In a decision that substantially reduced a plaintiff’s damages claim, the Dallas Court of Appeals has affirmed a trial court order applying New York law to an Illinois insured’s property damage claim stemming from a 2019 tornado.
Transform HoldCo LLC v. Starr Indemnity & Liability Company (No. 05-23-00339-CV; June 13, 2025) arose from a dispute over insurance coverage for property damage sustained by Transform when a 2019 tornado struck its distribution center in Garland. Starr denied Transform’s claim because the Garland warehouse was not listed on any schedules for the policy and the policy didn’t cover unnamed locations. Transform countered that the policy covered its merchandise as long as it was responsible for the goods. Transform sued Starr seeking declaratory judgment and alleging breach of contract, extracontractual claims, common-law bad faith, and promissory estoppel. Transform alleged Texas law applied, or, in the alternative, Illinois law, where Transform’s principal place of business if located. Starr contended that New York law applied to the claims. The trial court determined that the policy covered the loss and granted Transform’s partial MSJ motion on that issue.
Starr then requested the trial court to determine which state’s law applied to the remaining claims. The trial court opted for New York law, which does not recognize claims for common-law bad faith, private statutory causes of action, or attorney’s fees for breach of contract. It gave Transform permission to file an interlocutory appeal because the choice-of-law involved a controlling question of law upon which there was substantial ground for difference of opinion and immediate appeal would materially advance or terminate the litigation. The court of appeals granted the appeal.
In an opinion by Justice Jackson, the court of appeals affirmed. Texas courts apply the multi-factor, most significant relationship test to choice-of-law questions as set out in the Restatement (Second) of Conflict of Laws § 6. Sections 145 and 188 of the Restatement address factual considerations when applying § 6 to tort and contract claims, respectively. Courts look to the “qualitative nature of the contacts as affected by the policy-affected factors set out in Section 6” to determine the appropriate forum state. Taking up the tort claims first, the court must consider where the injury occurred, the place where the conduct causing the injury occurred, the domicile and place of business of the parties, and the place where the relationship between the parties is centered. As to Transform’s extracontractual causes of action, the pertinent issue was Starr’s handling of Transform’s claim.
Because Transform’s principal place of business is in Illinois, the court reasoned, the financial injury it sustained by Starr’s denial of the claim were most heavily felt there. Consequently, that factor favored Illinois law. On the claims handling side, however, Starr conducted all of that in New York, favoring New York law. Neither party resided in Texas, so this factor pointed to either Illinois or New York. The final factor, where the relationship was “centered,” favored New York because the parties’ relationship was based on the policy, which was underwritten and issued in New York. Nor did the § 6 factors favor Texas law. Although the tornado happened in Texas, Transform’s legal injury occurred in New York. As to Transform’s argument that Texas law should apply because Texas has “a strong interest in protecting the rights of its citizens,” Transform was an Illinois resident, not a Texas one. The court thus concluded that the most significant relationship regarding the extracontractual tort claims was New York, where Starr’s headquarters are located. The trial court did not err.
As to the contractual claims, the issue boiled down to attorney’s fees, which are recoverable in Texas but not in New York. The Restatement’s contract factors are a bit more objective, focusing on the place of contracting, performance, subject matter, and domicile of the parties. Here Starr, Transform, and Aon, Transform’s agent in negotiating the policy, were all located in different states and negotiated from there, so “neither the place of contracting nor the place of negotiation” were significant. The same went for the place of performance, which could equally have been in Illinois, where Starr billed Transform and Transform issued payment, or in New York, where Starr’s obligations under the contract were located. Turning to the location of the subject matter of the policy, the court again determined that no state predominated. The policy covered Transform’s property in other states and some foreign countries, the alleged breach occurred in New York, and Transform, an Illinois entity, wasn’t covered by Art. 21.42, Insurance Code, which requires that Texas law applies to contracts of insurance payable to a citizen or inhabitant of this state. The final factor—the domicile of the parties—pointed to Illinois or New York, but not Texas. Finally, the parties could have anticipated that a dispute over the policy would be brought in New York under New York law, particularly since the policy covered Transform’s property in various locations, not just Texas. The trial court did not err in selecting New York law on the contract claims, either.
