Insurance Policy Interpretation Governed by the Law of the State Where it is to be Performed

Ninth Circuit Requires Law of Place of Performance be Applied

Insurance policies are nothing more than contracts. If the policy does not state a choice of law, the law of California – as applied by the Ninth Circuit – requires that the policy be interpreted by application of the law of the jurisdiction where the policy is to be performed.

In Arrow Electronics, Inc., a New York Corporation V. Liberty Mutual Insurance Company, a Massachusetts Corporation, Travelers Casualty and Surety Company, Fka Aetna Casualty and Surety Company, AKA St. Paul Travelers, No. 18-55810, United States Court of Appeals for the Ninth Circuit (August 13, 2019), after an environmental contamination at Arrow Electronics, Inc.’s (“Arrow”) research facility located in Huntsville, Alabama (the “Huntsville Facility”) an insurance coverage dispute arose. The district court, found California law applied, granted summary judgment in favor of the insurers, Travelers Casualty and Surety Company and Liberty Mutual Insurance Company. Arrow appealed, arguing that the district court should have applied Alabama law.


To determine which state’s substantive law applies, the Ninth Circuit looked to California choice-of-law rules. Under California law, a contract is to be interpreted according to the law and usage of the place where it is to be performed; or, if it does not indicate a place of performance, according to the law and usage of the place where it is made. A contract indicates a place of performance within the meaning of California statutes if the contract expressly specifies a place of performance or if the intended place of performance can be gleaned from the nature of the contract and its surrounding circumstances.

The intended place of performance for a commercial liability insurance policy covering operations at one or more fixed locations is generally the jurisdiction where the operations are located because this is where the insurer and insured expect a third-party to file a complaint against the insured.

In cases where jurisdiction rests on diversity of citizenship, federal courts must follow the decisions of intermediate state courts in the absence of convincing evidence that the highest court of the state would decide differently.

Each of Arrow’s primary insurance policies explicitly mentioned the Huntsville Facility or Alabama, and each of the excess policies were clearly drafted with reference to the primary policies. Thus, the Ninth Circuit concluded that there was little doubt that the understanding of the parties at the time they entered into the insurance contracts was that Alabama law would apply to claims arising from the Huntsville Facility.

Accordingly, the Ninth Circuit, Alabama was the intended place of performance within the meaning of California Civil Code § 1646 for purposes of this case.


Simple, clear and understandable decision requiring the application of the law of the state where the contract of insurance was written to be performed. That the location was Huntsville, Alabama was obvious from the contract and the Ninth Circuit had no choice but to reverse. The result may be the same but the correct law must be applied.

© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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