PHILIP M. PRO, District Judge.
Presently before the Court is Defendant Auto-Owners Insurance Company's Motion to Determine Applicable Law (Doc.
On February 8, 2012, Plaintiffs filed a Motion for Reconsideration (Doc. # 67) of the Court's Order on the Motion to Determine Applicable Law. On February 27, 2012, Defendant filed an Opposition (Doc. # 72). On March 7, 2012, Plaintiffs filed a Reply (Doc. # 78). On March 14, 2012, the Court granted Plaintiffs' Motion for Reconsideration (Doc. # 81). Plaintiffs then filed an Opposition (Doc. # 86) to Defendant's Motion to Determine Applicable Law on March 28, 2012. On April 6, 2012, Defendant filed a Reply (Doc. # 88).
On or about May 24, 2010, Nancy Marie Ouellet ("Ouellet") applied for, negotiated, and purchased a motorcycle insurance policy from Defendant Auto-Owners Insurance Company ("Auto-Owners"), a Michigan corporation with its principal place of business in Michigan, which is licensed to do business in Colorado. (Def.'s Mot. to Determine Applicable Law ("Mot. to Det.") (Doc. # 61), Ex. A ¶ 2-4, Ex. A-1.) Auto-Owners is not licensed to do business in Nevada, nor does Auto-Owners underwrite insurance in Nevada. (Mot. to Det., Ex. A ¶ 4.) Ouellet purchased the insurance policy through an independent insurance agency, Don Bates Insurance, located in Colorado. (Id. ¶ 2, 5, Ex. A-1.) At the time she obtained the policy, Ouellet resided in Colorado. (Mot. to Det., Ex. A ¶ 5, Ex. A-1.) The policy was negotiated, purchased, executed, and issued in Colorado. (Mot. to Det., Ex. A ¶ 6.) The policy provided under-insured motorist benefits of $500,000 per person/per occurrence. (Mot. to Det., Ex. A-2.) Ouellet's motorcycle was licensed in Colorado. (Mot. to Det., Ex. A-3.)
On June 22, 2010, Ouellet was traveling on U.S. 93 in Nevada when Defendant Charles Gilman's ("Gilman") automobile struck her motorcycle. (Id.) Ouellet resided in Colorado at the time of the accident, and none of the Plaintiffs ever resided in Nevada. (Mot. to Det., Ex. A ¶ 14, Ex. A-3.) As a result of the accident, Ouellet suffered serious injuries and died. (Mot. to Det., Ex. A-3.) Don Bates Insurance filed an Automobile Loss Notice with Auto-Owners on Ouellet's behalf on July 7, 2010. (Mot. to Det., Ex. A-4.) The Notice listed Plaintiff Louis Vignola ("Vignola") as the policy "Contact" at a Colorado address. (Id.) From July 7, 2010 to August 19, 2010, Auto-Owners's Colorado office communicated with Vignola regarding the claim. (Mot. to Det., Ex. A ¶¶ 11-13; Pls.' Opp'n to Mot. to Det. ("Opp'n") (Doc. # 86), Exs. 5-7.) Vignola and Ouellet's two children (collectively "Plaintiffs") hired counsel in Nevada, and on August 9, 2010, Plaintiffs' counsel instructed Auto-Owners to direct all communications to Plaintiffs' counsel in Las Vegas, Nevada. (Opp'n, Exs. 5-6.)
Plaintiffs filed a Complaint in the Eighth Judicial District Court of Clark County, Nevada on November 2, 2010. (Notice of Removal (Doc. # 1), Ex. A.) Plaintiffs alleges that Auto-Owners refused to settle Plaintiffs' claims and failed to reasonably and promptly evaluate their claims. (Id. ¶¶ 18-19.) Plaintiffs brought suit against Auto-Owners for bad faith, unfair claims practices in violation of Nevada Revised Statutes § 686A.310, and contractual claims. (Opp'n at 3.) Auto-Owners removed the case to this Court on December 2, 2010. (Notice of Removal.)
Auto-Owners now seeks a determination of which state's law, Nevada or Colorado, applies to Plaintiffs' claims against Auto-Owners in this action. Auto-Owners identifies
Plaintiffs respond that their bad faith and unfair claims practices claims are torts, and because these torts arise out of the accident that occurred in Nevada, the most significant relationship test from § 146 of the Second Restatement on Conflicts of Law applies. The general rule under § 146 is that the law of the state where the injury occurred applies unless another state has a more significant relationship to the claims. Plaintiffs argue Nevada is the place of injury and Colorado does not have a more significant relationship to the claims. Therefore, Plaintiffs argue, Nevada law should apply to Plaintiffs' claims of bad faith and unfair claims practices. But Plaintiffs distinguish between their bad faith and unfair claims practices claims and their contractual claims. Although Plaintiffs do not articulate the nature of their contractual claims, Plaintiffs concede that Colorado law would apply to Plaintiffs' contractual claims.
Auto-Owners reply that all of Plaintiffs' claims against Auto-Owners are contractual because they relate to Auto-Owners' alleged refusal to pay insurance benefits under the insurance contract and not to the causation of the accident. Additionally, Auto-Owners acknowledges that a bad faith refusal to pay insurance benefits can be considered a tort and thus the most significant relationship test would apply. But Auto-Owners concludes that even under the most significant relationship test, Colorado law applies.
Federal courts sitting in diversity apply the forum state's choice of law rules to determine applicable substantive law. Narayan v. EGL, Inc., 616 F.3d 895, 898 (9th Cir.2010). In Nevada, the most significant relationship test, as set forth in § 145 of the Second Restatement of Conflicts of Law, governs tort actions. Section 145 provides:
Section 145 applies to tort actions "unless another, more specific section of the Second Restatement applies to the particular tort." Gen. Motors Corp. v.
The Second Restatement defines "personal injury" as "either physical harm or mental disturbance, such as fright and shock, resulting from physical harm or from threatened physical harm or other injury to oneself or to another." Restatement Second of Conflicts of Law § 146 cmt. b. Both § 145 and § 146 incorporate the following principles from § 6:
By contrast, the substantial relationship test governs contract claims in Nevada. Consol. Generator-Nevada, Inc. v. Cummins Engine Co., 114 Nev. 1304, 971 P.2d 1251, 1253 (1998). The Court should consider the following factors in determining which state has a substantial relationship to the contract:
971 P.2d at 1253-54 (citations omitted).
Here, Plaintiffs bring suit against Auto-Owners for bad faith, unfair claims practices in violation of Nevada Revised Statutes § 686A.310, and contractual claims. The parties agree that the substantial relationship test applies to Plaintiffs' contractual claims, and under that test, Colorado law applies. But the parties disagree over which test applies to Plaintiffs' claims for bad faith and unfair claims practices: (1) the most significant relationship test under § 146, (2) the most significant relationship test under § 145, or (3) the substantial relationship test. This determination turns on whether Plaintiffs' claims for bad faith and unfair claims practices are tort or contract claims.
The most significant relationship test from § 146 does not apply because neither claim is a personal injury tort. Specifically, Plaintiffs' claims for bad faith and unfair claims practices are not claims of "physical harm or mental disturbance, such as fright and shock, resulting from physical harm or from threatened physical harm or other injury to oneself or to another." Restatement Second of Conflicts of Law § 146 cmt. b. However, the most significant relationship test from § 145 applies to Plaintiffs' bad faith claim because
Section 145 instructs the Court to consider the contacts listed in § 145(2) in evaluating the § 6 principles. Although Nevada is the place of the personal injury upon which Plaintiffs' claims against Auto-Owners are based, the injury for which Plaintiffs seek relief against Auto-Owners is the alleged mis-handling of Plaintiffs' injury claim. Despite the fact that Plaintiffs' counsel is based in Nevada, Auto-Owners' Colorado office handled Plaintiffs' claim, thus the conduct and the injury occurred in Colorado. See Restatement Second of Conflicts of Law § 145(2)(a)-(b). Ouellet resided in Colorado, Vignola resides in Colorado, and Auto-Owners is licensed to do business in Colorado. See id. § 145(2)(c). Lastly, the parties' relationship is centered in Colorado because Ouellet applied for, negotiated, and entered into the insurance contract in Colorado; Ouellet's motorcycle was licensed in Colorado; Ouellet's insurance agent, Don Bates, is located in Colorado; and Auto-Owners's Colorado office handled Plaintiffs' claim. See id. § 145(2)(d). The fact that Plaintiffs' counsel communicated with Auto-Owners's Colorado office from Nevada, does not alter this conclusion. In short, all four of the contacts listed in § 145(2) suggest that Colorado has the most significant relationship to Plaintiffs' claims against Auto-Owners.
These contacts inform the § 6 analysis. First, given the volume of contacts with Colorado, the needs of the interstate and international systems are best satisfied by applying Colorado law. Second, although Nevada, as the forum state, has an interest in resolving disputes over an accident that occurred in Nevada, the injury at issue here is not Ouellet's death, it is the alleged mis-handling of Plaintiffs' insurance claim, which occurred in Colorado. Thus, Nevada's interests in the claims against Auto-Owners are minimal. Third, Colorado has significant interests in resolving the claims for bad faith and unfair claims practices — which occurred in Colorado, between residents of Colorado and a company licensed to do business in Colorado and arose out of a contract executed in Colorado. Fourth, having negotiated and executed the insurance contract in Colorado, the parties may have justifiably expected that Colorado law would govern disputes relating to the contract. Fifth, although Nevada law is arguably more favorable to the insured, both bodies of law impose duties and provide protections for parties to an insurance contract. Sixth, applying Colorado law to a contract executed in Colorado enhances certainty, predictability, and uniformity of result for the contracting parties. Seventh, there is no significant difference in the ease of determination and application of Nevada and Colorado law to Plaintiffs' claims. Therefore, Colorado law applies to Plaintiffs' claims of bad faith and unfair claims practices under the most significant relationship test as set forth in § 145.
Similarly, Colorado law applies to Plaintiffs' claims against Auto-Owners under the substantial relationship test. Ouellet and Auto-Owners entered into the contract for motorcycle insurance in Colorado. Don Bates Insurance negotiated the contract with Auto-Owners on Ouellet's behalf in Colorado. The insurance policy was issued in Colorado while Ouellet resided in Colorado; thus, the contract was performed
IT IS THEREFORE ORDERED that Defendant Auto-Owners Insurance Company's Motion to Determine Applicable Law (Doc. # 61) is hereby GRANTED.