John L. Watkins

Abstract

Application of the Erie doctrine requires that federal courts exercising diversity jurisdiction apply substantive state law consistent with the state’s highest court as a matter of federalism and to discourage forum shopping. This Article analyzes the reality, however, that federal courts decide important unsettled questions of state law differently than state courts, which undermines these two fundamental underpinnings of the Erie doctrine. Further, this Article demonstrates, through various examples, how these incorrect “Erie guesses” can have profound practical implications in the insurance context due to the standard use of form contracts for drafting insurance policies. As a result, litigants battle fiercely over the judicial forum, as federal courts are perceived, particularly by insurers, to decide procedural and substantive issues of state law differently than state courts. Considering that the abolishment of diversity jurisdiction is highly improbable, this Article argues that federal courts should adopt clear, uniform standards that favor the liberal use of certification of unsettled questions of state law to the state’s highest court. A constitutionally consistent approach to certification would promote the principles of federalism that underlie the Erie doctrine and would render moot the less productive question of why federal courts decide the issues differently.

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