Local dealers wont install off sized tire.

[JohnnyO]

Is this some sort of policy to avoid potential lawsuits if something goes wrong or premature wear on parts?

Yes.
Best you can do is try to explain that 265/70-17 is a factory optional size.
I try to stay away from chain shops when I can. Look for a local mom & pop tire shop.

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[Dextrose]

Thank you for all the input. Discount tire WILL install a larger tire size if safe for the rim diameter.