Ohio Supreme Court Applies Tort Conflict of Law Rules to an Insurance Bad Faith Claim.

In this 5-2 decision from the Ohio Supreme Court, the majority held that the tort conflict of law rules found in Section 145 of 1 Restatement of the Law 2d, Conflict of Laws, apply to an insurance bad faith lawsuit. The plaintiff, Scott Fetzer, a Delaware corporation with its headquarters in Cleveland, Ohio, brought suit against various insurers seeking indemnity for liability it incurred at two superfund sites located in Michigan. The subject insurance policies were allegedly issued to a company that Scott Fetzer acquired, which was headquartered in Indiana. In addition to seeking coverage, Scott Fetzer alleged that one of the insurers had acted in bad faith. A dispute arose as to whether Ohio, Michigan or Indiana law applied to the bad faith claim, since the laws were substantially different with regard to permissible discovery and recovery for alleged bad faith in each of these three states. 

The insurer argued that the court should apply contract choice of law analysis, and Scott Fetzer argued that tort choice of law rules should apply to the bad faith claim. The Ohio Supreme Court affirmed the trial court and court of appeals decision applying tort conflict of law rules found in Section 145 of 1 Restatement of the Law 2d, Conflict of Laws, to the insurance bad faith claims. The Supreme Court noted that bad faith claims sound in tort and are not rooted in any particular text of a contract and, instead, arise by operation of law.

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