Determining Duty in Premises Liability Actions: The Arizona Supreme Court Clarifies the Role of Unreasonably Dangerous Conditions

In a significant premises liability decision, Perez v. Circle K Convenience Stores, the Arizona Supreme Court overturned an entry of summary judgment in favor of Circle K and held that whether a condition was unreasonably dangerous is irrelevant to the issue of whether Circle K had a duty to provide a remedy or warning of the condition.  This decision reversed the lower courts’ rulings and reaffirmed the state of premises liability law in Arizona.

The lawsuit was filed by Roxanne Perez after she tripped and fell over a case of bottled water placed on the floor at a Circle K store.  The case of water was at the end of the aisle and Ms. Perez admitted that the case of water would have been clearly visible to her had she looked down. In the trial court, Circle K moved for summary judgment on the issue of duty, arguing that Circle K had no duty to remedy or warn against the condition because it was not unreasonably dangerous. The trial court and the Arizona Court of Appeals agreed, holding that there was no duty to provide a remedy or warning because the case of water was not an unreasonably dangerous condition.  However, the Arizona Supreme Court disagreed, emphasizing that duty is established based on the relationship between the parties.

In the unanimous Opinion, Chief Justice Timmer explained that the proper inquiry for determining whether a duty exists is whether a special relationship existed between the plaintiff and defendant. Certain factual issues may be considered when determining duty—such as the status of a visitor, the applicability of a statute to the circumstances, and whether the risk of harm arose within the scope of the special relationship. The Court clarified that whether a condition is unreasonably dangerous is only relevant to the issues of breach and causation and should not be considered when determining whether a duty exists. Thus, the Court held that because Ms. Perez was a business invitee, Circle K owed Ms. Perez a duty of care regardless of whether the condition was unreasonably dangerous or not. 

Even though the Court reversed the summary judgment ruling on the issue of duty, it recognized that summary judgment may be appropriate on other grounds. For example, although breach and causation are typically questions of fact for the jury, they can sometimes be decided as a matter of law if no reasonable juror could find in favor of the plaintiff on these issues. However, it declined to analyze breach and causation in this case because Circle K’s motion for summary judgment was based solely on the issue of duty.  Circle K could file another motion for summary judgment arguing that no reasonable juror could find that Circle K breached its duty of care because the case of water was not unreasonably dangerous as a matter of law. If that motion were granted by the trial court, the case would likely return to the Arizona Court of Appeals for further consideration. Until then, though, the Arizona Supreme Court has made it clear that a proprietor of a business is under an affirmative duty to make the premises reasonably safe for use by invitees, and that the issue of duty is based solely on the relationship between the parties, not the dangerousness of the condition. 

Thomas Rubin & Kelley PC has been representing retailers, landlords, and other landowners in Arizona for over 40 years.  If you have any questions regarding premises liability cases, please feel free to contact Michael Kelley or Brian Rubin at 602-274-8289 or mkelley@trkfirm.com and brubin@trkfirm.com.

TRK Gives Back

Defending Dog Bite Claims: It’s a Ruff Day

Homeowners do not think about the potential legal issues of owning a dog until it is too late and their dog attacks or bites someone. Assuming their particular dog breed is covered under their policy, what sort of claims should they be concerned about and what are the defenses? Under Arizona law, there are two theories of liability for a dog bite claim: strict liability and common law negligence.  

Common Law Negligence

A dog’s owner is only liable for common law negligence if the owner knew or had reason to know of their dog’s vicious propensities prior to the bite.  Perazzo v. Ortega, 32 Ariz. 154, 156, 256 P. 503, 504, (App. 1927.) There are two necessary factors in this regard: 1) the dog had vicious propensities; and 2) that the owner had knowledge of said vicious propensities. Both factors must be proven to succeed on a common law negligence claim. 

Arizona courts will determine whether a dog had “vicious propensities” on a case-by-case basis. In Perazzo, it was held that “[w]here one keeps on his premises a dog which has attacked or bitten a considerable number of persons, and is notoriously cross and vicious, it may be presumed that the owner has some knowledge of this fact.” With respect to the owner’s knowledge of the dog’s vicious propensities, courts have held that said knowledge need not be actual – meaning it can be imputed upon an owner if a joint owner, employee, spouse, or similarly situated person was aware of the animal’s vicious propensities, and thus it can be implied that the owner himself had such knowledge as well.  Good v. City of Glendale, 150 Ariz. 218, 221, (App. 1986.)  

Arizona also permits claims based on the common law theory of negligence per se, which prescribes that “[a] person who violates a statute enacted for the protection and safety of the public is guilty of negligence per se.” Id. There are numerous laws, statutes, and ordinances which specify certain guidelines as to the duties of a dog owner. For example, most jurisdictions have laws which prohibit a dog from being “at large,” meaning the dog is not sufficiently and legally fenced in, leashed, or contained. Thus, if a dog owner is found to have violated such a statute by allowing their dog to be “at large,” and the dog causes harm to someone, the owner can be held liable under a theory of negligence per se. It is also important to note that this cause of action is not exclusively limited to dog bite incidents but can be applied in any case wherein a dog “at large” causes any sort of harm or damage, including property damage.  

Strict Liability Claims

Strict liability is a significantly more rigid cause of action. Arizona Revised Statute (A.R.S.) §11-1025 prescribes that a dog owner is strictly liable for damages when their dog “bites a person when the person is in or on a public place or lawfully in or on a private place, including the property of the owner of the dog.” This is true “regardless of the former viciousness of the dog or the owner’s knowledge of its viciousness.”

Pursuant to the statute, if a dog bites someone who is either in a public place (i.e. a park, sidewalk, or street) or lawfully present on private property (i.e. anyone who is not a trespasser), the owner of that dog is liable – regardless of whether that dog was on a leash, behind a fence, or even on its own property. Further, under a strict liability cause of action it is irrelevant that the dog had never bitten anyone before nor demonstrated aggressive behavior prior to the incident. Unlike common law negligence as discussed below, the owner of the dog will be liable for injuries even if the owner showed the utmost care to prevent harm.  James v. Cox, 130 Ariz. 152, 153 (App. 1981.)  The “one free bite” rule does not exist, and you are liable regardless of the dog’s history of biting.

Unless the person was trespassing at the time of the incident, the only defense to a strict liability dog bite clam is “reasonable provocation.” This defense asserts that the victim is responsible for their own damages because he or she took some action that “a reasonable person would expect…is likely to provoke a dog.” The term “provoke” is not defined in the statute. However, the Arizona Court of Appeals has held that provocation is defined as an act or process of provoking, stimulation, or incitement.  Toney v. Bouthiller, 129 Ariz. 402, quoting Nelson v. Lewis, 36 Ill.App.3d 130 (1976.) Whether or not the actions of the victim constitute provocation is a question the majority of courts will leave up to the discretion of a jury. In order to maintain a strict liability claim, it must be brought within a year. If not, common law negligence is still available – note both strict liability and common law negligence can be claimed, if available.

Availability of Punitive Damages

Dog bite claims are particularly susceptible to punitive damage claims as well. On a broad scale, Arizona law restricts punitive damages those cases in which (1) the defendant's conduct is “aggravated and outrageous,” and (2) the wrongful conduct was guided by “an evil mind.” Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 331 (1986.) When a Plaintiff is asserting a claim for punitive damages against a Defendant in a civil lawsuit, “a plaintiff must always prove ‘outwardly aggravated, outrageous, malicious, or fraudulent conduct” and a plaintiff must also prove, as a second element, that the defendant's wrongful conduct was guided by evil motives.  Rawlings v. Apodaca, 151 Ariz. 149, 163 (1986.)

As applied to dog bite claims, punitive damages may be available where the owner either intended to have the dog bite or was reckless and careless in training and/or handling the dog.  For example, where a dog is trained to attack or where a dog was known to be vicious, but the owner kept the dog anyway.  Jones v. Manhart, 120 Ariz. 338 (1978.) Either way, a jury would still need to find clear and convincing evidence of an “evil hand” guided by “an evil mind.”

The attorneys at Thomas Rubin & Kelley PC are experienced in investigating and defending dog bite claims. Please feel free to contact us if you need assistance with any of your Arizona claims.  Brian Rubin (brubin@trkfirm.com) or Michael Kelley (mkelley@trkfirm.com).   

Arizona’s Family Purpose Doctrine

The family purpose doctrine was first adopted in Arizona in 1919 when the Arizona Supreme Court held that “a father who furnishes an automobile for the pleasure and convenience of the members of his family makes the use of the machine for the above purposes his affair or business, and that any member of the family driving the machine with the father's consent, either express or implied, is the father's agent.” Benton v. Regeser, 20 Ariz. 273, 278, 179 P. 966, 968 (1919). As explained by the court in Pesqueira v. Talbot, 7 Ariz. App. 476, 479, 441 P.2d 73, 76 (1968), though, “[b]ecause of its insecure agency foundation, formulation of a universally applicable test of parental liability under the family purpose doctrine has proven difficult.” As such, the Arizona Court of Appeals set forth the following elements: (1) “there must be a family with sufficient unity so that there is a head of the family;” (2) “the motor vehicle responsible for the injury must have been one ‘furnished’ by the head of the family to a member of the family;” and (3) “this vehicle must have been used on the occasion in question by the family member with the implied or express consent of the head of the family for a family purpose.”  Id. at 480, P.2d at 77.  

The definition of a “family” has certainly changed over time.  In 1984, the Arizona Court of Appeals that a “family” is “not limited to parents and their minor dependent children.”  Brown v. Stogsdill, 140 Ariz. 485, 487, 682 P.2d 1152, 1154 (Ct. App. 1984).  The “family” is broadly defined as “a group of individuals living under one roof and usually under one head,” and may include independent adults living under the same roof, so long as “the family itself is a family unit with a family head.” Id.  The question of whether someone is in a “family” may ultimately be a question of fact which needs to be decided by a jury.  For example, in Brown, the court held that there was a question of fact as to whether the son was sufficiently emancipated to not be considered a member of his parents’ family unit, despite that fact that he paid room and board, and purchased the car with his own money.  However, the court has recognized that not all relationships can create a “family” with respect to the family purpose doctrine.  In Alosi v. Hewitt, 229 Ariz. 449, 450-52, 276 P.3d 518, 519-21 (Ct. App. 2012), the Arizona Court of Appeals held that consenting adults in a romantic relationship did not create liability under the family purpose doctrine.  If fact, the court recognized that the family purpose doctrine “has not expanded beyond the parent-child relationship.”  Id.

There have been many challenges to the family purpose doctrine over the years in Arizona, but all have failed.  In Young v. Beck, 227 Ariz. 1, 3, 251 P.3d 380, 382 (2011), the parents argued that the family purpose doctrine should be abolished.  In particular, the parents argued that under Arizona’s Uniform Contribution Among Tortfeasors Act ("UCATA"), they could not be jointly and severally liable for the actions of their son unless he was their agent or servant.  However, the Arizona Supreme Court held that the legislature did not intend to abolish the family purpose doctrine with the enactment of UCATA.  Instead, the court found that the family purpose doctrine was akin to vicarious liability, and “imputes liability not because of the head of the family's independent fault or breach of a legal duty, but because of “the agency relationship that is deemed to exist between the head of the household and the driver of the family car.”  Id. at 5-6, 251 P.3d at 384-385.   

The parents in Young also argued that the family purpose doctrine should be abolished because it “lacks a viable legal basis or public policy justification, is ‘grossly unfair to any parent [of] a young driver,’ and functions as ‘solely a penalty against wealthy parents.’”  Id. at 6, 251 P.3d at 385.  Relying upon the doctrine of stare decisis, the court denied this request as well.  The court stated, “[t]he doctrine's primary justification is to provide ‘for an injured party's recovery from the financially responsible person - the family head - deemed most able to control to whom the car is made available.’”  Id. Additionally, the family purpose doctrine was adopted with the public policy goal of providing compensation to accident victims and encouraging parents to ensure that their children operate motor vehicles safely.  “Given the doctrine's long history, social utility in compensating injured victims, and conflicting policy considerations,” the court found “no compelling reason to abrogate the doctrine.” Id.

As it stands, the family purpose doctrine remains a viable legal doctrine in Arizona.  If a parent allows their child to drive an automobile which is furnished, at least in part, by the parent, that parent will be vicariously liable for the negligent operation of that automobile.  This is, perhaps, an over-simplification of the doctrine as there are nuances with respect to what constitutes a “family” or “household”, and whether the vehicle was actually “furnished” to the child for a “family purpose,” but the above analysis shows that Arizona courts will broadly interpret the doctrine to allow injured parties to be fully compensated. 

Thomas Rubin & Kelley PC has extensive experience defending and evaluating automobile liability claims, including the application of the family purpose doctrine.  Please feel free to reach out directly to Brian Rubin at brubin@trkfirm.com or Michael Kelley at mkelley@trkfirm.com with any of your questions.  We are always happy to help.   

“BOO!” - Don’t sue me bro, it was just a prank! Emotional Distress Claims in Arizona

Halloween is around the corner, which means it is time to set up spooky decorations and visit haunted houses where trained “scarers” will chase tweens with chainsaws. When you buy a ticket to a haunted house you know you are going to be subject to jump scares, screams, and threats of violence from actors. The chainsaw may be real, but there is no chain attached and the actor has been instructed to never touch a customer. While there are some extreme haunted attractions like McKamey Manor in Tennessee where guests must sign a liability waiver acknowledging that they are unable to leave and will be subjected to torture (including having bones broken, teeth removed, and being drugged), most strip mall haunted houses are just good, old-fashioned fun. The customers know there is no real danger and assume the risk of being frightened.  In most cases, there would be no basis for a customer to sue the haunted house for negligent or intentional infliction of emotional distress. Most haunted houses are more concerned with their guests attacking their employers or customers slipping and falling than being sued for emotional distress. 

However, jump scares are not limited to haunted houses and may happen any time. There are YouTube channels and television shows dedicated to pranking unwitting individuals with scary clowns, haunted elevators, and other things which you do not expect to run into when waiting at the bus stop or shopping in a store. Candid Camera was on television for 74 years with light-hearted pranks suitable for family viewing. However, some pranksters take things too far or pick the wrong person to scare, resulting in injuries.

Arizona law recognizes the torts of negligent infliction of emotional distress and intentional infliction of emotional distress.  In a negligence case, the plaintiff must prove: (1) the defendant was negligent; (2) defendant’s negligence created an unreasonable risk of bodily harm to the plaintiff; (3) defendant’s negligence was a cause of emotional distress to the plaintiff; (4) the plaintiff suffered physical injury or illness due to the emotional distress; and (5) plaintiff’s damages. See Revised Arizona Jury Instructions (Civil), 7th Ed., Negligence 9.  This claim involves situations where the plaintiff experienced an event which threatened their personal security. Arizona does not recognize run of the mill claims which involve transitory distress like weeping or insomnia.  Instead, Arizona requires the plaintiff to prove that their emotional distress was manifested in some physical way, like grinding of teeth, bedwetting, fainting, a heart attack, or a miscarriage. See Keck v. Jackson, 122 Ariz. 114, 593 P.2d 668 (1979).  This is the only way to prevent the courthouses from being filled with lawsuits filed by people who became temporarily upset or aggravated because someone accidentally caused them to fear for their safety. 

Many automobile accident cases involve claims of negligent infliction of emotional distress.  The claim may be based on a collision with the plaintiff’s vehicle or even a near miss situation where there was no physical contact, but the plaintiff was injured nonetheless. They may also include cases where the plaintiff witnesses bodily harm to a family member or someone closely akin thereto. Witnessing an injury to a coworker or pet is insufficient to warrant the bystander’s inclusion as a recognized claimant. In the “witnessing injury to another” cases the plaintiff must not only have a close personal relationship with the injured person, but they must also have been in the “zone of danger” of the injury producing event such that there was an unreasonable risk of bodily harm to them. As with other negligent infliction of emotional distress claims, there must still be a physical manifestation of the emotional distress to pursue the claim.

Intentional infliction of emotional distress is a much more serious allegation. In order to prevail on this claim, the plaintiff must prove: (1) defendant’s conduct was extreme and outrageous; (2) defendant’s conduct was either intentional or reckless; and (3) defendant’s conduct caused plaintiff to suffer severe emotional distress. Conduct is “extreme and outrageous” if an average member of the community would regard the conduct as atrocious, intolerable in a civilized community, and beyond all possible bounds of decency. See Revised Arizona Jury Instructions (Civil), 7th Ed., Intentional Torts 16. The “extreme and outrageous” element is the highest hurdle to overcome for most plaintiffs. Some factors the court will consider are defendant’s knowledge that the plaintiff is peculiarly susceptible to emotional distress, by reason of some physical or mental condition or peculiarity, or whether the defendant abused a position of authority with the plaintiff.  There is no master list of what conduct is considered extreme and outrageous, so each case must be decided on the facts of that case. For example, if an unsuspecting trick or treater wandered into the McKamey Manor and was kidnapped, subjected to torture, and had teeth pulled out without anesthesia, the court would likely find the conduct to be extreme and outrageous.  This is why McKamey Manor requires their customers to sign lengthy waivers which were hopefully drafted by very good lawyers.  Even the best waiver would not protect them from a lawsuit in Arizona, though, as the Arizona Supreme Court has held that a jury must decide whether the assumption of risk defense applies, even if the participant has signed a contract with an express assumption of risk clause.  Phelps v. Firebird Raceway, Inc., 210 Ariz. 403, 404, 111 P.3d 1003, 1004 (2005).  Limitation of liability clauses, on the other hand, may be enforced. See 1800 Ocotillo, Ltd. Liab. Co. v. WLB Grp., Inc., 219 Ariz. 200, 205-06, 196 P.3d 222, 227-28 (2008).

Thomas Rubin & Kelley PC routinely defends cases involving allegations of negligent and intentional infliction of emotional distress. Please contact Michael Kelley at mkelley@trkfirm.com or Brian Rubin at brubin@trkfirm.com if you need assistance with your scary Arizona cases.  Thankfully, we do not get spooked easily.  Happy Halloween!

Franklin v. CSAA General Insurance Company: A Monumental Decision from Arizona Supreme Court on UIM Stacking

On July 28, 2023, the Arizona Supreme Court issued an opinion that will have a significant bearing on inter-policy and intra-policy stacking of uninsured and underinsured motorist coverage. Essentially, the Court determined that insured drivers will be allowed to stack or combine UIM coverages if multiple vehicles are insured under a single insurance policy, unless the language of the policy meets strict statutory language requirements.

The Facts at Issue in Franklin

The mother of Plaintiff Kay Franklin was killed in an automobile accident caused by a negligent driver. Ms. Franklin collected the per person liability limit of the negligent driver’s insurance policy of $25,000. Thereafter, she submitted a UIM claim to her mother’s insurer, CSAA Insurance. At the time of the incident, the CSAA policy covered two vehicles and provided $50,000 of UIM coverage “per person.” The relevant policy contained a limitation of liability clause stating, in pertinent part: “The limit of liability shown on the Dec Page is the most we will pay regardless of the number of: … (2) covered cars… (7) premiums paid.”

CSAA willingly tendered $50,000 in UIM funds to Franklin. Franklin then made a claim for an additional $50,000 under a “stacking” theory. Franklin’s position was that the inclusion of the second vehicle in the policy indicated that the policy provided a separate, additional UIM coverage that Franklin could stack. Thus, from a practical standpoint, the UIM coverage would be increased from $50,000 to $100,000. The Court acknowledged that this was generally referred to as “intra-policy stacking.”  This is where multiple UIM coverages under a single policy are stacked, as distinguished from “inter-policy stacking” where UIM coverages of multiple policies on different policies are stacked.

The essential basis for Franklin’s position was that CSAA failed to comply with A.R.S. §20-259.01(H). This is the “anti-stacking” provision of Arizona’s UM/UIM act. This particular provision in the statute was noted by the Court to be the only provision that authorizes any limitation on stacking. This subsection provides, as follows:

If multiple policies or coverages purchased by one insured on different vehicles apply to an accident or claim, the insurer may limit the coverage so that only one policy or coverage, selected by the insured, shall be applicable to any one accident. If the policy does not contain a statement that informs the insured of the insured’s right to select one policy or coverage as required by the subsection, within thirty days after the insurer receives notice of an accident, the insurer shall notify the insured in writing of the insured’s right to select one policy or coverage.

CSAA rejected Franklin’s claim for an additional $50,000. The carrier contended that the policy provided a single UIM coverage and that there was no additional coverage to stack. Franklin then sued CSAA in Federal Court for declaratory relief. Franklin asserted breach of contract and bad faith. The Complaint was later amended to allege a class action on behalf of other parties insured by CSAA and similarly situated to Franklin.

Ultimately, CSAA filed a Motion for the District Court to certify certain issues presented here, which the Court granted. The  Arizona Supreme Court accepted review to clarify how A.R.S. §20-259.01 regulates an insurer’s ability to preclude insureds from intra-policy stacking of UIM coverages.

The Arizona Supreme Court Opinion

The Arizona Supreme Court pointed out that A.R.S. §20-259.01(H) dictates how insurers can prevent insureds from stacking UIM or UM coverages. The Court acknowledged the well-settled principle that insurers may limit stacking. However, the Court held that in order to do so, insurers must, per the statute, first provide a clearly worded stacking limitation in the policy. The Court indicated this language must be unambiguous, plainly disavowing the possibility of stacking.

In addition, CSAA argued that even if the policy does not contain the relevant language, per the statute, it is able to provide written notice “within thirty days” after the accident to preclude UIM coverage stacking. The Court disagreed, though, and determined that reading the statute to allow insurers to unilaterally limit coverage after the policy is issued would violate basic principles of contract law that require additional consideration and mutual assent for changes to an existing contract. Thus, the Supreme Court read the statute to require both an express and plainly worded stacking limitation in the policy and notice to the insured of their right to select one policy or coverage either in the policy itself or via writing within thirty days after the insurer is notified of the accident.

Furthermore, the Court advised that A.R.S. §20-259.01(H) only addresses situations where “multiple policies or coverages purchased by one insured on different vehicles apply to an accident or claim.” Therefore, before being allowed to stack coverages, insureds have to have purchased multiple policies or coverages on different vehicles. Therefore, the Court pointed out that the dispositive issue becomes whether an insured covered under a single multi-vehicle policy necessarily purchased multiple UIM coverages for each vehicle. The Court determined that the term “coverages purchased” under A.R.S. §20-259.01(H) was susceptible to different interpretations and was ambiguous. Specifically, the Court indicated that the text is unclear as to whether all multi-vehicle policies contain multiple purchased UIM coverages for each vehicle, thereby triggering subsection H, or whether insurers may define “coverages” purchased in the policies to be a single coverage, thereby avoiding subsection H’s application entirely. Based on this, the Court applied a secondary principle of interpretation, which included the consideration of the statute’s context, history, and purpose. The Court determined that when reviewing the statutory history and text of the statute, it supported a broad interpretation of “coverages purchased” which recognizes a separate UIM coverage “purchased” for each vehicle in a multi-vehicle policy. The Court determined that this interpretation aligned with the underinsured motorist act’s objective to afford UIM coverage.

Impact

The Franklin case affirms that the Arizona Supreme Court will strictly enforce the language of the UIM statute and broadly interpret policy language and the statute to afford coverage where most insurers and their insured’s may have previously believed there to be none.  Prior to this decision, most reasonable consumers would likely believe that they would only get the benefit of one UIM coverage limit for each accident, regardless of the number of vehicles listed on the policy. While this is still true if the insurer had policy language which unambiguously notified the insured that only one UIM policy or coverage, selected by the insured, shall apply to any one accident, insurers which relied upon the statute’s apparent option of notifying their insureds of their right to select one policy or coverage within 30 days of notice of an accident may be left holding the bag.

The full breadth of the impact of the opinion is not yet known. At a minimum, insurers should seek to modify their policy language to track with subsection H, which is set forth below:  

H. Uninsured and underinsured motorist coverages are separate and distinct and apply to different accident situations. Underinsured motorist coverage shall not provide coverage for a claim against an uninsured motorist in addition to any applicable uninsured motorist coverage. If multiple policies or coverages purchased by one insured on different vehicles apply to an accident or claim, the insurer may limit the coverage so that only one policy or coverage, selected by the insured, shall be applicable to any one accident. If the policy does not contain a statement that informs the insured of the insured’s right to select one policy or coverage as required by this subsection, within thirty days after the insurer receives notice of an accident, the insurer shall notify the insured in writing of the insured’s right to select one policy or coverage. For the purposes of this subsection, “insurer” includes every insurer within a group of insurers under a common management.

Insurers should place, in a conspicuous fashion, language in the policy (and possibly the declarations page) which unambiguously and plainly disavows the possibility of stacking. 

The impact on new policies and the cost to consumers was not discussed in the Court’s opinion, but it will likely be discussed at upcoming board meetings and congressional committee hearings.  Shrewd insurers may reconsider their premiums and the “multi-car” discounts which are automatically given to their insureds. In addition to the cost of updating policy language, some insurers may decide to issue separate declarations pages for each vehicle to avoid any argument that the declarations pages are ambiguous.  The true cost of implementing changes to avoid paying multiple UIM policy limits to one insured for one accident will not be known for several years. 

What will happen to prior UIM claims that were previously resolved and considered closed? Per one of the firms that represented the claimant in the Franklin matter, individuals who settled UIM claims previously where stacking was not allowed (or even sought) should revisit those claims as they believe that benefits that were owed were not provided in those claims. The six-year statute of limitations for breach of contract claims may prevent most claimants from coming back to re-open their stale claims, but some of them may have arguments that the statute of limitations should be tolled.  Needless to say, the limits of the application of the Court’s holding will be tested in coming years. 

Thomas Rubin & Kelley PC is an insurance defense law firm which specializes in the defense of insurance companies and their insureds. We routinely represent insurers in defense of claims, including cases which involve the issue discussed in this article. Please feel free to contact Brian Rubin at brubin@trkfirm.com or (602) 604-7509 or Michael Kelley at mkelley@trkfirm.com or (602) 604-7505 if you need assistance with your Arizona cases.

Uninsured and Underinsured Motorist Claims: Do Adjusters Have to Disclose the Settlement Range Placed on a UM/UIM Claim?

Insurance companies have a duty of good faith and fair dealing when handling claims for their insureds, which includes, among other things, a duty to disclose all policy benefits.  However, the insurer and the insured occupy adverse positions in a UM/UIM claim until the other motorist's liability is determined by agreement, arbitration, or litigation.  After reviewing a UM/UIM demand, insurers must conduct a reasonable investigation, decide the value of the claim, and, if appropriate, convey a settlement offer to the inured.  In order to make a settlement offer, the adjuster usually decides a range of value for the claim and makes an opening offer based on that range.  What happens when the insured asks the adjuster to disclose the range of value placed on the claim?  Does the adjuster need to disclose the settlement authority they have been given on the claim? Is the adjuster’s range of value a final decision as to what the insurer believes the claim is worth, and thus constitutes a policy benefit?

The case which holds the answer to these questions is Voland v. Farmers Ins. Co., 189 Ariz. 448, 451, 943 P.2d 808, 811 (Ct. App. 1997), where the Arizona Court of Appeals held that a carrier’s offer to settle a UM/UIM claim does not constitute an admission as to what the carrier is legally obligated to pay to its insured.  In particular, an offer to settle the claim for a certain number “does not mean [the insurer] acknowledged that was the minimal amount the insurer’s own adjuster had evaluated as being owed to the insured.” Id. Instead, a settlement offer on a UM or UIM claim is “simply a proposal to compromise and resolve the claim,” and represents “the carrier’s evaluation or best estimate, at that point in time, of what the trier (here, the arbitrators) might award.” Id. 

Since settlement offers do not constitute an admission as to the value of the claim, the settlement range or range of value placed on a UM/UIM claim does not bind the insurer or constitute an admission as to the value of the claim. For example, the court in Voland, found that a settlement offer did not bind the insurer or set a floor as to what the insurer would ultimately have to pay on the claim.  It is difficult for anyone, including insurers, to place a value on a bodily injury claim as it is “far from an exact science [and] is no more precise or predictable than throwing darts at a board.” Id. The court further recognized the public policy in favor of settling UM/UIM claims and determined that it was best to avoid requirements “which would have a chilling effect on genuine settlement evaluations and negotiations.” Id.

Based on the holding in Voland, an insurer’s refusal to disclose or offer the high end of the settlement range placed on a UM/UIM claim does not constitute bad faith.  There is no statute, regulation, or case in Arizona which requires a UM/UIM insurer to disclose or pay the highest potential settlement value placed on the claim by an adjuster. In fact, if there were such a requirement, it would have a “chilling effect on genuine settlement evaluations and negotiations,” which is exactly what the court was avoiding in Voland.  There is a valid reason for placing a settlement value range on a claim and allowing the adjuster to attempt to negotiate the UM/UIM claim withing that range. In order to have meaningful settlement negotiations, both the insurer and the insured must be willing to negotiate, and they cannot do so unless they assign a range to the value of the claim.  If a range is not placed on the claim, the adjuster would be forced to place a single number on the value of the claim and refuse any settlement demand above that number.  Of course, if either side were forced to disclose the top or bottom of their ranges, there would be no room for reasonable settlement negotiations. As such, as a matter of public policy, and in accordance with Voland, insurers should be permitted to place a range of value on a claim without being put in fear of setting an undisputed value on the claim or being forced to disclose their settlement authority. 

Thomas Rubin & Kelley PC is an insurance defense law firm which specializes in the defense of insurance companies and their insureds.  We routinely represent insurers in defense of bad faith claims, including cases which involve the issue discussed in this article. Please feel free to contact Michael Kelley at mkelley@trkfirm.com or (602) 604-7505 if you need assistance with your Arizona cases. 

Vehicle Theft and Theft-Related Insurance Fraud

Automobile theft is always evolving, thus creating a very challenging atmosphere for companies and agencies that are tasked with investigating and handling vehicle theft and claims of vehicle theft. Automobile thieves are pivoting to new and sophisticated methods for theft, including smart keys, cloning vehicles, utilizing cell phone applications to hack into a vehicle, and even using false identities to purchase expensive vehicles. Motor-vehicle theft has increased in recent years, and last year alone, more than 1 million vehicles were stolen nationwide.[1]

While the occurrence of motor vehicle theft is on the rise, the number of theft-related insurance fraud cases are also growing. Insurance fraud is a deliberate deception perpetrated against or by an insurance company or agent for financial gain. Fraud may be committed at different points by applicants, policyholders, third-party claimants, or professionals who provide services to claimants. Staged crashes, false or overblown reports, and faking information are just some of the instances where harm is caused to not only insurers, but to consumers as well. Several types of information failures and fraudulent practices drive costs up, such as unrecognized drivers, underestimated mileage, violations/accidents, and false garaging to lower premiums. While not always a result of malicious or conscious actions, premium leakage creates problems for consumers, too—as much as 14 percent of all personal auto premiums can be attributed to the cost of covering premium leakage.[2] According to a 2022 study conducted by various member-organizations of The Coalition Against Insurance Fraud, the cost of Property and Casualty Fraud in the United States is $45 billion per year.[3]

There is no foolproof way to spot or prevent incidents of theft-related insurance fraud. However, there are a few “best practices” which can be employed when handling and investigating potential instances of fraud. Insurers should always practice good data hygiene – verifying driver’s license numbers, capturing correct and complete driver details, reviewing title history for an allegedly stolen vehicle, and paying attention when a vehicle’s VIN is flagged. Insurance carriers should establish and maintain properly trained special investigation units (SIUs) to help identify and investigate suspicious claims.

It is, of course, of upmost importance to honor duties owed to insureds under any insurance policy. However, as discussed above, theft-related insurance fraud is not only a financial burden on the insurer, but also on their insureds. Proper investigation and handling of claims of automobile theft is paramount to curbing this growing problem, for the benefit of both insurers and insureds.

The attorneys at Thomas Rubin & Kelley, PC have significant experience with evaluating claims of vehicle theft, and with providing appropriate legal guidance to insurers. If you have any questions regarding the rise of theft-related insurance fraud, or if you require any assistance as to your Arizona claims, please do not hesitate to contact Brian Rubin (brubin@trkfirm.com) or Michael Kelley (mkelley@trkfirm.com).

Summary of 2023 Amendments

Sometimes, annual changes to Arizona’s Rules of Civil Procedure are minor. Sometimes times they are major. The 2023 amendments appear to be the former. This article discusses the changes to rules which we at Thomas Rubin & Kelley use in our litigation practice: Rules 16, 30, 32, and 47.

Rule 16 and 47 – Voir Dire  

Effective on January 1, 2022, the Arizona Supreme Court abrogated the rules of procedure for criminal cases, eviction matters, and civil cases that had previously granted parties peremptory strikes of jurors. At the same time, the Arizona Supreme Court adopted rules that encouraged expanded voir dire, expanded the use of juror questionnaires, and slightly modified the rule regarding challenges for cause. Since the beginning of 2022, Rule 47 now requires (unless the court orders otherwise) prospective jurors to complete case-specific written questionnaires. It also requires parties to either destroy or return the case specific written questionnaires to the court after jury selection has concluded.

To deal with the competing interests between the confidentiality of completed questionnaires and rights to maintain work product, the Court made some minor changes to Rule 47(b)(3). Effective on January 1, 2023, Rule 47(b)(3) now allows counsel for either party to retain copies of case-specific written questionnaires in their case files, if they contain work product. An amendment to Rule 16(f) which became effective in 2023 also now gives courts discretion on when the parties must file their requested written questionnaires.

With the removal of peremptory strikes, the 2022 amendments required the court to permit, when feasible, “liberal and comprehensive examination by the parties [and to] refrain from imposing inflexible limits on voir dire.” This amendment led to concerns that the court’s authority to manage voir dire was being diminished. To clarify the Court’s role as a gatekeeper, effective January 1, 2023, Rule 47(c)(5) now includes a subpart providing that “[t]he court retains the discretion to manage voir dire, including to preclude improper, excessive, or abusive questioning.”

Of course, removal of peremptory strikes has created scrutiny of court rulings on challenges for cause. As of the beginning of this year, a court must now state on the record the reasons for its ruling regarding all challenges for cause. Moreover, the 2023 version of Rule 47 allows the Court to excuse a prospective juror for cause if the parties stipulate that “in their good faith belief, the prospective juror cannot render a fair and impartial verdict.” To be clear, however, courts need not accept stipulations. Doing so is discretionary. Based on the 2023 amendments, it now appears that if a court rejects a stipulation regarding excluding a juror for cause, it must state on the record the basis for this rejection.

Rules 30 and 32 - Video depositions

Previously, Rule 30 required parties noticing depositions to state if the deposition was being recorded by audiovisual means, and if so, to state the location of the camera. This led to many “do-it-yourself” attorneys making video recordings of depositions on a camcorder or tablet. Because Rule 32 generally allows depositions to be used at trial, conflicts arose out of attorney-recorded depositions relating to the quality of the video, custody of the footage, and complaints about placement of the microphone or camera. These issues rarely arise when the deposition is recorded by an independent videographer. To address this issue, effective January 1, 2023, Rule 30(b)(3)(B) now requires that if a deposition will be recorded by video, the “notice must state the method and manner of audiovisual recording and the person or company that will conduct such recording.” This requirement will now give the non-noticing attorney a heads up that a deposition will be self-recorded. The advance notice of self-recording will afford parties the opportunity to mitigate potential quality issues caused by self-recording. Indeed, they can consult with opposing counsel or counter-notice the deposition and bring an independent video-recording service to the deposition in addition to the device used by the “do-it-yourself” attorney. Indeed, although Rule 32 was modified to require that as of January 1, 2023, the camera to squarely face the witness and avoid depicting other persons, these meager requirements will do little to preserve the quality of self-recorded depositions. Bringing an independent video-recording service to self-recorded depositions will be the best way to avoid quality and custody issues.

On that note, Rule 32(d) was also amended, effective January 1, 2023, to clarify that a party who objects to the method of a deposition being recorded need not counter-designate an additional method of recording to maintain the its objection. In other words, a party who objects to self-recording need not bring an independent videographer to the deposition to maintain its objection to the self-recording of the deposition.

The attorneys at Thomas Rubin & Kelley are well-versed in civil litigation. If you require any assistance with any of your Arizona claims, please do not hesitate to contact Brian Rubin (brubin@trkfirm.com) or Michael Kelley (mkelley@trkfirm.com).    

When is a Minor Settlement Needed in Arizona?

When is court approval of a minor’s settlement needed to make the settlement binding on the minor? 

Short answer: for every minor settlement. 

Long answer: there is some judgment involved.

It is a common argument of a plaintiff attorney to argue court approval for a minor settlement under $10,000 is not required.  Rule 16.3 of the Arizona Rules of Civil Procedure recently clarified this: “The settlement of a claim brought on behalf of a minor or adult in need of protection is not binding unless a judicial officer approves it as provided in Rule 53 of the Arizona Rules of Probate Procedure.”  So, if a personal injury claim or wrongful death claim is involved, it is required.

 1.         The Settlement Process for Settlements Under $10,000

The process for obtaining approval of a settlement under $10,000 is not straight-forward. If the settlement does not excess $10,000, a full conservatorship is not required.  We still recommend them when possible as a conservatorship – the process of a court appointing a conservator (usually a family member) to be responsible for the minor’s money until the minor turns 18 – gives the best protection to the money for the minor and guarantees it will be there when they become an adult.  Alternatively, if the case is already in litigation, the parties can file a stipulated motion for court approval explaining the settlement and citing the statutes requiring court approval – this is a quick process.

If the case is not in litigation, the options are trickier.  You can try and file a stipulated action in probate court for approval of the settlement, but in our experience, most courts convert the action into a conservatorship.  Whether to obtain court approval in those cases with settlements under $10,000 then becomes a judgment call with a cost/benefit analysis.  The conservatorship process typically costs around $3,000-$5,000, so if the settlement is for less than that, involves very minor injuries, or involves no injuries and very little treatment, the cost outweighs the benefit. It is also unlikely in those situations the minor will repudiate the settlement when they turn 18.  Larger claims and moderate to major injuries dictate the extra protection, especially if the minor’s medical bills are not covered by the settlement, such as in distribution cases.

2.         The Settlement Process for Settlements Over $10,000

Minor conservatorships are heard and managed by the Probate Courts in Arizona. The process is pretty much the same in every county, but slightly different forms or something like fiduciary training may be required, depending upon the county. Most counties have forms and instruction packets online and if they do not, the state has their own generic forms. 

The process is fairly straight forward: Establish who will act as the conservator (typically a parent or relative of the minor), file a probate cover sheet, petition for court approval of a minor settlement and to appoint a conservator, and affidavit of the petitioner with the court to open the case.  Obtain a hearing date. Any parent or guardian who has not had their legal rights cut-off has to have notice of the hearing.  If you do not know where they are, publish.  If you do and they will cooperate, have them sign a waiver regarding notice for this hearing and all future hearings.  Any request for attorney’s fees and costs will also need to be filed prior to the hearing by the requesting attorney.

Next, 10 court days before the hearing, the proposed orders need lodged with the court including the order to conservator and order approving and appointing.  If you are in a county that requires fiduciary or conservatorship training, then file proof of training.

Finally, attend the hearing.  Any minor over 10 years old should attend as well.  The closer they are to 18, the more the Court will want their input on the process.  Afterward, obtain orders, have Letters & Acceptance issued by the probate clerk, and then head to the bank (unless you have an annuity, which simplifies the process.) The final action is to file the Proof of Restricted Account with the Probate Clerk.

Conclusion

Rule 16.3 clarifies that court approval is required for all minor settlements.  However, sometimes, doing so just does not make sense for that particular settlement.  Of course, if the settlement is for $10,000 or more, court approval is mandatory through a conservatorship. The process there is very pleading and procedure heavy, but manageable once you have done it a few times (or dozens of times as we have.)

The attorneys at Thomas Rubin & Kelley are well-versed in civil litigation. If you require any assistance with any of your Arizona claims, please do not hesitate to contact Brian Rubin (brubin@trkfirm.com) or Michael Kelley (mkelley@trkfirm.com).    

Court of Appeals Narrows Punitive Damages Standard

There is a fine line between conduct which warrants only compensatory damages and conduct which warrants an award of punitive damages. Over the years, Arizona appellate courts have struggled to draw that line with sufficient accuracy such that trial courts and parties will have a clear understanding as to when punitive damages may be awarded in a negligence case. In Swift Transportation Co. of Arizona L.L.C. v. Carman, the Arizona Supreme Court provided some additional guidance on this issue which will shape the course of discovery in future negligence cases.

In January 2018, the driver of a tractor trailer owned by Swift Transportation was involved in a motor vehicle accident while driving on the freeway. The driver of the tractor trailer had engaged the “Jake Brake” (engine brake), set the cruise control to 62 mph in a 75 mph zone, was on the phone with his daughter using a hands-free Bluetooth device, and was passing a vehicle on the right on a downhill-sloping curve when the accident occurred. After the accident, he remained in the vehicle for five minutes without placing any traffic warning devices on the road to warn other motorists of the accident. Unfortunately, the driver of another tractor trailer collided with two other vehicles while trying to avoid the Swift trailer, killing and injuring several travelers. The plaintiffs sued Swift alleging negligence and filed a Motion on Prima Facie Case for Punitive Damages with the trial court to allow them to obtain Swift’s financial records. The trial court granted plaintiffs’ motion, and that order was affirmed by the Arizona Court of Appeals. The Arizona Supreme Court accepted special action review to clarify the standard for punitive damages, and ultimately held that the evidence in this case was insufficient to allow the claim to be presented to the jury.

Arizona courts require a plaintiff to make a prima facie showing that he or she will be entitled to present the issue of punitive damages to the jury before allowing discovery of a defendant’s financial information. In a negligence case, the plaintiff must establish that there is a reasonable likelihood that the punitive damages claim will be submitted to the jury. Recognizing that the purpose of punitive damages is to punish and deter, the Arizona Supreme Court confirmed that punitive damages may not be awarded based on mere negligence, gross negligence, or recklessness. “[A] defendant may not be subject to civil punishment through punitive damages unless he or she acts ‘with a knowing, culpable state of mind.”’ Swift Transp. Co. v. Carman, 515 P.3d 685,691 (2022)(citing Gurule v. Ill. Mut. Life & Cas. Co., 152 Ariz. 600, 601 (1987)). Compensatory damages are recognized as sufficient to deter unintentional and even grossly negligent conduct. Instead, there must be evidence that the defendant acted with an “evil mind.” “To establish an evil mind requires clear and convincing evidence that defendant’s actions either (1) intended to cause harm, (2) were motivated by spite, or (3) were outrageous, creating a ‘substantial risk of tremendous harm to others.’” Id. (citing Volz v. Coleman Co., 155 Ariz. 567, 570-71 (1987)).

The Arizona Supreme Court explained that “to be entitled to punitive damages in a negligence action, a plaintiff generally must show that the defendant’s conduct was ‘outrageous, oppressive or intolerable,’ and ‘create[d] [a] substantial risk of tremendous harm,’ thereby evidencing a ‘conscious and deliberate disregard of the interest[s] and rights of others.’” Id. at 692 (citing Volz and Gurule, supra). While this may be proven by establishing that the defendant engaged in criminal conduct, this is not required. Instead, the Plaintiff must prove that the defendant had reason to know of the facts which created a substantial, unreasonable risk of physical harm. “[I]t is not enough that a defendant had reason to appreciate the severity of the risk; the defendant must have actually appreciated the severity of the risk before consciously disregarding it.” Id. at 693. This is, of course, a very high standard. “Indeed, it will only be the rare negligence case that meets this standard.” Id.

Given the facts of the Swift Transp. Co. case, the Arizona Supreme Court held that the trial courted abused its discretion by committing an error of law when it reached the conclusion that the plaintiff made a prima facie case for punitive damages. Ultimately, the driver’s conduct may have been negligent, or even grossly negligent, but it was not enough for punitive damages. There was no evidence that the driver intended to injure anyone, or was motivated by spite or ill will, and the driver’s post-accident admissions were insufficient to establish that he consciously pursued a course of conduct knowing he created a substantial risk of significant harm to others. In other words, his actions did not amount to the sort of outrageous conduct required to establish an “evil mind.” Even though he was going faster than which may have been prudent under the circumstances, he was still driving at least 10 mph below the posted speed limit, and his actions were not so far outside the realm of reasonable conduct that they may be considered one of the “most egregious of cases” warranting punitive damages. Id. at 694. In fact, speeding alone is recognized by the court as insufficient to support a punitive damages award. The driver’s legal, hands-free use of his cell phone at the time of the accident was not considered to be aggravated or outrageous conduct.  The driver’s post-accident conduct of remaining in the vehicle for five minutes and failing to put out traffic warning devices did not give rise to the level of outrageous conduct. Federal regulations require the driver of a tractor trailer to place traffic warning devices on the road as soon as possible, or at least within ten minutes of being stopped on the highway. Since only five minutes had passed since the original accident, the driver did not violate federal regulations. Even if he did, his violation of the regulation would be a “far cry from the outrageous or quasi-criminal conduct sufficient to establish an evil mind.” Id.

The Court’s ruling in Swift Transp. Co. v. Carman begs the question as to what level of conduct would give rise to an award of punitive damages in an automobile case. Based on the Court’s opinion, the driver’s conduct must be quasi-criminal in nature, and there must be proof the driver actually appreciated the severity of the substantial risk of tremendous harm to others, and consciously disregarded it prior to the accident. Plaintiff must meet this burden of proof by clear and convincing evidence, which is much higher than the preponderance of the evidence standard which applies in a typical negligence case. As such, the ruling in Swift Transp. Co. v. Carman is proof that Arizona Courts should be reluctant to allow a claim for punitive damages to proceed to a jury, and should reserve the possibility of punitive damages for only the most egregious cases.

Thomas Rubin and Kelley has extensive experience litigating automobile negligence cases including claims for wrongful death and punitive damages. If you require legal assistance or have questions regarding this issue, please feel free to contact Michael G. Kelley at mkelley@trkfirm.com or Brian D. Rubin at brubin@trkfirm.com.

The Collateral Source Rule is Alive & Well in Arizona

Arizona still follows the Collateral Source Rule in tort cases. The Collateral Source Rule provides, in general, that a defendant may not introduce evidence that a collateral source unconnected with the defendant (for example, plaintiff’s health insurer) paid for plaintiff’s medical care or that a healthcare provider accepted a reduced amount for plaintiff’s medical care. The general purpose for the Collateral Source Rule is to prevent a tortfeasor from deriving any benefit from the fact that a plaintiff happened to exercise foresight in protecting themselves by procuring health insurance.

Arizona courts have explained that the reasoning behind the Collateral Source Rule is that a tortfeasor should not escape liability simply because the injured party purchased their own insurance. Further, courts have described that the Collateral Source Rule addresses the competing goals of ensuring that a tortfeasor pays only that amount to the plaintiff to make him/her whole and ensuring that the tortfeasor pays for his/her wrong and does not obtain an advantage by the happenstance that a plaintiff has another source of reimbursement. Since when an injured party receives compensation from another source, either the victim or the tortfeasor will receive a windfall, an Arizona public policy favors providing the victim with that windfall.

As far as applicability is concerned, for the Rule to apply, the compensation paid to a plaintiff must be fully independent of the defendant. The most common application of the Rule in Arizona takes place when an injured plaintiff has some or all of their medical expenses covered by health insurance. That plaintiff, despite payment in full or in part by the health insurer, is able to “board” that amount in the ensuing lawsuit. Moreover, the Collateral Source Rule allows a plaintiff to claim as damage the full billed amount of the medical services he/she received, even if a healthcare provider accepted a reduced amount for those services pursuant to an agreement with the plaintiff’s health insurer. In fact, a defendant is unable to present evidence that neither the plaintiff nor the health insurer would ever have to pay the full billed amount.

Moreover, as it relates to lost wages, the Collateral Source Rule prevents a defendant from showing that the plaintiff received unemployment compensation and similar benefits due to lost time from work.

It should be noted that a defendant’s insurer is not a collateral source because it is not fully independent of the defendant. Therefore, any payments made by the defendant’s insurer to the plaintiff are admissible in the lawsuit. In addition, the Collateral Source Rule does not preclude a defendant from arguing that the medical amounts billed are unreasonable or the care rendered was not necessary. A defendant is still able to present those arguments in the lawsuit.

Thomas Rubin & Kelley has extensive experience in defending a wide variety of negligence actions. Please do not hesitate to contact Brian Rubin (brubin@trkfirm.com) or Michael Kelley (mkelley@trkfirm.com), should you need assistance with any of your Arizona claims.

Punitive Damages in Negligence Cases

In August 2022, the Arizona Supreme Court had an opportunity to clarify the standard for punitive damages in a typical negligence case. The Court in Swift Trans. Co. of Az., LLC v. Carman in and for County of Yavapai, 515 P.3d 685, held that to be entitled to punitive damages in a negligence action, a plaintiff must generally show that the defendant’s conduct was outrageous, oppressive, or intolerable; and created a substantial risk of tremendous harm, thereby evidencing a conscious and deliberate disregard of the interests and rights of others.

The Swift case was precipitated by a tractor-trailer accident which involved multiple vehicles. The Swift Transportation driver was operating the tractor-trailer in the rain while utilizing a hands-free telephone. The driver was apparently on a telephone call at the time and had cruise control set 13 mph below the speed limit.  The driver was also traveling on a downhill sloping curve. The driver attempted to pass a vehicle in the right lane when the tractor-trailer hydroplaned, jackknifed, and ended up blocking traffic in the left lane. Shortly thereafter, another tractor-trailer arrived at the scene and attempted to avoid the stopped Swift Transportation tractor-trailer. Unfortunately, the second tractor-trailer driver was unable to avoid colliding with two other vehicles which resulted in significant injury and death to several other people in the roadway.

In the lawsuit arising from the accident, Plaintiffs asserted a punitive damage claim against Swift Transportation and its driver and sought to secure financial records to support the punitive damage claim. At the Trial Court level, the Judge ruled that Plaintiffs were entitled to the financial records because it found the facts demonstrated that the Swift Transportation driver consciously disregarded the unjustifiable substantial risk of significant harm to others. As a result of this ruling, Swift Transportation filed a Special Action Petition and the Court of Appeals granted jurisdiction. The Court of Appeals denied relief and found the records supported the Trial Court’s finding. The matter was then brought before the Arizona Supreme Court.

The Supreme Court, in its Opinion, initially went through the evolution of Arizona’s standard for punitive damages. The Court pointed out that previous Arizona precedent in a negligence case, specifically Volz v. Coleman Co., 155 Ariz. 567 (1987), found the proposition that the punitive damages standard in Arizona require something more than gross negligence, and that something more is an evil mind. The Volz Court indicated that this evil mind may be shown by: (1) evil actions; (2) spiteful motives; or (3) outrageous, oppressive, or intolerable conduct that creates a substantial risk of tremendous harm to others. Therefore, Arizona law required that absent evidence of evil actions or spiteful motives, the evil mind motivating a defendant’s conduct must be demonstrated by outrageous, oppressive, or intolerable conduct that creates a substantial risk of tremendous harm to others.

The Swift Court next dealt with the rationale for compensatory damages versus punitive damages in Arizona and highlighted the limited availability of punitive damages in Arizona. Specifically, the Swift Court explained that compensatory damages deter negligent conduct. However, the Court pointed out that punitive damages deter and punish outrageous conduct. The Court added that it does not aim to punish and deter all negligent conduct by way of punitive damages, rather, only that conduct which involves some element of outrage similar to that usually found in a crime.

Finally, the Swift Court explained that in negligence cases, outrageous conduct is often the only way to establish the “evil mind” necessary for punitive damages. To establish such an evil mind requires clear and convincing evidence that the defendant’s actions either (1) intended to cause harm, (2) were motivated by spite, or (3) were outrageous, creating a substantial risk of tremendous harm to others. In negligence cases, the Court pointed out that, by definition, there is not an intent to injure the Plaintiff, and a negligence defendant is unlikely to be motivated by spite or ill will. Therefore, the Swift Court held that the outrageousness of the Defendant’s conduct is the only means by which a plaintiff may prove the requisite evil mind for punitive damages in a negligence case.

Thomas Rubin & Kelley has extensive experience in defending negligence cases involving punitive damages. Please feel free to reach out directly to Brian Rubin at brubin@trkfirm.com or Michael Kelley at mkelley@trkfirm.com with any of your questions. We are always happy to help.

Wrongful Death Damages in Arizona

In Arizona, wrongful death lawsuits are slightly different from other personal injury lawsuits. Only certain statutorily dictated individuals can file wrongful death lawsuits and the damages are calculated differently than your standard personal injury lawsuit.

In a garden variety personal injury case, if someone is injured as a result of another person’s negligence, the injured person can file a personal injury lawsuit and can recover their damages. However, if a person is killed as a result of a negligent act, Arizona allows certain family members to essentially step into the shoes of the decedent and file a wrongful death claim. In essence, a wrongful death claim is meant to compensate the surviving family members for the losses they suffered as a result of their loved one’s death. Arizona’s wrongful death statutes govern wrongful death actions in Arizona. In Arizona, a wrongful death suit can be initiated by any of the following survivors of the deceased: (1) spouse; (2) child; (3) parent or guardian; and (4) personal representative of the deceased on behalf of the spouse, child, parent, guardian, or estate. Under Arizona law, these statutes do not allow the following to file a wrongful death suit: (1) siblings; (2) grandparents; (3) same sex partners; and (4) common law spouses. As far as damages are concerned, in a wrongful death lawsuit, a jury awards damages that are “fair and just” that the surviving members have experienced as a result of the death. Per the statute, these losses include: (1) loss of financial support; (2) loss of care, companionship, and guidance; (3) loss of love and affection; and (4) medical, funeral, and burial expense.

It is clear it is difficult to put a price tag on many of these losses. Often, wrongful death damages can be significant. Importantly, damages recovered in a wrongful death action are not subject to the debts or liabilities of the deceased, provided the action is not brought on behalf of the decedent’s estate. Put another way, if the spouse, child, parent, or guardian are awarded damages, no portion of the damages will need to go toward paying off any debts the deceased might have left behind, including, but not limited to, medical expenses.

Defense Verdicts - Brian Rubin, Kristen Briney & Michael Kelley

Congratulations to Brian Rubin and Kristen Briney on their unanimous defense verdict in a wrongful death case following a three-week jury trial in Maricopa County Superior Court!

The suit involved a 2018 accident which took place on the US 60, in Arizona. Specifically, the Thomas Rubin & Kelley client was cut off by an unknown vehicle as she attempted to merge onto the freeway. In an effort to avoid this impact, the TRK client lost control of her vehicle and struck a concrete barrier wall on the right side of the freeway. This caused her to tip over and come to a rest on the shoulder of the freeway. Numerous vehicles behind the now disabled vehicle perceived and reacted to this incident. In fact, one of the vehicles in the far-right lane came to a stop behind the TRK client’s vehicle. At some unknown time shortly thereafter (somewhere between 3 and 8 seconds), a motorcycle being operated by the decedent approached the scene. For some unknown reason, this individual was traveling at a speed too fast for the conditions that existed at the time. When he finally reacted to the scene in front, the motorcyclist applied only his rear brakes. This caused him to lose control of the motorcycle. He separated from the motorcycle a short distance from the vehicle that had stopped in the roadway behind the TRK client. Due to his momentum, it threw him into the rear of that vehicle where he was killed as a result of multiple blunt force trauma.

Various witnesses testified, including witnesses to the accident, a pair of investigating officers and multiple experts. During closing arguments, Plaintiffs’ counsel sought a jury award of over $6 million. After deliberation, the jury returned a unanimous verdict in favor of the Thomas Rubin & Kelley client.

Michael Kelley wins summary judgment in a wrongful death case in Maricopa County!

This case involved a mother who filed a wrongful death lawsuit after her 19-year-old daughter was struck and killed by a motorist while walking across the street.  The Plaintiff sued the driver of the vehicle and both of his parents alleging that they were vicariously liable for the actions of their son under the family purpose doctrine.  The driver was still in high school and lived with his mother during the week, but his father was the one that owned the vehicle. Even though the family purpose doctrine has broad application in Arizona, TRK was able to successfully convince the court that the mother could not be held liable under the family purpose doctrine because she did not furnish the vehicle to her son.  The mother and father were not married, lived in separate households, and provided separate financial support to their son.  While the mother had given her son money for his needs, she never gave him money specifically for gas or maintenance of the vehicle. The mother did have the ability to stop her son from driving the vehicle, but the ability to stop him from driving the vehicle was not equivalent to furnishing the vehicle.  Since the family purpose doctrine only creates liability for the head of a family if they furnish the vehicle to a family member, the mother could not be held liable for the death of the Plaintiff’s daughter. While the Plaintiff could pursue the wrongful death claim against the driver and his father, there was no basis to allow the claim to continue against TRK’s client. 

Automatic Assignment of Bodily Injury Claims Under Arizona's Workers' Compensation Laws

by: Michael G. Kelley

When dealing with a Claimant who has received workers’ compensation benefits, there are two issues which typically arise:

(1)   What is the amount of the workers’ compensation lien?

and

(2)   Has the claim been assigned to the workers’ compensation carrier? Both of these questions can be answered by reviewing A.R.S. § 23-1023, Arizona’s statute which addresses the liability of tortfeasors to injured employees.

The statute states:

23-1023. Liability of Third person to injured employee; election of remedies

A. If an employee who is entitled to compensation under this chapter is injured or killed or further aggravates a previously accepted industrial injury by the negligence or wrong of another person not in the same employ, the injured employee, or in event of death the injured employee's dependents, may pursue the injured person's remedy against the other person.

B.     If the employee who is entitled to compensation under this chapter or the employee's dependents do not pursue a remedy pursuant to this section against the other person by instituting an action within one year after the cause of action accrues, or if after instituting the action, the employee or the employee's dependents fail to fully prosecute the claim and the action is dismissed, the claim against the other person is deemed assigned to the insurance carrier or self-insured employer and all of the following apply:

1.     The insurance carrier or self-insured employer may institute an action against the other person.

2.     Any dismissal that is entered for lack of prosecution of an action instituted by the employee or the employee's dependents shall not prejudice the right of the insurance carrier or self-insured employer to recover the amount of benefits paid.

3.     If the statute of limitations of the claim is one year after the cause of action accrues, the insurance carrier or self-insured employer may file the action prior to one year after the cause of action accrues.

4.     The claim may be prosecuted or compromised by the insurance carrier or the person liable for the self-insured employer or may be reassigned in its entirety to the employee or the employee's dependents. After the reassignment, the employee who is entitled to compensation, or the employee's dependents, shall have the same rights to pursue the claim as if it had been filed within the first year.

C.     The employee or the employee's dependents shall provide the insurance carrier or the self-insured employer written notice of the intention to bring an action against a third party and shall provide to the insurance carrier or self-insured employer timely and periodic notice of all pleadings and rulings concerning the status of the pending action. In any action instituted by the employee or the employee's dependents, the insurance carrier or the self-insured employer shall have the right to intervene at any time to protect the insurance carrier's or the self-insured employer's interests.

D.     If the employee proceeds against the other person, compensation and medical, surgical and hospital benefits shall be paid as provided in this chapter and the insurance carrier or other person liable to pay the claim shall have a lien on the amount actually collectable from the other person to the extent of such compensation and medical, surgical and hospital benefits paid. This lien shall not be subject to a collection fee. The amount actually collectable shall be the total recovery less the reasonable and necessary expenses, including attorney fees, actually expended in securing the recovery. In any action arising out of an aggravation of a previously accepted industrial injury, the lien shall only apply to amounts expended for compensation and treatment of the aggravation. The insurance carrier or person shall contribute only the deficiency between the amount actually collected and the compensation and medical, surgical and hospital benefits provided or estimated by this chapter for the case. Compromise of any claim by the employee or the employee's dependents at an amount less than the compensation and medical, surgical and hospital benefits provided for shall be made only with written approval of the insurance carrier or self-insured employer liable to pay the claim.

E.     For purposes of this section, the commission shall have the same rights as an insurance carrier or self-insured employer.     

By its plain language, subsection D of the statute establishes that a workers’ compensation carrier has a lien on the amount of any settlement or judgment paid to the injured employee. To make sure this occurs, subsection C of the statute requires the employee to provide written notice of her intent to bring a lawsuit against a third-party tortfeasor, and provide the insurance carrier with timely and periodic notice of all rulings in the lawsuit. If the workers’ compensation carrier chooses to do so, it also has the right to intervene in the lawsuit. Workers’ compensation carriers in Arizona typically choose not to intervene in the lawsuit, as they simply enforce their lien by providing notice of the same to the claimant. It is not uncommon for a workers’ compensation carrier to never provide written notice to the tortfeasor that a lien applies to the settlement, so it is important to determine if such a lien applies by reviewing how the medical bills are paid, or requesting this information from the claimant or the claimant’s attorney.

A more interesting development occurs when the injured employee fails to file a lawsuit within one year of the accident. Pursuant to subsection B of the statute, the entire bodily injury claim “is deemed assigned to the insurance carrier or self-insured employer.” Prior versions of the statue did not contain such strict assignment language. When the statute was amended in 2007 the legislature deleted the “shall be deemed assigned” language in its entirety from the statute. This resulted in the Arizona Court of Appeals issuing a now defunct decision in Acosta v. Kiewit-Sundt. In that case, the Court held that even though the injured employee had waited more than one year after the injury to file lawsuit, the claim not barred because the statute no longer automatically assigned the claim to the workers’ compensation carrier. The legislature was paying attention, though, and shortly after this decision amended the statute to its current version which includes a specific directive that the claim is deemed assigned to the workers’ compensation carrier if the injured employee does not a file lawsuit within one year after the cause of action accrues. As long as the workers’ compensation benefits were paid after the amendment of the statute in 2014, the current version of the statute applies, and the employee is required to bring a lawsuit within one year to avoid having the claim being automatically assigned to workers’ compensation carrier.

Even though the injured employee’s claim may have been assigned to the workers’ compensation carrier, the statute still permits the carrier to file a lawsuit against the tortfeasor. The workers’ compensation carrier may also reassign the claim in its entirety to the injured employee, thus negating the effect of the one-year limitation set forth in subsection B of the statute. As such, if a lawsuit is filed more than one year after the injury occurred, it is important for defense counsel to conduct discovery on whether the workers’ compensation carrier has re-assigned the claim to the injured employee. If there has been no reassignment, a motion to dismiss should be filed.

The Arizona Supreme Court has confirmed that injured employees must bring their lawsuit within one year of the accident to avoid having the claim being automatically assigned to the workers’ compensation carrier. In Jackson v. Eagle KMC L.L.C. (Ariz. Sup. Ct. Jan. 2, 2019), the court recognized that “if a person entitled to compensation under Arizona workers’ compensation laws does not file an action against a third person who caused the injury within one year of the action accruing, the action is deemed assigned to the employer or the workers’ compensation insurer.” However, the court ultimately held that the statute did not apply because the Plaintiff’s benefits were paid and administered in Nebraska. Since Nebraska does not have an automatic assignment provision, the Plaintiff was entitled to maintain her claim against the tortfeasor.

It is important to conduct an early evaluation of any claim involving a claimant whose medical expenses have been paid by workers’ compensation. If it has been more than one year since the injury occurred, the injured employee would be barred from bringing the lawsuit unless there has been reassignment of the claim by the workers’ compensation carrier. If there has been reassignment of the claim, insurers and their defense counsel need to be aware that the workers’ compensation carrier has a lien which may apply to any settlement or judgment obtained by the Plaintiff.

Thomas Rubin & Kelley has extensive experience in defending cases involving injured employees, including the proper handling of workers’ compensation liens. Please feel free to reach out directly to Brian Rubin at brubin@trkfirm.com or Michael Kelley at mkelley@trkfirm.com with any of your questions. We are always happy to help.

Arizona's Family Purpose Doctrine

by: Michael Kelley

The family purpose doctrine was first adopted in Arizona in 1919 when the Arizona Supreme Court held that “a father who furnishes an automobile for the pleasure and convenience of the members of his family makes the use of the machine for the above purposes his affair or business, and that any member of the family driving the machine with the father's consent, either express or implied, is the father's agent.” Benton v. Regeser, 20 Ariz. 273, 278, 179 P. 966, 968 (1919). As explained by the court in Pesqueira v. Talbot, 7 Ariz. App. 476, 479, 441 P.2d 73, 76 (1968), though, “[b]ecause of its insecure agency foundation, formulation of a universally applicable test of parental liability under the family purpose doctrine has proven difficult.” As such, the Arizona Court of Appeals set forth the following elements: (1) “there must be a family with sufficient unity so that there is a head of the family;” (2) “the motor vehicle responsible for the injury must have been one ‘furnished’ by the head of the family to a member of the family;” and (3) “this vehicle must have been used on the occasion in question by the family member with the implied or express consent of the head of the family for a family purpose.”  Id. at 480, P.2d at 77.  

The definition of a “family” has certainly changed over time.  In 1984, the Arizona Court of Appeals that a “family” is “not limited to parents and their minor dependent children.”  Brown v. Stogsdill, 140 Ariz. 485, 487, 682 P.2d 1152, 1154 (Ct. App. 1984).  The “family” is broadly defined as “a group of individuals living under one roof and usually under one head,” and may include independent adults living under the same roof, so long as “the family itself is a family unit with a family head.” Id.  The question of whether someone is in a “family” may ultimately be a question of fact which needs to be decided by a jury.  For example, in Brown, the court held that there was a question of fact as to whether the son was sufficiently emancipated to not be considered a member of his parents’ family unit, despite that fact that he paid room and board, and purchased the car with his own money.  However, the court has recognized that not all relationships can create a “family” with respect to the family purpose doctrine.  In Alosi v. Hewitt, 229 Ariz. 449, 450-52, 276 P.3d 518, 519-21 (Ct. App. 2012), the Arizona Court of Appeals held that consenting adults in a romantic relationship did not create liability under the family purpose doctrine.  If fact, the court recognized that the family purpose doctrine “has not expanded beyond the parent-child relationship.”  Id.

There have been many challenges to the family purpose doctrine over the years in Arizona, but all have failed.  In Young v. Beck, 227 Ariz. 1, 3, 251 P.3d 380, 382 (2011), the parents argued that the family purpose doctrine should be abolished.  In particular, the parents argued that under Arizona’s Uniform Contribution Among Tortfeasors Act ("UCATA"), they could not be jointly and severally liable for the actions of their son unless he was their agent or servant.  However, the Arizona Supreme Court held that the legislature did not intend to abolish the family purpose doctrine with the enactment of UCATA.  Instead, the court found that the family purpose doctrine was akin to vicarious liability, and “imputes liability not because of the head of the family's independent fault or breach of a legal duty, but because of “the agency relationship that is deemed to exist between the head of the household and the driver of the family car.”  Id. at 5-6, 251 P.3d at 384-385.   

The parents in Young also argued that the family purpose doctrine should be abolished because it “lacks a viable legal basis or public policy justification, is ‘grossly unfair to any parent [of] a young driver,’ and functions as ‘solely a penalty against wealthy parents.’”  Id. at 6, 251 P.3d at 385.  Relying upon the doctrine of stare decisis, the court denied this request as well.  The court stated, “[t]he doctrine's primary justification is to provide ‘for an injured party's recovery from the financially responsible person - the family head - deemed most able to control to whom the car is made available.’”  Id.  Additionally, the family purpose doctrine was adopted with the public policy goal of providing compensation to accident victims and encouraging parents to ensure that their children operate motor vehicles safely.  “Given the doctrine's long history, social utility in compensating injured victims, and conflicting policy considerations,” the court found “no compelling reason to abrogate the doctrine.” Id.

As it stands, the family purpose doctrine remains a viable legal doctrine in Arizona.  If a parent allows their child to drive an automobile which is furnished, at least in part, by the parent, that parent will be vicariously liable for the negligent operation of that automobile.  This is, perhaps, an over-simplification of the doctrine as there are nuances with respect to what constitutes a “family” or “household”, and whether the vehicle was actually “furnished” to the child for a “family purpose,” but the above analysis shows that Arizona courts will broadly interpret the doctrine to allow injured parties to be fully compensated. 

Thomas Rubin & Kelley PC has extensive experience defending and evaluating automobile liability claims, including the application of the family purpose doctrine.  Please feel free to reach out directly to Brian Rubin at brubin@trkfirm.com or Michael Kelley at mkelley@trkfirm.com with any of your questions.  We are always happy to help. 

Significant Changes to Offers of Judgment Served on/after 1/1/2022

The Arizona Supreme Court modified Rule 68(g) of the Arizona Rules of Civil Procedure by changing the amount of sanctions available when a party rejects an offer of judgment and fails to beat the offer at trial. Under the new version of Rule 68(g), the sanctions against a party who fails to obtain a more favorable judgment than the offer is “twenty percent of the difference between the amount of the offer and the amount of the final judgment.” This change applies to offers of judgment served on or after January 1, 2022. Under the old version of Rule 68(g), the sanctions were the opposing party’s reasonable expert fees and double the taxable costs incurred after service of the offer. The effect of these changes is significant. Indeed, after January 1, 2022, for a defendant to obtain sanctions, the defendant would need to make an offer of judgment significantly greater than the true value of the case. Similarly, a plaintiff with a weak case can make unreasonable offers of judgment to defendants because of the outside risk of a runaway jury.  

Cases Involving Questionable Causation and/or Damages

Consider a case involving a minor rear-end car accident with little property damage to either vehicle, and proof of pre-existing conditions and/or proof that the delta-V of the plaintiff’s vehicle is incapable of causing injury. The plaintiff obtained $3,000 worth of chiropractic treatment over two months and then obtained $50,000 dollars in lien-based pain management intervention. Assume that if the pain management treatment is not recoverable, this case is worth $5,000. Assume a 15% chance that a jury finds it is recoverable, and awards $100,000.  

Under the new rule, if the plaintiff rejects a $5,000 offer of judgment and obtains $5,000 at trial, the sanctions against the plaintiff are zero because 20% of zero (the difference between the offer and the judgment) is zero. Alternatively, if Plaintiff serves an offer of judgment for $50,000 and obtains a judgment of $100,000, the defendant must pay plaintiff $10,000 in Rule 68 sanctions. Clearly, the plaintiff has little to lose by rejecting a reasonable offer of judgment because the sanctions will be little to nothing for trying to get lucky at trial under the new rule.

Cases With Strong Liability Defenses / Likely Defense Verdicts

Consider a wrongful death case arising out of a car accident where the decedent was driving and had a BAC of .08 and struck the insured’s vehicle. Plaintiff argues that the defendant, despite no correlation, is at fault because the insured was driving 8 miles per hour over the speed limit. Assume that the odds of defense verdict are 85% and that the plaintiff’s damages are realistically $500,000. The plaintiff refuses to settle.

Under the new rule, a defense verdict after a $10,000 offer of judgment would yield $2,000 in sanctions against the plaintiff. Under the old rule, however, the plaintiff would have been forced to think twice before rejecting an offer of judgment because the sanctions under this scenario would result in plaintiff owing the defendant tens of thousands of dollars in expert fees and taxable costs. Additionally, under this scenario, if the plaintiff made an offer of judgment for $500,000 (the reasonable full value of their damages that does not contemplate liability defenses) and then ends up with a runaway jury that awards $1,000,000, the defendant must pay $100,000 in sanctions.

Conclusion

Simply put, the new version of Rule 68 decreases the risk to plaintiffs in weak cases while also increasing the risk to defendants. At best, plaintiffs will be disincentivized to settle as many of them have little to lose from a low or defense verdict, and the costs for their gamble will not be borne by them. At worst, the changes may incentivize plaintiffs to demand more from defendants because the costs to plaintiffs to prepare a weak case for trial is substantially less than to the defense given that many fee agreements do not require plaintiffs to pay for their own experts.

The attorneys at Thomas Rubin & Kelley are well-versed in civil litigation. If you require any assistance as to any of your Arizona claims, please do not hesitate to contact Brian Rubin (brubin@trkfirm.com) or Michael Kelley (mkelley@trkfirm.com).    

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