JAMES L. DENNIS, Circuit Judge:
The conflict of laws issue in this diversity case, removed from a Mississippi state
Clinton Williams, the Mississippi resident plaintiff, was injured in the course and scope of his employment in Mississippi while he was working for Steven Tanner, an Alabama resident contractor. The employer's insurer, Liberty Mutual Insurance Company, did not timely begin paying Williams worker's compensation. In fact, it delayed payments for eight months, during which time Williams brought proceedings for compensation against Liberty Mutual both in the Mississippi Worker's Compensation Commission (MWCC) and in an Alabama state court. Additionally, Williams asserted a claim for damages for "outrageous conduct" against Liberty Mutual in his Alabama suit. Ultimately, Liberty Mutual conceded its liability to Williams for worker's compensation under both Mississippi and Alabama law and reached settlement agreements with Williams in which Williams reserved his rights to sue the insurer for intentional bad-faith refusal to pay compensation in Mississippi and for outrageous conduct in Alabama.
This Court reviews questions of law, including conflicts of law questions, de novo and district court factual determinations for clear error. Abraham v. State Farm Mut. Auto. Ins. Co., 465 F.3d 609, 611 (5th Cir.2006). The facts here are undisputed, so our review is de novo. See Coats v. Penrod Drilling Corp., 5 F.3d 877, 882 (5th Cir.1993), opinion reinstated in part on reh'g en banc, 61 F.3d 1113 (5th Cir.1995).
A federal court sitting in diversity must apply the choice-of-law rules of the state in which it sits. Day & Zimmermann, Inc. v. Challoner, 423 U.S. 3, 4-5, 96 S.Ct. 167, 46 L.Ed.2d 3 (1975) (per curiam); Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Ellis v. Trustmark Builders, Inc., 625 F.3d 222, 225 (5th Cir. 2010); see also Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). This diversity action was removed from Mississippi state court to the U.S. District Court for the Southern District of Mississippi. It is undisputed that Mississippi's choice-of-law rules therefore govern.
In Mississippi, choice-of-law analysis arises only when there is a true conflict between the laws of two states, each having an interest in the litigation. Zurich Am. Ins. Co. v. Goodwin, 920 So.2d 427, 432 (Miss.2006). As we noted at the outset, there is a crucial and true conflict between Alabama and Mississippi law on the issue presented in this case.
Regarding the first step of the choice-of-law analysis, "the law of the forum determines whether an issue in the action is substantive or procedural in nature." Hartford Underwriters Ins. Co. v. Found. Health Servs. Inc., 524 F.3d 588, 593 (5th Cir.2008) (internal quotation marks and alteration omitted). "In Mississippi, `few laws are classified as procedural' and for choice of law purposes the Mississippi Supreme Court has labeled as procedural only rules of evidence and procedure, statutes of limitations, and awards of attorney's fees and interest." Id. (quoting Zurich, 920 So.2d at 433). When "resolution of [an] issue determines whether [the plaintiff] has `has a viable cause of action,'... the issue is substantive." Id. (quoting Hancock v. Watson, 962 So.2d 627, 629 (Miss.Ct.App.2007)). The parties do not dispute that the issue here is substantive. We agree that the issue in this case is a substantive rather than procedural matter because it determines whether Williams has a viable cause of action. See id. We therefore proceed to the next step in the choice-of-law inquiry.
The parties' central dispute pertains to the second choice-of-law factor, whether Williams' claim for damages based on Liberty Mutual's alleged intentional bad-faith refusal to pay him worker's compensation is properly characterized as a tort or a contract action. Mississippi law determines whether a matter is properly characterized as a tort or a contract because that inquiry is part of Mississippi's choice-of-law rules. See, e.g., Klaxon, 313 U.S. at 496, 61 S.Ct. 1020; Ellis, 625 F.3d at 225.
The Mississippi Supreme Court, in the seminal case of Southern Farm Bureau Casualty Insurance Co. v. Holland, held that an employee entitled to worker's compensation benefits from her employer has a separate and independent right to recover damages from the employer's worker's compensation insurer because of the insurer's intentional bad-faith refusal to pay compensation when due, which constitutes an independent intentional tort committed by the insurer outside the scope of the worker's employment. 469 So.2d at 56-59. The action "derives from the independent and allegedly intentional, tortious conduct of [the insurer] in refusing to pay benefits owing under the [Mississippi Workers' Compensation] Act without an arguable basis therefor." Id. at 59. Moreover, in Holland, the Mississippi Supreme Court concluded "that the exclusivity provision of the Workers' Compensation Act does not bar an action by the employee against the insurance carrier for the commission of an intentional tort. The independent tort is not compensable under our Workers' Compensation Act and to extend immunity to compensation carriers for a separate injury to workers goes far beyond the intent of the act." Id.; see, e.g., Leathers v. Aetna Cas. & Sur. Co.,
In tort matters, Mississippi applies section 145 of the Restatement Second. E.g., Mitchell, 211 So.2d at 514-16; see Ellis, 625 F.3d at 226-27 (in suit governed by Mississippi's choice-of-law rules, applying Restatement Second's section 145 to plaintiff's tort claim for negligence against a third-party tortfeasor following work-related injury for which he had previously received workers' compensation benefits). For the reasons that follow, the section 145 factors, which Mississippi courts regard as relevant to the choice-of-law determination in a tort action, dictate that Mississippi law, and not Alabama law, governs the conflict of law question raised by the present tort suit.
Section 145 instructs courts to consider the following factors when an action sounds in tort: "the place where the injury occurred"; "the place where the conduct causing the injury occurred"; "the domicile, residence, nationality, place of incorporation and place of business of the parties"; and "the place where the relationship, if any, between the parties is centered." RESTATEMENT SECOND § 145(2). "These [factors] are to be evaluated according
Mitchell, 211 So.2d at 516. "Mississippi courts will apply the law of the place of injury unless another state has a more substantial relationship to the action." Davis v. Nat'l Gypsum Co., 743 F.2d 1132, 1133 (5th Cir.1984) (citing Mitchell, 211 So.2d at 516).
Considering the foregoing factors, we conclude that, pursuant to Mississippi's choice-of-law rules, Mississippi has the most significant relationship to the tort action and that Mississippi substantive law therefore governs this dispute. Williams, a Mississippi resident who was the victim of a job-related accident in Mississippi, alleges that he was injured when Liberty Mutual, intentionally and in bad faith, refused to pay him worker's compensation benefits to which he was entitled under Mississippi law and which he sought in the Mississippi Worker's Compensation Commission. Thus, Mississippi is the state where the injury of intentional bad-faith refusal to pay worker's compensation occurred. See Mitchell, 211 So.2d at 516; Davis, 743 F.2d at 1133; RESTATEMENT SECOND § 145(2)(a). In addition, Williams alleges that Liberty Mutual's intentional bad-faith misconduct took place in Mississippi, where Liberty Mutual allegedly refused to pay him workers' compensation benefits.
The district court erroneously concluded that, under Mississippi law, Liberty Mutual's alleged intentional bad faith refusal to pay Williams worker's compensation was merely a breach of contract and not an "independent tort committed by the carrier outside the scope of [Williams'] employment" as the Mississippi Supreme Court held in Holland, 469 So.2d at 56. Contrary to Holland, its progeny, and its underlying reasons discussed above, the district court reasoned:
Williams, 2011 WL 5183572, at *6.
Although the district court later cited Holland for the proposition that "Mississippi law permits a bad faith claim against a workers compensation carrier," id. at *7, the district court nevertheless substituted its own conclusion that Williams' action sounds in contract. As a federal court sitting in diversity jurisdiction, we must look to state law to determine how that state would apply its own choice-of-law rules. See Challoner, 423 U.S. at 4-5, 96 S.Ct. 167 (explaining that a federal court sitting in diversity must apply the choice-of-law rules of the state in which it sits); Klaxon, 313 U.S. at 496, 61 S.Ct. 1020 (same). In this case, which Liberty Mutual removed from Mississippi state court to the U.S. District Court for the Southern District of Mississippi, we therefore look to how Mississippi courts would classify the nature of the action — i.e., as sounding in "tort, property, or contract." Ellis, 625 F.3d at 225; see Challoner, 423 U.S. at 4-5, 96 S.Ct. 167; Klaxon, 313 U.S. at 496, 61 S.Ct. 1020. As we explained above, Mississippi recognizes a tort action for damages based on the independent tort committed by an insurer outside the scope of a worker's employment when the insurer intentionally and in bad faith refuses to pay workers' compensation benefits when they are due. See Holland, 469 So.2d at 56.
The cases relied on by the district court are inapposite.
Consequently, the district court erroneously analyzed this case under the Restatement (Second) of Conflicts sections 188 and 193, applicable to contracts, rather than under section 145 of torts as we conclude the Mississippi Supreme Court would have done applying its holding in Holland and its conflict of laws jurisprudence.
The district court was also led astray by its misinterpretation of our decision in Ellis v. Trustmark Builders, Inc., 625 F.3d 222 (5th Cir.2010), and its misreading of the Restatement (Second) of Conflict of Laws § 184. Neither Ellis nor § 184 is apposite here, contrary to the district court's misconception.
Ellis was a Mississippi employee of an Alabama subcontractor when he was injured on an apartment complex construction site in Mississippi. Ellis, 625 F.3d at 223. After collecting worker's compensation pursuant to Alabama law through his employer's insurance policy with Liberty Mutual, Ellis brought a personal injury suit against the owner, the general contractor and others alleging that their negligence contributed to his job-related accident and injuries. Id. at 224. Unlike in the present case, Liberty Mutual did not refuse Ellis worker's compensation benefits but paid him promptly and in good faith. See id. Applying section 145 of the Restatement Second of Conflicts, we held that Alabama law had a more significant relationship to the case because: Ellis'
Consequently, Williams' action for damages against Liberty Mutual in the present case is distinguishable from Ellis in many important respects: It is based on the insurer's independent tort against Williams outside the scope of his employment by intentionally in bad faith refusing to pay him worker's compensation due to him under Mississippi law; it is not an action against third persons whose alleged negligence contributed to the same work-related accident out of which Williams' worker's compensation claim arose; and it is not an action against third-person tortfeasors who are incorporated in or reside in Alabama.
For essentially the same reasons, the district court was mistaken in its conclusion that Restatement (Second) of Conflict of Laws § 184 "prohibits recovery against the employer and carrier on a bad faith claim under Mississippi law." Id. at *10. Section 184 does not so provide. Instead, section 184 states that recovery for tort or wrongful death will not be permitted in any state if the defendant is declared immune from such liability by the workmen's compensation statute of a state under which the defendant is required to provide insurance against the particular risk and under which other specified circumstances prevail. The scope of section 184 is delineated by its comment a, which provides that: "The rule of this Section applies to all actions in tort or wrongful death that may be brought to recover damages for injuries suffered by an employee in the course of his employment." (Emphasis added.) Liberty Mutual points to no authority — and in particular no Mississippi authority — that has extended section 184 of the Restatement to immunize insurance companies from actions based on intentional bad-faith refusal to pay worker's compensation. As we noted earlier, the Mississippi Supreme Court in Holland recognized, under common law, that an injured worker may recover damages from a worker's compensation insurer for an independent tort, outside the scope of the worker's employment, when the insurer intentionally and in bad faith refuses to pay worker's compensation to which the worker is entitled. Thus, we conclude that the district court misinterpreted section 184 and that the Mississippi Supreme Court would not adopt that incorrect reading as part of its conflict-of-laws jurisprudence.
For these reasons, we REVERSE the judgment of the district court and REMAND