In Centeno v. American Liberty Ins. Co., 2019 WL 568926 (D. Ariz. Feb. 12, 2019) (Order), an insurance bad faith case arising from a workers’ compensation claim, the Arizona District Court granted a motion to dismiss bad faith and aiding and abetting claims against a Third-Party Administrator (“TPA”) and its Adjuster.
- The Arizona District Court confirmed insureds may not assert bad faith claims against a TPA or a TPA’s adjusters because the duty of good faith and fair dealing arises from a contract—the insurance policy—but neither a TPA nor an adjuster has a contractual relationship with an insured.
- A viable aiding and abetting bad faith claim against a TPA or an adjuster must allege bad faith acts committed by a TPA and an adjuster “separate and apart” from the alleged bad faith acts of an insurer.
The Insured reported that she tripped and injured her back while in the course and scope of her employment. The Insurer initially accepted the claim, the Insurer subsequently denied the claim, and the Industrial Commission of Arizona ruled in the Insured’s favor.
The Insured subsequently filed a Complaint against the Insurer, the Insurer’s TPA, and the TPA’s Adjuster. The Insured asserted bad faith claims against the Insurer and the TPA, aiding and abetting bad faith claims against the TPA and the Adjuster, and punitive damages claims against all three defendants.
The TPA and the Adjuster filed a Motion to Dismiss.
In granting the Motion to Dismiss, the Arizona District Court reasoned as follows:
- A bad faith claim “requires a contractual relationship. Without a contract, there is no duty of good faith and fair dealing.” (citing Walter v. F.J. Simmons & Others, 169 Ariz. 229, 237, 818 P.2d 214, 222 (Ariz.App. 1991)).
- In Centeno, no contractual relationship existed between the Insured and either the TPA or the Adjuster, so the bad faith claims against both failed as a matter of law.
- Many judges in the Arizona District Court have held that an agent can be liable for aiding and abetting a principal’s breach of the duty of good faith and fair dealing. (citing Morrow v. Boston Mut. Life Ins. Co., 2007 WL 3287585, at *6 (D. Ariz. Nov. 5, 2007) (rejecting argument that aiding and abetting bad faith claims against an insurance administrator could be dismissed because it was same entity as the insurer); Inman v. Wesco Ins. Co. , 2013 WL 2635603, at *4 (D. Ariz. June 12, 2013) (noting that “an aiding and abetting claim is not barred simply because a person worked for the alleged primary tortfeasor and was acting within the scope of her employment”)).
- A viable aiding and abetting bad faith claim against a TPA or an adjuster, however, requires an allegation of “some action taken by [a TPA and/or an adjuster] separate and apart from the facts giving rise to the [bad faith] claim against” an insurer.
- In Centeno, the Complaint did not allege bad faith acts by either the TPA or the Adjuster “separate and apart from” the alleged bad faith acts of the Insurer, so the Arizona District Court dismissed the aiding and abetting faith claims against the TPA and the Adjuster.
Nate is a partner at Jaburg Wilk in Phoenix, Arizona. His practice focuses on insurance coverage, bad faith litigation, commercial litigation, general liability litigation and professional liability litigation. He represents insurance companies, contractors, policy holders, global corporations, insurance adjusters, business owners, insurance agents and professionals. If you have questions about insurance law contact Nate at 602-248-1032 or firstname.lastname@example.org