In a federal court diversity action involving an insurance claim, which law governs the substantive issues?

In a federal court diversity action, the substantive law that governs the issues at hand is determined by the law of the state whose substantive law is applied. This principle is rooted in the Erie Doctrine, established by the Supreme Court in the case of Erie Railroad Co. v. Tompkins. The Erie Doctrine mandates that federal courts sitting in diversity must apply the law of the state in which they are located to ensure that there is no disparity between the outcomes of state and federal cases involving the same legal issues.

In cases like this one, where the diversity jurisdiction is invoked, it's essential to adhere to the local state laws as they are viewed as substantive law for the case. This allows the federal court to respect the legal standards and policies of the state, ensuring the parties involved receive a fair trial reflective of the state's laws.

The other options provided do not accurately reflect the governing legal standards in a diversity action. The law of the insurance company’s state of incorporation is irrelevant to the substantive issues of the case at hand. There is no specific federal law that applies uniformly to all insurance claims; it depends primarily on state law, and while common law can influence rulings, it varies by jurisdiction and does not serve as a single, applicable standard across all