California Law Applied to Costco’s Cheese Recall Insurance Coverage Dispute

Finding that California law applies to a dispute between Costco Wholesale Corp. and Nationwide Mutual Insurance Co., a federal court has dismissed Costco’s claims for violations of Washington state law and for bad faith coverage by estoppel arising out of the insurer’s refusal to handle claims of personal injury from cheese that Costco sold. Costco Wholesale Corp. v. Nationwide Mut. Ins. Co., No. 11-1550 (W.D. Wash., Seattle, decided September 20, 2012). The court determined that, under the “most significant relationship” test applied in the context of a conflict of laws, “the most significant contacts between Costco and Nationwide occurred in California.” Because California law does not provide relief as to a number of Costco’s claims, the court dismissed them but gave the company the opportunity to amend the complaint by November 1, 2012. If it does not do so, the matter will be dismissed.