You could write a book doing a choice of law analysis on the simplest claim. And some have. Take a policy issued in state A, accident and suit in State B, and it’s off to the races to figure out which state’s law would be applied, by courts in state A and state B – each using their own choice of law rule -- if a coverage action were someday brought in either state. Before you know it you’ve written a four page, eye-glazing, metaphysical analysis, addressing the relative weight of six different contacts to the dispute.

Of course, there is a strong likelihood that, when all is said and done, the answer could have been had in two seconds – the law applicable to the coverage dispute will be the state of the insured’s address on the policy’s Dec Page. After all, if a state applies lex loci conractus for determining choice of law – the state where the contract was made – the law applicable will very likely be the insured’s address on the policy’s Dec Page. If a state applies the Restatement’s “Substantial Relationship” test for determining choice of law, the law applicable will also very likely be the insured’s address on the policy’s Dec Page – especially if the insured has multi-state operations. Under the Restatement’s “Substantial Relationship” test, the state where the policy was issued is given out-sized significance.

But is there an exception to this analysis when determining choice of law for purposes of a bad faith claim? That was essentially the issue before the Oklahoma Supreme Court in Martin v. Gray, No. 114660 (Okla. Nov. 8, 2016). The court held that, because bad faith is an independent tort, a tort-based choice of law analysis controlled.

Kourtni S. Martin suffered serious injuries in an automobile accident in Oklahoma City. At the time she had UM coverage with Goodville Mutual. The policy was purchased by her parents while they lived in Kansas and Kourtni was a listed/rated driver on the policy. Before the collision, her parents notified their Kansas agent that Kourtni was moving to Oklahoma and that her vehicle would be garaged in Oklahoma. After the collision, the claim was reported to the agent in Kansas who then transmitted the claim to the insurer which was located principally in Pennsylvania. The claim was adjusted out of Pennsylvania.

At some point, Kourtni filed a bad faith claim against Goodville Mutual in Oklahoma. Goodville filed a motion to dismiss on the basis that Kansas law does not recognize a bad faith claim as a matter of law. The trial court granted Goodville’s motion, holding that Kansas law applied, and dismissed the bad-faith claim.

At issue before the Oklahoma Supreme Court: Which state’s law applied to the bad faith claim – Kansas or Oklahoma?

The trial court had determined that Kansas law applied based on the application of certain Oklahoma statutes. How the statutes operated to get there is not relevant here. What is relevant is that they pointed to the state where the policy was issued – Kansas -- as the law to be applied.

However, the Oklahoma Supreme Court undertook a different analysis and reached a different conclusion: “This Court holds that a claimed violation of an insurer’s implied-in-law duty of good faith and fair dealing presents an independent tort pursuant to Christian v. American Home Assurance Company and McCorkle v. Great Atlantic Insurance Company, requiring application of the law of the state with the most significant relationship to the alleged violation. Therefore, the trial court erred when it held that Kansas law applied automatically to Insured’s breach of contract and tort claim based on the duty of good faith and fair dealing.” (emphasis in original).

So, as the Supreme Court saw it, the basis for determining choice of law, for this independent tort claim of bad faith, was the “most significant relationship” test: “the rights and liabilities of parties with respect to a particular issue in tort shall be determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties. The factors to be taken into account and to be evaluated according to their relative importance with respect to a particular issue, shall 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 occurred.”

Applying this test to the matter at hand, the court concluded that we’re not in Kansas anymore: “The actions by Insurer related to the bad-faith claim appear to have occurred primarily in Oklahoma and Pennsylvania: (1) any injury from the alleged bad faith occurred in Oklahoma where Insured is located; (2) the alleged conduct causing injury from bad faith occurred in Oklahoma or Pennsylvania, where the claim was handled; (3) the domicile of Insurer and Insured are Pennsylvania and Oklahoma, respectively, and (4) the place where the relationship between the parties occurred has yet to be determined.”

As a general rule, when it comes to choice of law, for purposes of a coverage dispute, the address on the Dec page will always be the most important factor. But for states that treat bad faith as an independent tort, the rationale of Martin v. Gray, which uses a tort-based analysis for choice of law, cannot be overlooked in the calculus.