In Moses v. Halstead, the court was faced with a choice of law issue: should the court apply the law of the place of the insurance policy or the law of the place of performance? The court found that Kansas law applied under both the place of the contract and the place of performance analysis.
Moses was the passenger in her car when Halstead ran off the road, injuring her. The insurance policy was issued by Allstate in Kansas. The accident occurred in Missouri. When Allstate failed to settle Moses’ claim for policy limits, Moses sued Halstead in Missouri and got a judgment in excess of limits. The judgment was registered in Kansas state court, and Moses started garnishment proceedings. Allstate removed the case to federal court.
The trial court ruled that Missouri law applied and that Allstate was entitled to judgment since Missouri required an assignment from the insured before a judgment creditor can file an action agaisnt the insurance company for bad faith refusal to settle. Kansas does not require such an assignment.
The Tenth Circuit reversed, finding that Kansas law applied to the claim. It noted that in Kansas, while an insurer’s duties are contractually based, breach of the duty is judged by a tort standard of care. The court reviewed various Kansas decisions and determined that a claim for negligent or bad faith refusal to settle goes to the substance of an insurer’s contract duties, rather than the manner of performance of those duties. Therefore, the claim would be govered by the law of the place of the contract, Kansas. Furthermore, the court determined that a failure to settle claim went to the manner and method of performance, and that the place of performance would apply to this issue. Since the demand for performance and the rejection of that demand was made in Kansas, the court found that Kansas law applied to this issue, as well.
The court then remanded the case for the trial court to apply Kansas law in the first place.
Summary judgment had been argued without any mention of choice of law rules. The court also discusses the differences between Kansas and Missouri law on bad faith failure to settle claims.