(Article from Insurance Law Alert, December 2020)
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A Missouri federal district court ruled that a policyholder could pursue a Missouri statutory “vexatious refusal to pay” claim against its insurer, notwithstanding a policy provision that designated New York law as controlling. Maritz Holdings Inc. v. Certain Underwriters at Lloyd’s London Subscribing to Policies Numbered B122F10115115 and F10115116, 2020 WL 7023952 (E.D. Mo. Nov. 30, 2020).
The policyholder sought coverage under a breach-response policy for two security breaches. When the insurer denied coverage, the policyholder sued, alleging breach of contract and vexatious refusal to pay pursuant to Missouri statutory law. The insurer moved to dismiss the statutory claim, arguing that it fails to state a claim under New York law, which governs all disputes “arising out of” the policy pursuant to a choice of law provision.
The court agreed with the insurer that “arising out of” is not limited to disputes arising out of policy interpretation, and extends to vexatious refusal to pay claims. However, applying Missouri conflict of law rules, the court concluded that the Missouri statute advances an important public policy—“the equitable and fair treatment of Missouri insureds”—and therefore overrides the choice of law provision.