How Missouri handles choice of law in bad faith cases.
Mar. 2016  |  Bad Faith Update  |  Vol. 2 Iss. 5

Choice of Law

Insurance litigation often creates interesting choice of law dilemmas, especially since the ability to assert a claim and the scope of those claims can vary greatly from state to state. And while the resolution of conflict of law issues in any case may be difficult and time consuming, the analysis can be doubly troubling when coverage and bad faith claims are present.

Missouri generally follows the most significant relationship test to resolve choice of law issues, but the analysis and factors to be considered differ depending on whether a tort or contract claim is at issue. 

Since policy interpretation and coverage issues are based in contract principles and bad faith claims sound in tort, the substantive law of multiple states may apply to different claims contained within a single proceeding.

Issues of Coverage Under the Policy

As is often the case in bad faith litigation, the interpretation of an insurance policy to determine the scope of coverage to be provided may be required.  

When this is the case, the choice of which state’s law to apply is generally determined by looking to the place where the parties understood the principal risk would be located. When clarifying the meaning of the principal location of the insured risk, courts have stated that the principal location is the place where the insured risk will be during the major portion of the policy period. In the case of automotive insurance, the place where the vehicle is garaged is said to be the principal location of the risk.

While the principal location of the insured risk is generally determinative of the choice of law issue, Court’s appear to evaluate the following factors from § 188 of the Second Restatement when the principal location is not readily apparent:

  1. The place of contracting;
  2. The place of negotiation of the contract;
  3. The place of performance;
  4. The location of the subject matter of the contract; and
  5. The domicile, residence, nationality, place of incorporation and place of business of the parties.

These factors are weighted on a case by case basis depending on their importance to the issue before the court which allows some flexibility in determining which state law will apply.

Bad Faith Claims

In Missouri, claims for bad faith against a carrier are considered torts meaning that courts will utilize the factors set out in §145 of the Second Restatement to determine which state has the most significant relationship to the claim. The factors courts will consider include:

  1. The place where the injury occurred;
  2. The place where the conduct causing the injury occurred;
  3. The domicile, residence, nationality, place of incorporation and place of business of the parties; and
  4. The place where the relationship, if any, between the parties is centered.

When conducting an analysis and discussing the factors outlined above, courts are not always clear in describing the significance of each factor. This is understandable as the weight given to each factor is dependent on the facts of each case.  However, a few principles can be gleaned from recent decisions.

First, federal courts have determined the insured’s injury occurs where the economic impact of the excess verdict is felt if an excess verdict is present. This is generally the state where the insured resides and/or where the verdict was entered. 

The second factor described above is usually determined by where settlement negotiations took place or should have taken place. 

Finally, the place where the claim was handled, including settlement negotiations, and where the tort which gave rise to the underlying action occurred, are both to be given great consideration in deciding the fourth factor.

Of course, if the substantive law of all the involved states provide similar extra-contractual remedies, no true conflict exists and the outcome should be the same irrespective of which state’s law applies.

Looking for Help?

Kirk Presley and his team work on bad faith cases on a routine basis.

If you need help, call him at (816) 931-4611 or send him an email at

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Kirk's practice focuses on significant plaintiff’s personal injury and wrongful death claims in the areas of products and premises liability, general aviation, and insurance bad faith litigation.
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