## Facts

- Gloria Bates was injured in a 1975 automobile accident in Illinois, resulting in chronic spinal injuries requiring ongoing treatment.
- At the time of the accident, Bates and her husband were Michigan residents insured under a Michigan no-fault automobile policy issued by Nationwide Insurance Company.
- Nationwide accepted the claim and paid accident-related medical benefits for years, initially through its Michigan office.
- After Bates moved to Arizona, she continued treatment there; she sent bills to Nationwide and Nationwide continued paying.
- In 1984, Nationwide transferred the claim file from Michigan to its home office in Columbus, Ohio, and Bates submitted bills to Ohio.
- In 1985, Nationwide requested an examination by a Phoenix physician, who opined Bates’s condition was stationary and she no longer needed accident-related care.
- Nationwide’s Ohio claims personnel terminated medical-payments benefits as not “reasonable and necessary” and refused to reinstate payments after Bates requested reconsideration.
- Bates sued Nationwide in Arizona for breach of contract, first-party insurance bad faith, and punitive damages; Michigan law did not recognize a first-party bad-faith tort, while Arizona and Ohio did.

## Issues

1. Under Arizona choice-of-law rules applying the Restatement (Second) of Conflict of Laws “most significant relationship” test, whether Arizona, Michigan, or Ohio law governs Bates’s claims for insurance bad faith and punitive damages.

## Decision

- The Arizona Supreme Court held that Arizona law governs the bad-faith and punitive-damages issues.
- The court treated the insurance bad-faith claim as tortious for choice-of-law purposes and applied Restatement (Second) tort principles.
- The court reversed the trial court’s partial summary judgment applying Michigan law and remanded for further proceedings.

## Legal Principles

- Arizona applies the Restatement (Second) of Conflict of Laws “most significant relationship” approach, evaluating relevant contacts and weighing them under Restatement § 6 policy factors.
- A first-party insurance bad-faith claim is analyzed as a tort for choice-of-law purposes, even though it arises from an insurance contract.
- In tort choice-of-law analysis, key contacts include: (1) where the injury is felt, (2) where the conduct causing injury occurred, (3) parties’ residences and business locations, and (4) where the relationship is centered.
- The state of contract formation and initial claim handling may be outweighed when the alleged bad-faith conduct and resulting harm occur later in other states.
- A forum state has a strong interest in applying its remedial and deterrent tort law to protect residents who experience the economic and medical consequences of insurer misconduct within the state.
- An insurer’s expectations based on the policy’s issuing state do not control the law governing later-arising tort claims tied to other states where the insured resides and suffers harm.

## Conclusion

Arizona had the most significant relationship to the alleged bad-faith termination of benefits because Bates resided and experienced the harm in Arizona and Arizona had strong policies favoring remedies for insurer misconduct; therefore, Arizona law, not Michigan law, governed the bad-faith and punitive-damages claims, requiring reversal of partial summary judgment and remand.


Bates v. Superior Court, 749 P.2d 1367 (Ariz. 1988)