Court Opinion

ID: 9894280
Source: CourtListenerOpinion
Date Created: 2023-11-01 13:08:14.114459+00
Date Added: 2024-06-11T09:09:30.946984
License: Public Domain

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as Scott
Fetzer Co. v. Am. Home Assur. Co., Inc., Slip Opinion No. 2023-Ohio-3921.]

                                           NOTICE
      This slip opinion is subject to formal revision before it is published in an
      advance sheet of the Ohio Official Reports. Readers are requested to
      promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
      South Front Street, Columbus, Ohio 43215, of any typographical or other
      formal errors in the opinion, in order that corrections may be made before
      the opinion is published.

                          SLIP OPINION NO. 2023-OHIO-3921
  THE SCOTT FETZER COMPANY, APPELLEE, v. AMERICAN HOME ASSURANCE
    COMPANY, INC., ET AL.; TRAVELERS CASUALTY AND SURETY COMPANY,
                                        APPELLANT.
  [Until this opinion appears in the Ohio Official Reports advance sheets, it
  may be cited as Scott Fetzer Co. v. Am. Home Assur. Co., Inc., Slip Opinion
                                   No. 2023-Ohio-3921.]
Insurance-policy claims—Choice-of-law rules—The choice-of-law analysis
        applicable to an insurer bad-faith claim is provided by Section 145 of 1
        Restatement of the Law 2d, Conflict of Laws—Insurer bad-faith claims
        sound in tort and are not rooted in any particular text of a contract and
        instead arise by operation of law—Court of appeals’ judgment applying
        Ohio law to discovery dispute related to insurer bad-faith claim affirmed.
   (No. 2022-0595—Submitted March 21, 2023—Decided November 1, 2023.)
              APPEAL from the Court of Appeals for Cuyahoga County,
                              No. 110428, 2022-Ohio-1062.
                                    ________________
                                  SUPREME COURT OF OHIO

         BRUNNER, J.
         {¶ 1} In this case, we consider which choice-of-law rule applies to resolve
a claim that an insurance company acted in bad faith with respect to an insured’s
claim for coverage. We hold that 1 Restatement of the Law 2d, Conflict of Laws,
Section 145 (1971) governs this dispute. Accordingly, we affirm the judgment of
the Eighth District Court of Appeals.
                                        I. Background
         {¶ 2} This dispute arose out of environmental-cleanup and remediation
work at two Superfund sites in Bronson, Michigan.1 The affected sites include the
land on which three manufacturing facilities once operated, along with nearby
areas. Appellee, the Scott Fetzer Company, acquired one of those three facilities
in 1968, when it merged with the facility’s previous operator, Kingston Products
Corporation, an Indiana firm. Pursuant to the merger agreement, Scott Fetzer
acquired all of Kingston’s assets and liabilities and emerged as the successor
corporation. Scott Fetzer then continued to operate the facility from 1968 to 1984.
         {¶ 3} In 1986, the United States Environmental Protection Agency (“EPA”)
identified Scott Fetzer as a potentially responsible party that would be required to
investigate and remediate environmental contamination in Bronson. In the years
following, the EPA pursued enforcement actions against Scott Fetzer, which led to
a consent decree requiring Scott Fetzer to finance and perform the necessary
remedial work. The owner of a manufacturing facility subsequently operating at
the site, ITT, Inc., also sued Scott Fetzer, claiming that it was responsible for some
of the contamination at ITT’s facility. That action resulted in a judgment requiring
Scott Fetzer to reimburse ITT for costs it had incurred in addressing the
environmental damage at that facility.

1. The facts stated here are taken from the pleadings.

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       {¶ 4} To defray the cost of responding to these claims, Scott Fetzer turned
to liability-insurance policies issued to it or Kingston in the 1960s. Specifically, it
identified one general-liability insurance policy issued by the predecessor of
Arrowood Indemnity Company, two excess-blanket-catastrophe liability policies
issued by a predecessor of Century Indemnity Company, and one umbrella liability-
insurance policy issued by American Home Assurance Company. It also identified
four policies that it believed were issued to Kingston by a predecessor of appellant,
Travelers Casualty and Surety Company, between 1964 and 1968.
       {¶ 5} Scott Fetzer notified the insurance companies of the environmental
claims being asserted against it, and for many years, it sought to invoke the defense-
and-indemnification provisions of the policies and communicated with the
insurance companies about its claims. Ultimately, however, Scott Fetzer asserts,
the insurers not only did not provide the coverage and reimbursement it sought, but
they did not even provide a final, comprehensive coverage determination.
       {¶ 6} In October 2019, Scott Fetzer filed this action asserting a breach-of-
contract claim against each insurance company alleging breaches of the insurance
contracts at issue. Scott Fetzer also asserted a tort claim against each company
based on allegations that they had acted in bad faith when handling Scott Fetzer’s
claims. Scott Fetzer sought relief in the form of a declaratory judgment that it is
entitled to coverage under the policies, along with monetary damages for breach of
contract and bad faith in handling Scott Fetzer’s claims.
       {¶ 7} Relevant to this appeal are Scott Fetzer’s claims against Travelers,
based on four separate insurance policies that Travelers’ predecessor-in-interest
allegedly issued to Kingston from 1964 to 1968. Travelers answered by disputing
that the existence of the policies has been confirmed. And it denied that it has any
obligation to provide coverage for Scott Fetzer’s losses.
       {¶ 8} Travelers moved to bifurcate the bad-faith claim from the breach-of-
contract and declaratory-judgment claims and to stay discovery on the bad-faith

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claim. It argued that its request promoted efficiency in that if Scott Fetzer failed to
establish entitlement to coverage, then its bad-faith claim would have no basis.
       {¶ 9} The trial court ordered the bad-faith claim bifurcated but did not stay
discovery on that claim. It then stated, “The parties and the court will deal with
privilege and other discovery disputes as they arise.”
       {¶ 10} Several months later, Scott Fetzer moved to compel Travelers to
produce documents relating to its claims-handling procedures or guidelines for
making    coverage    determinations     as   well   as   internal   documents     and
communications relating to its handling of Scott Fetzer’s claim. Travelers claimed
that the information was covered by attorney-client privilege and was work product.
Scott Fetzer argued that in Ohio, the attorney-client privilege does not shield from
discovery documents revealing a defendant’s bad faith, quoting Boone v. Vanliner
Ins. Co., 91 Ohio St.3d 209, 213, 744 N.E.2d 154 (2001) (“claims file materials that
show an insurer’s lack of good faith * * * are unworthy of [privilege] protection”).
But Travelers argued that Ohio law does not apply, because Ohio’s choice-of-law
rules require the court to apply either Michigan or Indiana law to resolve the
discovery dispute. Travelers noted that Kingston was an Indiana company that had
contracted for the policies in Indiana. Michigan is the site of the insured risk.
Michigan law does not recognize a cause of action for bad faith, and Indiana law
does not allow discovery of materials covered by attorney-client privilege.
       {¶ 11} The trial court ordered Travelers to provide it with the documents
sought in the motion, along with a privilege log, so that the court could review them
in camera. The court subsequently referred the matter to an administrative judge.
       {¶ 12} The administrative judge reviewed the documents at issue and
concluded that for purposes of his review, Ohio law applies to the discovery dispute
concerning Scott Fetzer’s bad-faith claim. The administrative judge applied Ohio
law concerning whether attorney-client privilege applies in the context of a bad-
faith claim, and he concluded that Travelers could not withhold attorney-client

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                                 January Term, 2023

communications that are probative of good faith in processing, evaluating, or
refusing to pay Scott Fetzer’s claim. The administrative judge ordered that some
of the documents be produced, albeit with redactions for attorney-client
communications that did not concern the bad-faith claim, and that others could be
withheld entirely because they did not contain communications concerning Scott
Fetzer’s bad-faith claim.
        {¶ 13} Travelers appealed the administrative judge’s order. The trial court
subsequently stayed the administrative judge’s order pending that appeal.
        {¶ 14} The court of appeals affirmed. It held that Ohio law governs the bad-
faith discovery dispute, in part because the cause of action is a tort. 2022-Ohio-
1062, ¶ 17. To reach that conclusion, the appellate court relied on the choice-of-
law criteria set forth in 1 Restatement of the Law 2d, Conflict of Laws
(“Restatement”). According to those criteria, Fetzer’s bad-faith claim first had to
be classified as either a contract claim or a tort claim because “ ‘different choice-
of-law rules apply depending on whether the cause of actio[n] sounds in contract
or in tort.’ ” (Emphasis sic.) Id. at ¶ 7, quoting Ohayon v. Safeco Ins. Co. of Illinois,
91 Ohio St.3d 474, 476, 747 N.E.2d 206 (2001).
        {¶ 15} Section 6 of the Restatement, “Choice-of-Law Principles,” lists
general principles for choice-of-law analyses. It provides:

                (1) A court, subject to constitutional restrictions, will follow
        a statutory directive of its own state on choice of law.
                (2) When there is no such directive, the factors relevant to
        the choice of the applicable rule of law include
                (a) the needs of the interstate and international systems,
                (b) the relevant policies of the forum,

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                 (c) the relevant policies of other interested states and the
        relative interests of those states in the determination of the particular
        issue,
                 (d) the protection of justified expectations,
                 (e) the basic policies underlying the particular field of law,
                 (f) certainty, predictability and uniformity of result, and
                 (g) ease in the determination and application of the law to be
        applied.

1 Restatement, Section 6, at 10.                Subsequent provisions provide additional
principles to apply in particular situations. Rules for “an issue in tort” are set forth
in Section 145,2 while rules for particular types of torts are set forth in Sections 146
through 155. Choice-of-law rules for “an issue in contract” are set out in Section

2. Section 145, “The General Principle,” provides:

                 (1) The rights and liabilities of the parties with respect to an issue in tort
        are determined by the local law of the state which, with respect to that issue, has
        the most significant relationship to the occurrence and the parties under the
        principles stated in § 6.
                 (2) Contacts to be taken into account in applying the principles of § 6 to
        determine the law applicable to an issue include:
                 (a) the place where the injury occurred,
                 (b) the place where the conduct causing the injury occurred,
                 (c) the domicil, residence, nationality, place of incorporation and place
        of business of the parties, and
                 (d) the place where the relationship, if any, between the parties is
        centered.
        These contacts are to be evaluated according to their relative importance with
        respect to the particular issue.

1 Restatement, Section 145, at 414.

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                                        January Term, 2023

188,3 followed by rules for particular types of contracts in Sections 189 through
197. Of these, Section 193 applies to disputes over the “validity of a contract of
fire, surety or casualty insurance and the rights created thereby.”4 Id., Section 193,
at 610.
          {¶ 16} Most relevant to this dispute are Sections 145, 188, and 193 of the
Restatement. Scott Fetzer argued in the court of appeals that its bad-faith claim is
properly understood as a tort claim and that the court should look to the criteria set
out in Section 145—specifically, that Ohio is where its alleged injury from bad faith

3. Section 188, “Law Governing in Absence of Effective Choice by the Parties,” provides:

                    (1) The rights and duties of the parties with respect to an issue in contract
          are determined by the local law of the state which, with respect to that issue, has
          the most significant relationship to the transaction and the parties under the
          principles stated in § 6.
                    (2) In the absence of an effective choice of law by the parties (see § 187),
          the contacts to be taken into account in applying the principles of § 6 to determine
          the law applicable to an issue include:
                    (a) the place of contracting,
                    (b) the place of negotiation of the contract,
                    (c) the place of performance,
                    (d) the location of the subject matter of the contract, and
                    (e) the domicil, residence, nationality, place of incorporation and place
          of business of the parties.
                    These contacts are to be evaluated according to their relative importance
          with respect to the particular issue.
                    (3) If the place of negotiating the contract and the place of performance
          are in the same state, the local law of this state will usually be applied, except as
          otherwise provided in §§ 189-199 and 203.

1 Restatement, Section 188, at 575.

4. Section 193, “Contracts of Fire, Surety, or Casualty Insurance,” provides:

                    The validity of a contract of fire, surety or casualty insurance and the
          rights created thereby are determined by the local law of the state which the parties
          understood was to be the principal location of the insured risk during the term of
          the policy, unless with respect to the particular issue, some other state has a more
          significant relationship under the principles stated in § 6 to the transaction and the
          parties, in which event the local law of the other state will be applied.

1 Restatement, Section 193, at 610.

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                             SUPREME COURT OF OHIO

occurred and is therefore the state that has the most significant relationship to the
occurrence. Travelers argued that the bad-faith claim should be viewed as a
contract claim and that the choice-of-law analysis should apply the criteria in
Section 188 or Section 193—specifically, the location of the subject matter of the
contract and the place of contracting, which are Michigan and Indiana, respectively.
       {¶ 17} The court of appeals agreed with Scott Fetzer that the bad-faith claim
is a tort claim, and it therefore applied the choice-of-law rules set forth in Section
145 of the Restatement. In applying Section 145’s factors, the court concluded that
Ohio is the state with the most significant relationship to the parties and to
Travelers’ alleged failure to make a timely coverage determination. It upheld the
trial court’s application of Ohio law to Scott Fetzer’s bad-faith tort claim.
       {¶ 18} Travelers appealed to this court, asserting a single proposition of
law: “Restatement (Second) § 193 governs the choice-of-law analysis for bad faith
claims because they arise out of insurance contracts.” We accepted jurisdiction.
167 Ohio St.3d 1470, 2022-Ohio-2633, 191 N.E.3d 450.
                                    II. Analysis
       {¶ 19} Travelers maintains that Section 193 of the Restatement provides the
choice-of-law rules for Scott Fetzer’s bad-faith claim. Section 193 applies to
disputes concerning the “validity” of an insurance contract and “the rights created
thereby.” 1 Restatement, Section 193, at 610. According to Travelers, a bad-faith
claim is one of “the rights created thereby.” Travelers also contends that this court
essentially recognized as much in Hoskins v. Aetna Life Ins. Co., 6 Ohio St.3d 272,
452 N.E.2d 1315 (1983). In that case, we stated that an insurer’s duty to act in good
faith is “[b]ased upon the relationship between an insurer and its insured” and that
a breach of the duty will “give rise to a cause of action in tort against the insurer”
for bad faith. Id. at paragraph one of the syllabus.

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                                 January Term, 2023

       {¶ 20} Travelers also emphasizes that a bad-faith claim is effectively
inseparable from an insurance contract because the contract creates the claim. As
the Tenth District has stated:

       “[t]he insurance contract and the relationship it creates contain more
       than the company’s bare promise to pay certain claims when forced
       to do so; implicit in the contract and the relationship is the insurer’s
       obligation to play fairly with its insured” when handling the
       insured’s claims.

Gillette v. Estate of Gillette, 163 Ohio App.3d 426, 432, 837 N.E.2d 1283 (10th
Dist. 2005), quoting Rawlings v. Apodaca, 151 Ariz. 149, 154, 726 P.2d 565 (1986).
Finally, Travelers argues that it makes sense to apply Section 193 of the
Restatement to bad-faith claims because—unlike the more general provisions of
Section 145 and 188—it was drafted to reflect principles specifically relevant to the
insurance context.
       {¶ 21} Scott Fetzer contends that a bad-faith claim does not concern the
“validity” of the contract and that the duty to act in good faith is not one of the
“rights created thereby.” As a result, Scott Fetzer argues, such a claim does not fall
within the text of Section 193 of the Restatement. Scott Fetzer also contends that
Hoskins actually supports its position.       Scott Fetzer argues that contrary to
Travelers’ assertion, that decision specifically recognized that a claim alleging bad
faith is a tort claim, which arises by operation of law. And because a claim alleging
bad faith is an independent tort, Scott Fetzer says, courts in Ohio routinely
distinguish between rules that apply to bad-faith claims and those that apply to
breach-of-contract claims, with the former drawn from rules governing tort claims
and the latter drawn from principles of contract.

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                               SUPREME COURT OF OHIO

        {¶ 22} We agree with Scott Fetzer. The plain text of Section 145(1) of the
Restatement states that the section provides the choice-of-law rules for “an issue in
tort.” 1 Restatement, Section 145(1), at 414. That naturally includes bad-faith
claims, which we have held sound in tort: “Based upon the relationship between an
insurer and its insured, an insurer has the duty to act in good faith in the handling
and payment of the claims of its insured. A breach of this duty will give rise to a
cause of action in tort against the insurer.” Hoskins, 6 Ohio St.3d 272, 452 N.E.2d
1315, at paragraph one of the syllabus; see also Dombroski v. WellPoint, Inc., 119
Ohio St.3d 506, 2008-Ohio-4827, 895 N.E.2d 538, ¶ 8 (“Insurer bad faith is an
actionable tort in this state”).
        {¶ 23} Section 193 of the Restatement, by contrast, does not contain
language that would arguably cover bad-faith claims; as noted above, it states that
it provides choice-of-law rules for disputes over the “validity” of an insurance
contract and “the rights created thereby.” 1 Restatement, Section 193, at 610. We
disagree with Travelers’ argument that a bad-faith claim is one of the “rights created
thereby.” That a bad-faith claim can be litigated only between the parties to an
insurance contract does not mean that the contract creates it. Importantly, a bad-
faith claim is not rooted in any particular text of the contract. Instead, as we
explained in Hoskins, it arises by operation of law:

                The liability of the insurer [on a bad-faith claim] does not
        arise from its mere omission to perform a contract obligation, for it
        is well established in Ohio that it is no tort to breach a contract,
        regardless of motive. * * * Rather, the liability arises from the
        breach of the positive legal duty imposed by law due to the
        relationships of the parties. * * * This legal duty is the duty imposed
        upon the insurer to act in good faith and its bad faith refusal to settle

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       a claim is a breach of that duty and imposes liability sounding in
       tort.

(Emphasis added.) Hoskins at 276. Consequently, the existence of an insurance
contract is what causes the common-law rule to apply to particular entities. The
plain language of Section 193 therefore indicates that it does not apply to a bad-
faith claim.
       {¶ 24} Applying the “most significant relationship” test of Section 145 of
the Restatement when resolving choice-of-law tort actions is consistent with
decisions of courts elsewhere. See, e.g., Bates v. Ariz. Superior Court in & for
Maricopa Cty., 156 Ariz. 46, 49, 749 P.2d 1367 (1988); Williams v. Liberty Mut.
Ins. Co., 741 F.3d 617, 622, 625 (5th Cir.2014); Am. Guar. & Liab. Ins. Co. v. U.S.
Fid. & Guar. Co., 668 F.3d 991, 996-1001 (8th Cir.2012); Lange v. Penn Mut. Life
Ins. Co., 843 F.2d 1175, 1179-1181 (9th Cir.1988).
       {¶ 25} Travelers identifies decisions that it claims support its position, but
those cases are distinguishable. See, e.g., Malbco Holdings, L.L.C. v. AMCO Ins.
Co., D.Or No. CV-08-585-ST, 2008 WL 5205202, *5 (Dec. 11, 2008) (applying
Section 193 of the Restatement to a bad-faith claim because the state at issue
considered such a claim to be a “contractual claim, not a tort claim”); Celebre v.
Windsor-Mount Joy Mut. Ins. Co., E.D.Pa. No. CIV.A. 93-5212, 1994 WL 13840,
*1 (Jan. 14, 1994) (stating that Pennsylvania’s choice-of-law rules are the same
“regardless of whether the action is characterized in contract or in tort”); Kilmer v.
Connecticut Indemn. Co., 189 F.Supp.2d 237, 246 (M.D.Pa.2002) (applying
Pennsylvania’s bad-faith law to a dispute over coverage of a New York loss covered
by a Connecticut insurance company because the policyholders are Pennsylvania
residents).
       {¶ 26} Travelers also contends that a bad-faith claim should be viewed as
arising out of a contract because, unlike a typical tort claim, a bad-faith claim can

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be brought only by one contracting party against another. According to Travelers,
that fact matters because the parties to a contract have certain justified expectations
about how disputes involving the contract will be resolved, and choice-of-law rules
typically seek to protect those justified expectations. See Ohayon, 91 Ohio St.3d at
476-477, 747 N.E.2d 206 (explaining that “the parties to a contract are largely free
to negotiate the law to be applied to disputes arising thereunder” and that “[i]n the
absence of such a choice, the Restatement’s contractual choice-of-law rules seek to
protect the justified expectations of the contracting parties”). Travelers asserts that
Section 193 of the Restatement protects the justified expectations of the parties to
an insurance contract by focusing primarily on the “principal location of the insured
risk,” see 1 Restatement, Section 193, Comment c, at 612.             And, Travelers
contends, the “principal location of the insured risk” is just as important in the
context of a bad-faith claim as it is in the context of a breach-of-contract claim.
According to Travelers, Section 193 therefore provides a natural fit for a bad-faith
claim.
         {¶ 27} We disagree. Travelers’ argument does not address the different
nature of a tort claim—even one, like a bad-faith claim, that is litigated where there
is a contractual relationship in the background.
         {¶ 28} The protection of justified expectations “is an important value” in
choice of law. 1 Restatement, Section 6, Comment g, at 15. “Generally speaking,
it would be unfair and improper to hold a person liable under the local law of one
state when he had justifiably molded his conduct to conform to the requirements of
another state.” Id. But the Restatement also recognizes that the protection of
justified expectations is less important in situations involving negligence and torts.
Id. As we have explained:

                Unlike a contracting party, * * * a negligent tortfeasor acts
         without a conscious regard for the legal consequences of his or her

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                                January Term, 2023

       conduct—let alone the particular law to be applied to that conduct—
       and the parties contesting liability and/or the appropriate measure of
       damages for the conduct thus “have no justified expectations to
       protect.” Restatement at 15, Section 6, Comment g. Accordingly,
       the Restatement and courts emphasize different factors when
       resolving choice-of-law issues in these contextually distinct legal
       fields.

Ohayon, 91 Ohio St.3d at 477, 747 N.E.2d 206; see also 1 Restatement,
Section 145, Comment b, at 415-416 (tortfeasors “have few, if any, justified
expectations in the area of choice of law to protect, and as to them the protection of
justified expectations can play little or no part in the decision of a choice of law
question”). For an issue of tort, Section 145 therefore focuses the choice-of-law
analysis on factors other than the “principal location of the insured risk,” 1
Restatement, Section 193, Comment c, at 612, such as the location of the injury and
the location of the tortious conduct, which may be different from the location of the
insured risk.
       {¶ 29} So when one party to an insurance contract brings a bad-faith claim
against another, Section 145 of the Restatement is the natural fit for the dispute
because it focuses on factors other than the “principal location of the insured risk,”
1 Restatement, Section 193, Comment c, at 612. Here, while the parties might have
justified expectations about alleged breaches of the insurance contracts, Scott
Fetzer’s bad-faith claim is that Travelers acted without a conscious regard for the
legal consequences of its conduct. Given this allegation, it is difficult to find any
justified expectations that Travelers might have that are undermined by a complaint
alleging bad faith sounding in tort. This is especially so given that Travelers has
refused to participate in discovery. As a result, instead of focusing on factors that
seek to protect justified expectations, like the “principal location of the insured

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risk,” we conclude that the factors identified in Section 145 are the appropriate ones
to consider when determining the law applicable to bad-faith claims.
                                  III. Conclusion
       {¶ 30} For these reasons, we conclude that the court of appeals correctly
held that the choice-of-law analysis applicable to a bad-faith claim is provided by
Section 145 of the Restatement. We therefore affirm the judgment of the Eighth
District Court of Appeals.
                                                                 Judgment affirmed.
       DONNELLY, STEWART, and DETERS, JJ., concur.
       FISCHER, J., concurs in judgment only.
       KENNEDY, C.J., dissents, with an opinion joined by DEWINE, J.
                               _________________
       KENNEDY, C.J., dissenting.
       {¶ 31} Because a bad-faith claim against an insurance company would not
exist except for the contractual relationship between the insurer and the insured, the
choice-of-law rules for insurance contracts provided by Section 193 of 1
Restatement of the Law 2d, Conflict of Laws (1971), should guide the
determination of which state’s laws govern the adjudication of an insurer bad-faith
claim. The Eighth District Court of Appeals, however, chose not to follow Section
193 when it decided that Ohio law controls discovery disputes related to the insurer
bad-faith claim that appellee, Scott Fetzer Company, asserted against appellant,
Travelers Casualty and Surety Company. I would reverse the judgment of the court
of appeals and remand this matter to that court for further proceedings consistent
with this opinion. The majority does not, and I therefore dissent.
       {¶ 32} Scott Fetzer alleges that it is a Delaware corporation headquartered
in Ohio that is potentially liable for environmental remediation of a site in
Michigan. It contends that it is covered by one or more insurance policies issued
by Travelers’ predecessor-in-interest to Scott Fetzer’s predecessor-in-interest, an

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Indiana company. Travelers is a Connecticut corporation, and it disputes that the
insurance policies exist. Scott Fetzer filed this action seeking a declaration that
Travelers is obligated to provide insurance coverage and asserting claims for breach
of contract and for the bad-faith failure to indemnify and defend it.
       {¶ 33} The trial court correctly bifurcated the coverage question from Scott
Fetzer’s bad-faith claim. However, this matter has come before this court because
the trial court failed to stay discovery on the bad-faith claim. This prematurely
obligated Travelers to respond to discovery requests about claims that would not
be actionable without a determination that Travelers in fact had a duty to indemnify
Scott Fetzer. Rather than permit litigation on an issue that may never ripen, the
trial court should have stayed discovery on the bad-faith claim. Because it did not,
this court is asked to issue what is essentially an advisory opinion about what
choice-of-law rules govern a discovery dispute that should not yet have arisen in
the first place, notwithstanding “our long-standing practice [that] disfavors issuing
advisory opinions,” Capital Care Network of Toledo v. Ohio Dept. of Health, 153
Ohio St.3d 362, 2018-Ohio-440, 106 N.E.3d 1209, ¶ 31.
       {¶ 34} The question presented by the parties concerns what choice-of-law
rules apply to Scott Fetzer’s efforts to compel production of documents from
Travelers that may be relevant to the insurer bad-faith claim. Scott Fetzer maintains
that the choice-of-law rules for tort actions found in Section 145 of the Restatement
should apply, while Travelers contends that the rules governing insurance contracts
set out in Section 193 control.
       {¶ 35} This court initially followed the common-law rule in tort actions that
“the substantive law of the place where the injury occurred was controlling under
the rule of lex loci delicti.” Morgan v. Biro Mfg. Co., Inc., 15 Ohio St.3d 339, 340,
474 N.E.2d 286 (1984). And at common law, the court had held that “where a
conflict of law issue arises in a case involving a contract, the law of the state where

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the contract is to be performed governs.” Schulke Radio Prods., Ltd. v. Midwestern
Broadcasting Co., 6 Ohio St.3d 436, 438, 453 N.E.2d 683 (1983).
       {¶ 36} This court departed from these rules in 1971 to also consider the
relevant interests of the states concerned. Morgan at 340-341. In determining how
these interests should be weighed in tort cases, the court adopted Sections 6, 145,
and 146 of the Restatement. Id. at 342. And in Ohayon v. Safeco Ins. Co. of Illinois,
the court adopted Sections 187 and 188 for contract cases. 91 Ohio St.3d 474, 747
N.E.2d 206 (2001), paragraph two of the syllabus. Section 188 in turn incorporates
Section 193. Subsequently, in Am. Interstate Ins. Co. v. G & H Serv. Ctr., Inc., this
court stated that it had “adopted the Restatement in its entirety” in Morgan. 112
Ohio St.3d 521, 2007-Ohio-608, 861 N.E.2d 524, ¶ 8.
       {¶ 37} I understand that this court has said that an insurer bad-faith claim
sounds in tort. Dombroski v. WellPoint, Inc., 119 Ohio St.3d 506, 2008-Ohio-4827,
895 N.E.2d 538, ¶ 8, citing Hoskins v. Aetna Life Ins. Co., 6 Ohio St.3d 272, 452
N.E.2d 1315 (1983), paragraph one of the syllabus. “[L]iability arises from the
breach of the positive legal duty imposed by law due to the relationships of the
parties.” Hoskins at 276. “This legal duty is the duty imposed upon the insurer to
act in good faith and its bad faith refusal to settle a claim is a breach of that duty
and imposes liability sounding in tort.” Id. Section 145(1) of the Restatement states
that “[t]he rights and liabilities of the parties with respect to an issue in tort are
determined by the local law of the state which, with respect to that issue, has the
most significant relationship to the occurrence and the parties under the principles
stated in § 6.” 1 Restatement, Section 145(1), at 414.
       {¶ 38} Nonetheless, an insurer bad-faith claim depends on the existence of
a contractual relationship between an insurer and insured. The determination that
an insurer acted in bad faith cannot be made without first determining the rights
under the insurance contract and whether the insurer violated a contractual duty

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                                January Term, 2023

created by it. And Section 193 of the Restatement applies when the rights created
by an insurance contract are at issue:

               The validity of a contract of fire, surety or casualty insurance
       and the rights created thereby are determined by the local law of the
       state which the parties understood was to be the principal location
       of the insured risk during the term of the policy, unless with respect
       to the particular issue, some other state has a more significant
       relationship under the principles stated in § 6 to the transaction and
       the parties, in which event the local law of the other state will be
       applied.

Id., Section 193, at 610.
       {¶ 39} An insurer bad-faith claim may be actionable as a tort, but “ ‘[t]he
duty * * * [of an insurer to act in good faith] is immanent in the contract whether
the company is attending to the claims of third persons against the insured or the
claims of the insured itself.’ ” (Brackets sic.) Hoskins at 276, quoting Gruenberg
v. Aetna Ins. Co., 9 Cal.3d 566, 575, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973).
Tellingly, Scott Fetzer pleaded its bad-faith claim as a violation of “[t]he duty of
good faith and fair dealing [that] is implicit in every insurance contract.”
(Emphasis added.) As Scott Fetzer recognizes, the implied duty of good faith and
fair dealing is a contractual duty. See Lucarell v. Nationwide Mut. Ins. Co., 152
Ohio St.3d 453, 2018-Ohio-15, 97 N.E.3d 458, ¶ 42 (“every contract imposes an
implied duty of good faith and fair dealing in its performance and enforcement”).
       {¶ 40} It appears that the violation of that duty is tortious because of the
special relationship between the insurer and the insured, the great disparities of
power between them, and the vulnerability of the insured at the time a claim is filed
and a settlement is sought by the insurer. See Hoskins, 6 Ohio St.3d at 275, 452

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                             SUPREME COURT OF OHIO

N.E.2d 1315. But that does not change the fact that the duties in question here are
based on a contract.
       {¶ 41} Because the implied duty of good faith is contractual in nature and
an insurer bad-faith claim is inextricably tied to the rights and obligations created
by the insurance contract, Section 193 of the Restatement should govern the
determination of what state’s law applies to an insurer bad-faith claim. I therefore
would reverse the judgment of the court of appeals and remand this matter to that
court to decide in the first instance which state’s law applies to this dispute under
Section 193.
       {¶ 42} In seeking affirmance of the court of appeals’ decision in this case,
Scott Fetzer maintains that another provision of the Restatement—Section
139(2)—provides the choice-of-law rules for the exercise of an evidentiary
privilege and that Section 139(2) would make the law of the forum state applicable.
However, that question was not resolved by the court of appeals in the first instance.
As a court of last resort on state-law issues, this court “is ‘a court of final review
and not first view,’ and it does not ‘[o]rdinarily * * * decide in the first instance
issues not decided below.’ ” Austin v. Reagan Natl. Advertising of Austin, L.L.C.,
596 U.S. 61, 76-77, 142 S.Ct. 1464, 212 L.Ed.2d 418 (2022), quoting Zivotofsky v.
Clinton, 566 U.S. 189, 201, 132 S.Ct. 1421, 182 L.Ed.2d 423 (2012). “ ‘In
particular, when we reverse on a threshold question, we typically remand for
resolution of any claims the lower courts’ error prevented them from addressing.’ ”
Id., quoting Zivotofsky at 201.
       {¶ 43} Moreover, Scott Fetzer’s reliance on Section 139(2) of the
Restatement is misplaced. Section 139(2) provides, “Evidence that is privileged
under the local law of the state which has the most significant relationship with the
communication but which is not privileged under the local law of the forum will be
admitted unless there is some special reason why the forum policy favoring
admission should not be given effect.” 1 Restatement, Section 139(2), at 385. As

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                                January Term, 2023

Comment d to Section 139(2) explains, “[a]mong the factors that the forum will
consider in determining whether or not to admit the evidence are (1) the number
and nature of the contacts that the state of the forum has with the parties and with
the transaction involved, (2) the relative materiality of the evidence that is sought
to be excluded, (3) the kind of privilege involved and (4) fairness to the parties.”
Id. at 387.
        {¶ 44} Most important here is that this controversy bears little connection
to Ohio. It involves liability under one or more insurance policies for Travelers—
a Connecticut corporation—to Scott Fetzer’s predecessor-in-interest—an Indiana
company—that covered a site in yet another state, Michigan. The only connection
this controversy has to Ohio is that Scott Fetzer says that its principal place of
business is in this state and it apparently sought coverage for losses it incurred at
that location. Also important is the fairness to the parties that relied on the
privilege, and as Comment d to Section 139(2) of the Restatement points out, “[t]he
forum will take such steps as may be necessary to prevent a party to the action from
taking an inequitable advantage of the privilege.” Id. at 388. According to
Travelers, the discovery sought by Scott Fetzer is privileged under Michigan and
Indiana law, and it has contended “that it should not be required to produce
attorney-client privileged documents that Scott Fetzer could use in trying to prove
its claim for coverage in [the] coverage dispute.” The existence of a privilege
should not turn on what forum has been selected by a litigant.
        {¶ 45} For these reasons, I would reverse the judgment of the Eighth
District Court of Appeals and remand this manner to that court for it to conduct the
choice-of-law analysis set forth in Section 193 of the Restatement. Because the
majority does otherwise, I dissent.
        DEWINE, J., concurs in the foregoing opinion.
                               _________________

                                         19
                           SUPREME COURT OF OHIO

       Shumaker, Loop & Kendrick, Amanda M. Leffler, Lucas M. Blower, Phillip
W. Lambert, and Sarah M. Sears, for appellee.
       Plunkett Cooney, Christina L. Corl, Patrick E. Winters, and Jeffrey C.
Gerish, for appellant.
                             _________________

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