Choice of Law in Insurance Coverage Disputes

In today’s blog post, Miller Friel attorney Kimberly Wehle introduces her four part series, Four Tips for Advocating Insurance Coverage Disputes.  In this first part, she addresses the critical importance that choice of law plays in any corporate insurance coverage dispute.  

The series begins with this topic to highlight how critical choice of law can be to the final outcome of any large insurance claim.  Insurance coverage law is governed by state law, which can vary drastically from state to state.  Interpreting the exact same policy language under two different sets of substantive law can result in entirely different results.  For example, applying one state’s law, the claim may be covered, but the same may not be true if a different state’s law is applied.  The law that applies can also vary issue-by-issue in the same case.  Accordingly, choice of law is something that needs to be considered very early for each insurance claim, and it needs to be managed effectively throughout the claims process to maximize chances of a favorable outcome across the entire range of insurance issues presented.   

Choice of law
Miller Friel, PLLC attorney Kimberly Wehle

We have included a transcript of the video below:

Four Tips for Advocating Insurance Coverage Disputes:

#1 Choice of Law


Choice of law is an incredibly important element of an insurance recovery case. It can determine who wins or loses, as well as how much money the winner actually recovers. By choice of law, I mean what rules, what legal rules will apply to that particular case, to that particular insurance policy. Each state has its own set of state laws and those laws can conflict. So, an insurance policy, identical policy, construed, for example, under the laws of California could come out one way and construed under the laws of Nevada could come out a very different way depending on what California and Nevada courts have held with respect to similar insurance policies in prior cases.

It can matter policy by policy based on the factual background of the negotiation of the policy, where the alleged injury occurred, a lot of factual issues relating to how the policy came about, how the policy was implemented, where the premiums were paid. There is a factual element to it. Some insurance policies will be very specific as to what state law will apply. It is something that’s individualized and has to be addressed on a policy by policy basis, even though many policies have what we call boilerplate language, similar language from policy to policy. It has to be very carefully construed. As a matter of contract law essentially an insurance policy is a contract like any other contract, just more complicated often times.

The judge will decide what law applies if there’s a conflict. If the question is does Nevada or California apply, for example, to this particular insurance policy. If there’s no conflict, if Nevada and California have exactly the same thing to say, for example, about how do you construe an exclusion, a provision excluding coverage for certain circumstances, then it doesn’t really matter which law applies. The court will probably apply what we call the law reform state wherever the case was filed.

If there’s a conflict, however, if Nevada and California have a different view on how to construe, how to read an exclusion to an insurance policy and the outcome in California would be very different from the outcome in Nevada, the parties will have a dispute about that and we will brief, that is we’ll write memoranda of law, competing memoranda of law that explain why we think one state law applies. The other side will argue no, the other state law should apply and then the judge will make the determination after having read the series of papers. The papers can be quite complicated.

Intersecting issues of not only state law, contract law, sometimes federal jurisdictional questions if the case is in federal court on what we call removal, that it was filed in state court and then the defendant wanted it in federal court, so it was removed to federal court. Those issues then would be injected in the case and it can be quite complicated and sophisticated depending on the circumstances of the case. It’s very important to make a decision early on as to what law is more favorable to the client and to craft the litigation in a way that maximizes the possibility of recovery under the proper state law that, in our view, should apply on behalf of the client.

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