by Nathan Meyer | Aug 14, 2017 | Insurance
Stafford v. Burns, —P.3d—,2017 WL 164310 (Ariz.App. January 17, 2017)
This is a medical malpractice and wrongful death case arising from emergency medical care rendered after a methadone overdose, the Arizona Court of Appeals “decline [d] to impose a requirement that Offers of Judgment be deemed reasonable before sanctions are imposed under Rule 68(g).”
In Arizona, a Rule 68 Offer of Judgment requires mandatory shifting of post-offer expert fees and double taxable costs if an Insurer, or any defendant, subsequently beats an Offer of Judgment at trial. Rule 68 states, “If the offeree rejects an offer and does not later obtain a more favorable judgment…the offeree must pay, as a sanction, reasonable expert witness fees and double the taxable costs…incurred by the offeror after making the offer…” ARCP 68(g).
In Stafford, the Court of Appeals rejected a “good faith” requirement in Offers of Judgment for two primary reasons.
First, “Arizona courts have uniformly held, consistent with the rule’s plain language, that sanctions imposed by Rule 68(g) are both mandatory and punitive.”
Second, adding a “good faith” requirement would undermine rather than serve the purpose of Offers of Judgment—“to promote settlement and avoid protracted unnecessary litigation.” The Court of Appeals reasoned that a “reasonableness requirement would only increase the cost of litigation by inviting the expenditure of time to resolve an offer’s validity [i.e. reasonableness and/or good faith], driving the parties’ settlement positions further apart.” (emphasis in original).
What are the primary takeaways for insurers in Arizona bad faith cases?
Arizona continues to enforce Offers of Judgment that encourage settlement and Stafford makes it more likely that Arizona will enforce a “Conditioned Offer of Judgment,” i.e. an Offer of Judgment conditioned on no entry of judgment, execution of a Settlement Agreement, and filing a Stipulation to Dismiss. See “How Insurers Can Shift the Risks of Attorney Fees, Expert Fees, and Costs in Arizona Bad Faith Cases.”
by Nathan Meyer | Aug 10, 2017 | Insurance
Because Arizona cases touching on this issue are copious, confusing, and complex, we note the following guidelines—though sometimes conflicting—have emerged from Lee and its progeny and will assist an Insurer’s analysis of whether a court will find an implied waiver of the Privilege:
1. The mental state of an Insurer must be an issue to impliedly waive the privilege.[1]
a. An Insurer cannot impliedly waive the Privilege if it defends a bad faith claim solely on objective reasonableness.[2]
b. A court, however, may reject an Insurer’s claim it is defending a bad faith based solely on objective reasonableness.[3]
2. An Insurer must affirmatively inject the relevance of attorney-client communications into the litigation to impliedly waive the Privilege.[4]
a. These acts do affirmatively inject the relevance of attorney-client communications into litigation:
i. An Insurer asserts its actions were subjectively reasonable based, in part, on its agents’ evaluation of the law and part of that evaluation is informed by counsel.[5]
ii. An Insurer’s adjusters testify that they considered and relied upon the legal opinions or legal investigation of in-house counsel to deny a claim.[6]
iii. Counsel directs an Insurer to act in bad faith, i.e. counsel directs an Insurer to: make an Insured jump through needless adversarial hoops, take actions without a reasonable basis, or delay a claim.[7]
iv. An Insurer asserts a defense dependent upon the advice or consultation of counsel.[8]
v. An Insurer asserts its settlement offers were subjectively reasonable, in part, because it determined it had a strong probability of prevailing on coverage.[9]
vi. An Insured testifying he did not seek policy benefits because, based on prior counsel’s advice, he did not think benefits were available and consequently did not seek benefits earlier.[10]
b. These acts do not affirmatively inject the relevance of attorney-client communications into litigation:
i. An Insurer and counsel simply conferring and/or trading information for advice.[11]
ii. An Insurer taking actions based on counsel’s advice.[12]
iii. An Insurer forming subjective evaluations of its claims and defenses based on counsel’s advice.[13]
iv. An Insured (or an Insurer) filing a bad faith action.[14]
v. An Insurer’s mere denial of bad faith or affirmative claim of good faith.[15]
vi. An Excess Insurer suing a Primary Insurer for bad faith based upon a breach of the duty to give equal consideration to settlement offers within policy limits.[16]
vii. An Insurer relying on advice of counsel to issue a denial letter.[17]
viii. An Insurer consulting with counsel to evaluate the objective reasonableness of its position.[18]
ix. An Insurer asserting its actions were subjectively reasonable and admitting it consulted with counsel regarding the subjectively reasonable actions.[19]
3. An Insurer does not waive the Privilege would deny the Insured access to information vital to the Insured’s claim; i.e. the Insurer cannot use the Privilege as both a sword and a shield.[20]
a. Neither the relevance nor importance alone of attorney-client communications is sufficient to impliedly waive the Privilege.[21]
b. A court probably will not find an implied waiver of the Privilege if the Insured has other evidence of bad faith available.[22]
4. Even if an Insurer impliedly-waives the Privilege, the waiver is limited to content actually communicated to the Insurer.[23] The implied waiver does not extend to counsel’s file.[24]
[1] See Twin City Ins. Co. v. Burke, 204 Ariz. 251, 63 P.3d 282 (Excess Insurer did not waive the privilege, in part, because the mental state and conduct of the Excess Insurer’s agents and counsel were not at issue); Empire West Title Agency, L.L.C. v. Talamante ex rel. Cty of Maricopa, 234 Ariz. 497, 323 P.3d 1148 (Purchaser did not waive privilege, in part, because the Purchaser’s state of mind was not an issue).
[2] See Nguyen v. Am. Commerce Ins. Co., 2014 WL 1381384 *5 (Ariz.App. Apr. 8, 2014) (Memorandum Decision) (Insurer did not impliedly waive the Privilege, in part, because the Insurer defended solely on objective reasonableness).
[3] See Mendoza v. McDonald’s Corp., 222 Ariz. 139, 153-54, 213 P.3d 288, 302-03 (App. 2009).
[4] See State Farm v. Lee, 199 Ariz. 52, 56, 13 P.3d 1169, 1173 (2000) (En Banc) (stating the first and second criteria of the implied waiver test, i.e. a litigant impliedly waives the Privilege if, “(1) assertion of the privilege was a result of some affirmative act, such as filing suit or raising an affirmative defense, by the asserting party; (2) through this affirmative act, the asserting party put the protected information at issue by making it relevant to the case.”); see also Mt. Hawley Ins. Co. v. Slayton ex rel. Cty. of Coconino, 2013 WL 708535 (Ariz.App. Feb. 26, 2013) (Memorandum Decision) (in case which arose from a General Contractor (“GC”) Insurer suing a Subcontractor (“Sub”) Insurer to recover defense and indemnity costs, Court of Appeals held that the GC Insurer did not impliedly waive the Privilege, in part, because the GC Insurer did not inject attorney-client communications into the lawsuit by attempting to rely on attorney-client communications to prove its defense and settlement of the underlying case was reasonable).
[5] See Lee, 199 Ariz. at 57, 13 P.3d at 1174; Nguyen, 2014 WL 1381384 *5 (Insurer did not impliedly waive the Privilege, in part, because the Insurer never took the position that “its subjective view of the law was reasonable ([much less that its] subjective view necessarily incorporated advice from its counsel.”); Ingram v. Great Am. Ins. Co., 112 F.Supp. 3d 934, 939 (D. Ariz. 2015) (Insurer impliedly waived privilege where it denied workers compensation claim after a subjective evaluation of the law).
[6] Roehrs v. Minnesota Life Ins. Co., 228 F.R.D. 642, 646-647 (D. Ariz. 2005) (Order) (an Insurer impliedly waived the Privilege because the adjusters affirmatively injected attorney-client communications into the litigation by testifying at their depositions that “they each considered andrelied upon, among other things, the legal opinions or legal investigation [of in-house counsel] in denying” the claims) (emphasis added); but see Safety Dynamics Inc. v. Gen. Star Indem. Co., 2014 WL 268653 at *1 (D. Ariz. Jan. 24, 2014) (Order) (Roehrs is not precedent, distinguished Roehrs, and declined to follow Roehrs).
[7] See Mendoza, 222 Ariz. at 153-154, 213 P.3d at 303-04.
[8] Everest Indemnity Ins. Co. v. Rea, 236 Ariz. 503, 342 P.3d 417, 419 (App. 2015).
[9] In Cosgrove v. Nat’l Fire & Marine Ins. Co., 2016 WL 4578139 (D. Ariz. Sept. 2, 2016), a bad faith case arising from an alleged breach of the duty to give settlement offers within policy limits equal consideration, the District of Arizona held that an Insurer impliedly waived the Privilege with coverage counsel because the Insurer asserted its settlement decisions were subjectively reasonable, in part, because: it determined there was an 80 percent chance the claims were not covered, this “determination involved[d] an evaluation of the law”; “it [was] highly likely [the Insurer’s] determination was informed by counsel’s advice”; and it was “more probable than not that [the Insurer] not only consulted with [coverage counsel] but necessarily relied on the information and advice [it] received.” Cosgrove, 2016 WL 4578139 *5.
[10] Barten v. State Farm Mut. Auto. Ins. Co., 2015 WL 11111310 (D. Ariz. June 19, 2015) (Order) (in bad faith case arising from a car accident, District of Arizona held that an Insured would impliedly-waive the Privilege regarding his decision not to seek attendant care benefits if he affirmatively injected the issue by testifying that he did not think attendant care benefits were available and consequently did not seek such benefits earlier based on his previous counsel’s advice).
[11] See Lee, 199 Ariz. at 66, 13 P.3d at 1183 (“We assume client and counsel will confer in every case, trading information for advice. This does not waive the privilege.”); Safety Dynamics, Inc. v. Gen. Star Indem. Co., 2013 WL 11299209 at *3, 4 (D. Ariz. Aug. 8, 2013) (Order) (Insurer did not impliedly waive the Privilege, despite an adjuster’s testimony that he relied on advice of counsel to issue a denial letter, in part, because Lee noted that “client and counsel confer[ing]” does not waive the privilege, so the deposition testimony was “insufficient by itself to waive the privilege”).
[12] See Lee, 199 Ariz. at 66, 13 P.3d at 1183 (“We assume most if not all actions taken will be based on counsel’s advice. This does not waive the privilege.”); Safety Dynamics, 2013 WL 11299209 at *3, 4 (Magistrate ordered that an Insurer did not impliedly waive the Privilege, despite an adjuster’s testimony that he relied on advice of counsel to issue a denial letter, in part, because Lee noted that “action taken…based on counsel’s advice” does not waive the privilege, so the deposition testimony was “insufficient by itself to waive the privilege”).
[13] See Lee, 199 Ariz. at 66, 13 P.3d at 1183 (“Based on counsel’s advice, the client will always have a subjective evaluations of its claims and defenses. This does not waive the privilege.”); Nguyen, 2014 WL 1381384 *5 (Insurer did not impliedly waive the Privilege, in part, because the Insurer merely consulted counsel to evaluate the objective reasonableness of its position).
[14] See Lee, 199 Ariz. at 62, 13 P.3d at 1179; Burke 204 Ariz. at 255, 63 P.3d at 286; Empire West, 234 Ariz. 499, 323 P.3d 1150; Slayton, 2013 WL 708535 (GC Insurer did not impliedly waive the Privilege, in part, by simply filing the lawsuit).
[15] See Lee, 199 Ariz. at 62, 13 P.3d at 1179.
[16] See Burke, 204 Ariz. 251, 63 P.3d 282
[17] Safety Dynamics, 2013 WL 11299209 at *3, 4 (Insurer did not impliedly waive the Privilege, despite an adjuster’s testimony that he relied on advice of counsel to issue a denial letter, in part, because Lee noted that “client and counsel confer[ing]” does not waive the privilege, so the deposition testimony was “insufficient by itself to waive the privilege”).
[18] See Nguyen, 2014 WL 1381384 *5 (Insurer did not impliedly waive the Privilege, in part, because the Insurer merely consulted counsel to evaluate the objective reasonableness of its position).
[19] See Everest, 236 Ariz. 503, 504, 342 P.3d 417, 418 (Insurer did not impliedly waive the Privilege despite asserting its actions were subjectively reasonable and admitting it consulted with counsel regarding the subject settlement agreement) (“Lee expressly held that the assertion of a subjective good faith defense coupled with consultation with counsel did not, without more, waive the attorney-client privilege.”).
[20] See Lee, 199 Ariz. at 56, 13 P.3d at 1173 (stating the third criteria of Arizona’s implied waiver test, i.e. a litigant impliedly waives the Privilege if, “(3) application of the privilege would have denied the opposing party access to information vital to his defense.”); Id. at 65, 13 P.3d at 1182 (Under the sword and shield analysis, the Insurer’s “claims managers cannot testify that they investigated the state of the law and concluded and believed they were acting within the law but deny [the Insureds] the ability to explore the basis for this belief and to determine whether it might have known its actions did not conform to the law.”); Burke, 204 Ariz. at 255, 63 P.3d at 286 (questions that determine whether an Insurer implied waived the Privilege include: (a) “Would the application of the privilege deny [Insurer] access to information vital to its defense?”; and (b) “Would recognizing the privilege make it impossible for the factfinder to fairly determine the very issue raised by [Insurer]?”); Mendoza, 222 Ariz. at 155, 213 P.3d at 304 (The Insurer “sought to shield from [the Insured] the very evidence she would need to challenge [the Insurer’s] representations that its adjusters subjectively believed their actions were reasonable and taken in good faith.”); Everest, 236 Ariz. 503, 342 P.3d at 418 (the Privilege “may be deemed waived [only] when application of the privilege would deny an opposing party access to necessary information to counter a claim or defense asserted by the other party.”); Ingram, 112 F. Supp. at 939 (the Insurer’s adjusters could not “testify that they investigated the state of the law and concluded and believed they were acting within the law but deny [the Insureds] the ability to explore the basis for this belief and to determine whether it might have known its actions did not conform to the law.”).
[21] See Burke, 204 Ariz. at 256, 63 P.3d at 287 (as Lee noted, “there is more than relevance and materiality needed to find a waiver, for communications with counsel are almost always very relevant and material.”); Lee, 199 Ariz. at 58, 13 P.3d at 1175; Empire West, 234 Ariz. at 499, 323 P.3d at 1150 (“neither the relevance nor pragmatic importance alone of the information sought will support a finding that the attorney-client privilege has been waived.” (internal cites omitted); Everest, 236 Ariz. 503, 342 P.3d at 419 (it “is not sufficient that the information sought is relevant or important to a claim or defense…”).
[22] See Lee, 199 Ariz. at 56, 13 P.3d at 1173 (again, stating the third criteria of the implied waiver test, i.e. a litigant impliedly waives the Privilege if, “(3) application of the privilege would have denied the opposing party access to information vital to his defense.”); Empire West, 234 Ariz. at 500, 323 P.3d at 1151 (an implied waiver should not be found unless the party seeking the attorney-client communications demonstrates that denial of the waiver would “undermine its defense” and there are not “other means of obtaining information about what [a litigant] knew or should have known…”) (even if the Purchaser’s state of mind was at issue, the Title Agent did not “demonstrate that denying it access to the requested communications would undermine its defense” because it had “other means of obtaining information about what [the Purchaser] knew or should have known regarding the easement’s purported abandonment.”); Slayton, 2013 WL 708535 (GC Insurer did not impliedly waive the Privilege, in part, because the Sub Insurer had reasonable alternatives to seeking privileged communications to prove its case, such as retaining an expert to testify the GC Insurer did not act reasonably in defending and settling the underlying action).
[23] See Cosgrove, 2016 WL 4578139 (limited implied waiver to “communication with [coverage counsel] to the extent those communication addressed the coverage issues in the underlying case on which [the Insurer] based its settlement decisions.”); Ingram, 112 F. Supp. 3d at 940 (limited the implied waiver to “only those communications pertaining to the law and information that was part of what [the Insurer] knew in reaching its evaluation of the law” and the Insurers were “not entitled to discovery of all of counsel’s communications.”); City of Glendale v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 2013 WL 1797308 at *6, 7 (D. Ariz. Apr. 29, 2013) (Order) (a case which arose from an Insurer’s refusal to defend and indemnify and considered an Insurer’s assertion of an advice-of-counsel defense and consequent explicit waiver of the Privilege rather than an implied waiver of the Privilege, held the Insurer’s waiver extended only to “counsel’s advice that was contained in the adjuster’s notes in the claims file” and did not extend to “documents in [counsel’s] files that [were] not communicated to the Insurer.”); Roehrs, 228 F.R.D. at 647 (Magistrate concluded an Insurer impliedly waived the Privilege, but limited the waiver to communication with certain adjusters on certain issues).
[24] Id.
About the Author: Nathan D. Meyer is a Partner at the Phoenix law firm of Jaburg Wilk. One of his specialties is insurance coverage and bad faith. Nate advises and represents insurance clients in coverage, bad faith, contribution and liability matters.
by Nathan Meyer | Aug 8, 2017 | Insurance
In Orosco v. Maricopa County Special Health Care District, (2017 WL 469690) (Ariz. App. February 2, 2017), a medical malpractice case in which the jury’s $4.25 million verdict exceeded two offers of judgment made by plaintiffs, the Arizona Court of Appeals held “a subsequent offer of judgment does not extinguish the effect of an offeree’s failure to accept a prior offer when the judgment is less favorable to the offeree than both offers” and consequently ruled that a plaintiff was entitled to pre-judgment interest from the date of the first offer of judgment.
Under Arizona’s offer of judgment rule, Rule 68, if an offeree rejects an offer of judgment and “does not obtain a more favorable judgment,” then the offeree must pay sanctions of:
(1) Reasonable post-offer expert witness fees,
(2) Double the post-offer taxable costs, and
(3) “Prejudgment interest on unliquidated claims accruing from the date of the offer.” See ARCP 68(g).
In Orosco, the Arizona Court of Appeals held a subsequent offer of judgment does not extinguish the effects of an offeree’s failure to accept an initial offer of judgment for three primary reasons.
(1) The weight of authority from other jurisdictions allows an offeror to collect sanctions from a first offer of judgment.
(2) “A contrary outcome might deter a plaintiff from making an early offer of judgment or from later adjusting an earlier demand.”
(3) Recovery from the first offer of judgment is consistent with Rule 68’s “purpose to encourage the settlement of lawsuits before trial” and to “avoid protracted litigation.” “Permitting an offeror to make additional offers of judgment encourages the parties to continue to evaluate their cases as the litigation proceeds and thereby generally fosters settlement.”
What are the primary takeaways for insurers in Arizona bad faith cases (or any Arizona litigant)?
(1) Arizona insurers should treat offers of judgment like Chicago voting and make them “early and often” to shift the risks of attorney fees, expert fees, and costs.
(2) An insured/plaintiff’s early offer of judgment could substantially increase an insurer’s exposure on a large claim.
(3) Arizona continues to enforce offers of judgment that encourage settlement and Orosco makes it even more likely that Arizona will enforce a “Conditioned Offer of Judgment,” i.e. an Offer of Judgment conditioned on no entry of judgment, execution of a Settlement Agreement, and filing a Stipulation to Dismiss.
Also See “How Insurers Can Shift the Risks of Attorney Fees, Expert Fees, and Costs in Arizona Bad Faith Cases.”
by Nathan Meyer | Aug 8, 2017 | Insurance
Although Arizona law regarding the implied waiver of the attorney-client privilege (the “Privilege”) is far from certain, an Insurer may avoid a waiver by following these tips:
- An Insurer should consider whether to defend a bad faith claim solely on objective reasonableness.[1]
- An Insurer should avoid, if possible, asserting its actions were subjectively reasonable based on its adjuster’s evaluation of the law, especially when the evaluation is informed by counsel.[2]
- An Insurer should not allow counsel to direct claim handling.[3]
- An Insurer should instruct its adjusters that outside counsel’s advice is simply a consideration and the Insurer’s ultimate positions—whether a coverage determination, settlement offer, etc.—are not dependent reliant upon outside counsel’s advice.[4]
- If an Insurer wants counsel to analyze the subjective or objective reasonableness of its actions, then an Insurer should perform its own analysis and reach its own conclusions first, and then obtain counsel’s analysis.[5]
- An Insurer should argue, if possible, that an Insured has alternative avenues of attempting to prove the alleged bad faith.[6]
- If an Insurer believes that whether it impliedly waived the Privilege is a close call, then it should litigate in state court rather than federal court.[7]
- If an Insurer believes that implied waiver of the Privilege may be an issue, then it should communicate with its counsel on the phone rather than in writing.[8]
[1] See Nguyen v. Am. Commerce Ins. Co., 2014 WL 1381384 *5 (Ariz.App. Apr. 8, 2014) (Memorandum Decision (Insurer did not impliedly waive the Privilege, in part, because the Insurer defended solely on objective reasonableness).
[2] See State Farm v. Lee, 199 Ariz. 52, 57, 13 P.3d 1169, 1174 (2000) (En Banc); Nguyen, 2014 WL 1381384 *5 (Insurer did not impliedly waive the Privilege, in part, because the Insurer never took the position that “its subjective view of the law was reasonable ([much less that its] subjective view necessarily incorporated advice from its counsel.”); Ingram v. Great Am. Ins. Co., 112 F.Supp. 3d 934, 939 (D.Ariz. 2015) (Insurer impliedly waived privilege where it denied workers compensation claim after Insurer’s subjective evaluation of the law).
[3] See Mendoza v. McDonald’s Corp., 222 Ariz. 139, 153-54, 213 P.3d 288, 303-04 (App. 2009) (Insurer impliedly waived the privilege, in part, because substantial evidence indicated the Insurer’s attorneys directed the Insurer’s adjusters to: (a) force the Insured to jump through needless adversarial hoops (numerous IMEs with “good doctors”); (b) take positions without a reasonable basis (the Insurer asserted the Insured’s injury was not work-related at a hearing, despite the adjuster’s belief the injury was work-related and it would be bad faith to assert otherwise); and (c) delayed the claim (“relied on counsel’s advice in delaying surgical authorization through the end of her involvement with the claim…”).
[4] See Lee, 199 Ariz. at 66, 13 P.3d at 1183 (“We assume client and counsel will confer in every case, trading information for advice. This does not waive the privilege.”) (“We assume most if not all actions taken will be based on counsel’s advice. This does not waive the privilege.”); Safety Dynamics, Inc. v. Gen. Star Indem. Co., 2013 WL 11299209 at *3, 4 (D. Ariz. Aug. 8, 2013) (Order) (Insurer did not impliedly waive the Privilege, despite an adjuster’s testimony that he relied on advice of counsel to issue a denial letter, in part, because Lee noted that “client and counsel confer[ing]” does not waive the privilege, so the deposition testimony was “insufficient by itself to waive the privilege”); Roehrs v. Minnesota Life Ins. Co., 228 F.R.D. 642, 646-647 (D. Ariz. 2005) (Order) (Insurer impliedly waived the Privilege because the adjusters affirmatively injected attorney-client communications into the litigation by testifying at their depositions that “they each considered and relied upon, among other things, the legal opinions or legal investigation [of in-house counsel] in denying” the claims) (emphasis added); but see Safety Dynamics Inc. v. Gen. Star Indem. Co., 2014 WL 268653 at *1 (D. Ariz. Jan. 24, 2014) (Order) (Roehrs is not precedent, distinguished Roehrs, and declined to follow Roehrs);
[5] See Nguyen, 2014 WL 1381384 *5 (Insurer did not impliedly waive the Privilege, in part, because the Insurer merely consulted counsel to evaluate the objective reasonableness of its position); Everest Indem. Ins. Co. v. Rea, 236 Ariz. 503, 504, 342 P.3d 417, 418 (App. 2015) (Insurer did not impliedly waive the Privilege despite asserting its actions were subjectively reasonable and admitting it consulted with counsel regarding the subject settlement agreement) (“Lee expressly held that the assertion of a subjective good faith defense coupled with consultation with counsel did not, without more, waive the attorney-client privilege.”); Safety Dynamics Inc. v. Gen. Star Indem. Co., 2014 WL 11281283 at *3, 4 (D. Ariz. Apr. 3, 2014) (“Based on counsel’s advice, the client will always have a subjective evaluations of its claims and defenses. This does not waive the privilege.”).
[6] See Lee, 199 Ariz. at 56, 13 P.3d at 1173 (stating the third criteria of the implied waiver test, i.e. a litigant impliedly waives the Privilege if, “(3) application of the privilege would have denied the opposing party access to information vital to his defense.”); Empire West Title Agency, L.L.C. v. Talamante ex rel. Cty. of Maricopa, 234 Ariz. 497, 500, 323 P.3d 1148, 1151 (2014) (an implied waiver should not be found unless the party seeking the attorney-client communications demonstrates there are not “other means of obtaining information about what [a litigant] knew or should have known…”) (even if the Purchaser’s state of mind was at issue, the Title Agent did not “demonstrate that denying it access to the requested communications would undermine its defense” because it had “other means of obtaining information about what [the Purchaser] knew or should have known regarding the easement’s purported abandonment.”); Mt. Hawley Ins. Co. v. Slayton ex rel. Cty. of Coconino, 2013 WL 708535 (Ariz.App. Feb. 26, 2013) (Memorandum Decision) (held GC Insurer did not impliedly waive the Privilege, in part, because the Sub Insurer had reasonable alternatives to seeking privileged communications to prove its case, such as retaining an expert to testify the GC Insurer did not act reasonably in defending and settling the underlying action).
[7] Of the thirteen cases—both published and unpublished—considered for this article, only two of the seven Arizona state court cases found an implied-waiver of the Privilege, but five of the six Arizona federal cases found an implied waiver.
[8] See City of Glendale v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 2013 WL 1797308 at *6, 7 (D. Ariz. Apr. 29, 2013) (Order) (Insurer’s waiver extended only to “counsel’s advice that was contained in the adjuster’s notes in the claims file”).
by Nathan Meyer | Aug 8, 2017 | Insurance
Epperson v. AAA Fire & CAs. Ins Co., WL 406144 (Ariz.App January 31, 2017)
Memorandum Decision, an insurance bad faith case arising from a fire claim, the Arizona Court of Appeals affirmed the trial court’s grant of summary judgment to an Insurer, despite the Insurer paying the claim over 15 months after the fire occurred.
The Insured’s argued the trial court erroneously ruled there was no bad faith as a matter of law because the trial court improperly:
- Dismissed evidence that the Insurer failed to contact witnesses and develop information that might support the Insured’s claim; and
- Disregarded the Insured’s expert affidavit.
The Arizona Court of Appeals held the Insurer had “good reason to suspect arson” and the Insured’s expert affidavit did not raise a material question of fact, which precluded summary judgment.
The Arizona Court of Appeals noted the following undisputed evidence indicated both “good reason to suspect arson” and no material fact to issue regarding bad faith:
- The Insurer promptly interviewed relevant witnesses, performed an investigation of the fire scene, and sought relevant public documents;
- When the Insurer’s initial investigation revealed the fire was of suspicious origin, it asked the Insured’s to provide verifying documents and statements under oath;
- The Insured’s did not immediately cooperate with the Insurer’s investigation and failed for several months to both provide the requested information and submit to sworn examination; and
- After the Insured’s examinations under oath, the Insurer conducted follow-up investigation: it conducted follow-up interviews, obtained additional records, and attempted to contact witnesses identified by the Insured’s.
The Epperson opinion also provides a detailed account of the Insurer’s investigation and the “red flags” surrounding the Insured’s claim.
Regarding the Insured’s expert affidavit, the Court of Appeals:
- Noted the trial court’s ruling that the expert opinion was not evidence that created a material fact; and
- Cited Florez v. Sargeant, 185 Ariz. 521, 527, 917 P.3d 250 (1996), which held that conclusory expert affidavits do not create a triable facts issue if they:
- do not cite facts to support an expert’s opinion, or
- list facts which do not support the expert’s legal conclusion do not create a triable fact issue.
What are the takeaways for an Arizona Insurer investigating a suspicious fire claim and/or defending bad faith cases arising from the same?
- Epperson provides a detailed summary of a prompt, reasonable investigation of a fire claim, which Arizona insurers can use as a guide.
- At least one Arizona court stayed a bad faith case to allow an Insurer to complete its investigation of a fire claim. But see A.R.SCt. 111(c).
- Despite numerous “red flags” and “good reason to suspect arson,” an Insurer should still promptly attempt to interview witnesses and investigate facts that may support an Insured’s claim.
- An Insured’s conclusory expert affidavit may be insufficient to defeat an Insurer’s motion for summary judgment.
by Nathan Meyer | Aug 8, 2017 | Insurance
Many contracts or leases require one party to get insurance protection for the other party or landlord. Typically, they simply pass along the request for the insurance coverage to their insurance agent or broker and assume that their insurance will be updated to reflect the addition. To “prove” compliance with the contract requiring additional insurance coverage, the parties will often rely upon a “Certificate of Insurance.”
Unfortunately, when a personal injury occurs or property is damaged they realize that the Certificate of Insurance the parties had been relying upon actually states: “This certificate is issued as a matter of information only and confers no rights upon the certificate holder.” The parties may learn the insurance policy does not provide coverage because the insurer never completed the proper paper work to add the coverage that was required by “Endorsement.”
One of the biggest mistakes made when a contract or lease includes a provision requiring specific insurance coverage (i.e. naming the company as an additional insured or a loss payee) is reliance a Certificate of Insurance as evidence of coverage.
Certificates of Insurance:
- Do not confer rights upon the certificate holder;
- Do not affirmatively or negatively amend, extend, or alter the coverage afforded by the insurance policies; and
- Do not constitute a contract between the insurer and certificate holder.
In no uncertain terms, a Certificate of Insurance does not actually add any party listed therein to the policy in any way.
Endorsements:
A party is ONLY covered under a policy if an insurer issues an endorsement that adds that party as an “Additional Insured” or “Loss Payee.” An insurance policy is comprised of three parts – declarations, forms, and endorsements. The declarations list the forms and endorsements that comprise the policy. Any coverage form or endorsement not listed in the declarations is not part of the policy.
A specific Additional Insured endorsement is used to add coverage for specific Additional Insured’s by name. The coverage afforded to the specially-named Additional Insured depends upon the language of the endorsement itself. Review the endorsement carefully.
The best way to prevent having little or no insurance coverage, despite any contractual entitlement to coverage, is to ensure that an attorney reviews contract documents and pertinent parts of the insurance policy to ensure that contractually required coverage is in place.
To Protect Yourself:
- Never accept a Certificate of Insurance as proof that parties were properly added to the pertinent insurance policy;
- Request the endorsement and declarations page of the insurance policy.
- Ask an attorney to analyze the insurance required by the contract or lease and all pertinent insurance policy provisions to confirm compliance with any contractual insurance requirements.
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