## Facts

- Allstate issued an automobile insurance policy in Kansas to Moses’s father, a Kansas resident, providing liability coverage relevant to claims against driver Chris Halstead.
- In Missouri, Halstead crashed the vehicle, injuring passenger Shelby Moses.
- Moses’s counsel offered to settle Moses’s claim against Halstead for Allstate’s $25,000 policy limits; the offer and Allstate’s rejection occurred in Kansas.
- Moses sued Halstead in Missouri state court and obtained a $100,000 judgment; Allstate paid $25,000, leaving a $75,000 unpaid excess judgment.
- Moses registered the Missouri judgment in Kansas and commenced a Kansas garnishment action against Allstate, alleging negligent or bad-faith refusal to settle and seeking the $75,000 excess.
- After removal to federal court in Kansas, the district court ultimately applied Missouri law and entered judgment for Allstate on the ground that Moses lacked an assignment from Halstead.

## Issues

1. Under Kansas choice-of-law rules, does Kansas or Missouri law govern a judgment creditor’s garnishment claim alleging an insurer’s negligent or bad-faith failure to settle?
2. Under the governing law, may a judgment creditor pursue recovery of an excess judgment from the insurer through garnishment without obtaining an assignment of the insured’s failure-to-settle claim?

## Decision

- The Tenth Circuit held Kansas law governs the dispute.
- The court reversed the judgment for Allstate and remanded for further proceedings.
- The court held that, under Kansas law, Moses was not required to obtain an assignment from Halstead to pursue garnishment based on Allstate’s alleged negligent or bad-faith failure to settle.

## Legal Principles

- In diversity, a federal court applies the forum state’s choice-of-law rules.
- Kansas applies a Restatement (First) contract approach to issues concerning the substance of contractual obligations, generally using the law of the state where the contract was made (issued/delivered), not the state of the accident or underlying tort suit.
- A claim that an insurer negligently or in bad faith failed to settle is treated in Kansas as arising from the insurance contract, though evaluated under a tort standard of care.
- Kansas permits a judgment creditor, via garnishment, to assert the insured’s rights against the insurer for negligent or bad-faith failure to settle and to seek amounts exceeding policy limits without a formal assignment from the insured.

## Conclusion

The Tenth Circuit ruled that Kansas law governed Allstate’s alleged failure to settle because the insurance contract was made in Kansas, and it held Kansas allows an injured judgment creditor to pursue the insurer for an excess judgment through garnishment without an assignment from the insured, requiring reversal and remand.


Moses v. Halstead & Allstate Ins. Co., 581 F.3d 1248 (10th Cir. 2009)