Part 6 of 8
One of the quietest mistakes in multi-party liability claims is also one of the most expensive. Claims teams often assume they know which law applies. The loss location feels obvious. The contract looks familiar. The coverage issues seem routine.
Those assumptions were always risky.
The AVOID Act did not change choice-of-law rules. What it did was remove the delay that once allowed those assumptions to be corrected quietly, after positions had already been taken.
A Common Real-World Scenario
A property owner hires a snow removal contractor. The contract includes an indemnity clause requiring the contractor to defend and indemnify the owner for claims “arising out of the work.”
A pedestrian slips and falls on an icy sidewalk. The injured party sues the property owner, and the owner tenders the claim to the contractor and the contractor’s carrier.
At first glance, the scenario looks routine.
The Assumption That Feels Safe
The loss occurs in State A, a jurisdiction where “arising out of the work” language is broadly enforced and defense obligations are often triggered by allegations alone. Based on experience, the claims team assumes this is a standard snow contract and that a defense is owed.
Defense is extended early, and the file moves forward.
What Was Missed
What the claims team did not focus on initially was a governing-law provision in the contract.
The contract is governed by State B.
State B treats indemnity very differently. Defense obligations are not implied. Indemnity for the indemnitee’s own negligence is narrowly limited. “Arising out of” language is strictly construed.
Under State B law, defense may not be owed at all, and indemnity may be limited or barred entirely.
The facts did not change.
The contract did not change.
Only the law did.
Why This Becomes a Serious Problem
Once litigation begins, positions harden quickly. Defense counsel has appeared. Strategy has been built around an assumed defense obligation. Other parties rely on that posture when deciding how to plead and whom to implead.
When the choice-of-law issue finally surfaces, the problem is no longer theoretical. The defense was extended under the wrong legal framework. At that point, correcting course is not just a coverage issue. It becomes a reliance issue, a procedural issue, and often a matter of judicial discretion.
Where the AVOID Act Fits In
The AVOID Act applies only after a lawsuit is filed. It governs third-party practice and impleader deadlines. It does not change how choice of law is determined.
What it does do is remove the time cushion that once allowed claims teams to postpone this analysis. Once litigation starts, decisions tied to defense and third-party practice must be made early. That is when incorrect assumptions about governing law become embedded in the file.
The Real Risk Is Building the File on the Wrong Law
The exposure in this scenario is not driven by speed. It is driven by building the file on the wrong legal foundation.
Choice of law determines whether defense is owed, whether indemnity is enforceable, and how contract language is interpreted. When that analysis is wrong at the outset, every downstream decision is affected.
Ignoring choice of law creates exposure regardless of how carefully the rest of the file is handled.
The Disciplined Approach
Disciplined claims handling requires identifying governing law early. Contracts must be read under the law they specify. Policies must be evaluated under the law that applies to them. Defense decisions must follow that analysis, not habit or convenience.
The AVOID Act does not reward speed. It rewards accuracy.
The Takeaway
Choice of law still controls outcomes. The AVOID Act did not make this issue more complicated. It made ignoring it more expensive.
Claims teams that confront governing law early retain control. Teams that assume it can be sorted out later discover that later never arrives.
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