu alone incurred medical expenses exceeding $150,000 during her New York hospital stay.

In this factual setting, we reject the characterization of the parties' contacts with New York as "fortuitous." In a broad sense, the occurrence of any automobile accident, and therefore its precise location, is always "fortuitous" in that accidents by their very nature are unexpected and unpredictable. The place of an accident, however, may be considered fortuitous only when the driver did not intend or could not reasonably have anticipated being in that jurisdiction at the time of the accident. See Kell, supra, 263 N.Y.S.2d at 650 ("[I]n communities located close to State lines or other countries such as Canada, it is very common for people to travel in and out of both states or countries and that although the happening of an accident may be termed fortuitous, the place where the parties are when the accident happens may or may not be."). Here, it is undisputed that Freedom River specifically authorized plaintiffs to drive the car to New York and, in fact, the car was rented for that purpose. Compare Reale v. Herco, Inc. 589 N.Y.S.2d 502 , 508 (App.Div. 1992) (noting that infant plaintiff who voluntarily went to Pennsylvania for specific purpose of spending vacation at Hershey Park had very direct and substantial nexus with Pennsylvania), with Kilberg v. Northeast Airlines, Inc., 172 N.E.2d 526, 527 (N Y 1961) (describing place of injury in air disaster as fortuitous because passenger's "plane may meet with disaster in [s]tate he never intended to cross but into which the plane has flown because of bad weather . . . or an airplane's catastrophic descent may begin in one [s]tate and end in another").

We also reject the lower courts' characterization of Section 388 as a "loss-allocating" rule with no deterrent purpose. Although vicarious liability rules, broadly defined, serve a loss-allocating function, there is no question that from its inception Section 388 also was intended to regulate irresponsible car lending practices, and it is that underlying governmental purpose that guides our inquiry. That the rule regulates highway safety indirectly, by providing an incentive for responsible business practices, rather than directly by stating a "rule of the road" is irrelevant to the strength of New York's policy.

New Jersey's interests, as previously noted, are not as squarely implicated because, although New Jersey's common law plainly shields automobile owners from liability for permissive use of their vehicles in this State, New Jersey does not have a governmental interest in affording that same protection to its residents for tortious conduct out of state. In addition, whether New Jersey's common-law rule comprehensively reflects this State's governmental policy concerning the responsibilities of automobile ownership is unclear. The coexistence of the traditional vicarious liability rule and the more recent legislation requiring auto owners to purchase insurance that provides coverage for permissive users suggests a somewhat ambiguous and inconsistent state policy on the issue of liability without fault. Thus, the application of New York law would certainly not frustrate, and may even be partially congruent with, this State's policy regarding a vehicle owner's responsibility for injuries caused by the negligence of a permissive user of the vehicle.

Although our dissenting colleague asserts that our disposition is inconsistent with decisions in other choice-of-law cases involving automobile accidents, post at 154-55, 733 A.2d at 1158-59, we discern no such inconsistency. We reiterate that in performing the governmental-interest analysis that governs choice-of-law issues that analysis often is heavily influenced by the specific facts of the case, especially in comparing the competing interests of the states. We have emphasized that "the qualitative, not the quantitative, nature of a state's contacts ultimately determines whether its law should apply." Pfizer, supra, 154 N.J. at 198. Accordingly, our disposition of this appeal is influenced significantly by the specific facts relevant to the evaluation of the competing interests of New York and New Jersey, and that evaluation could be affected if the factual context were altered.

For a forum state to favor the application of its own law is not uncommon, and that tendency understandably is enhanced when the parties are all residents of that state. Nevertheless, when the interest of the forum in the determination of an issue is minimal and "a foreign state has a real interest in having its law apply to rights and liabilities of parties to an event which occurred within its borders, this Court has recognized that sound principles of comity often require the application of the foreign state's law to a suit brought in the courts of this State." Mellk, supra, 49 N.J. at 229. Here, after a "full consideration of the policies and purposes of the rules of the states involved," ibid., we conclude that New York has the paramount interest in the controversy.

IV

The judgment of the Appellate Division is reversed and the matter is remanded for further proceedings consistent with this opinion.

CHIEF JUSTICE PORITZ and JUSTICES HANDLER, O'HERN and COLEMAN join in JUSTICE STEIN'S opinion. JUSTICE POLLOCK has filed a separate dissenting opinion, in which JUSTICE GARIBALDI joins.