Category Archives: Arizona

ARIZONA BUSINESS OWNERS MUST READ INSURANCE RENEWALS CAREFULLY

The Arizona Department of Insurance issued a regulatory bulletin noting that commercial policy holders are only entitled to 30 days’ notice of changes or reduction in coverage.  This does not leave a whole lot of time to shop.

The bulletin stresses that mere warning of possible changes is not enough. The communication must be “sufficiently specific to allow policyholders to make an informed decision”. Nevertheless, notice is considered given if the “insurer delivers new policy terms and conditions thirty days before the expiration of the policy”.

So, thirty days before renewal you might get (or get online access to) a renewal package and a bill. If you are like most business owners and professionals, you have enough to do taking care of clients and customers. It would be normal to look for the bill and make sure it gets paid, but otherwise ignore the other stuff. This could be a costly mistake. It is important to compare the renewal offer to your current coverage to make sure there are no changes. Contact your broker or the insurance company promptly if there are any discrepancies or if you have any questions.

DON’T FORGET THAT OLD CREDIT CARD BALANCE – THE BANK HAS MANY YEARS TO SUE

The typical credit card agreement requires that you make a minimum monthly payment. If you miss a monthly payment, the issuer can declare a default and demand immediate payment of the full balance (legal jargon: “accelerate”) with fees, etc. But what if the bank just lets it slide?

In Arizona, the bank has six years to sue on credit card debt (A.R.S. § 12-548(A)(2)).  In a case decided Thursday, the Arizona Court of Appeals said that the six-years do not start to run until the bank notifies the consumer that it has elected to accelerate.

The consumers missed a payment in 2007, made their last payment in 2008, and the balance was charged off. The bank eventually assigned the debt to a company that sued the consumers in 2014. The consumers argued that that the six years started to run when they first missed a payment in 2007. The Arizona Court of Appeals said the clock does not start until a demand for payment in full is issued.

The court said that this rule is not bad for consumers because it gives space to work things out if the consumer falls behind. The court said banks are unlikely to ignore dormant accounts just to allow interest to pile up. The court mentioned that the consumers might have “equitable” defenses (laches) if unreasonable delay by the bank is prejudicial. The burden of proving an equitable defense would be on the consumer and I would not count on it.

So just because you haven’t heard anything for a few years does not mean you’re off the hook.

Mertola v Santos (3/2/2017)

AZ COA2: TENANT CANNOT ENJOIN LANDLORD FROM EVICTING

A dispute arose over the terms of a commercial lease, and the landlord sued the tenant for certain operating expenses. The tenant then stopped paying rent and sought a preliminary injunction against any eviction proceedings. The landlord responded with an amended complaint for forcible detainer (eviction). The trial court granted the preliminary injunction and denied the eviction. Appeal ensued.

The Court of Appeals, Division 2, reversed, holding that the trial court did not have authority to enjoin eviction. The Forcible Detainer statute, A.R.S. §12-1171 et. seq., gives the landlord the right to an expeditious adjudication, and “the only issue shall be the actual right of possession”, A.R.S. §12-1177(A). Since claims for equitable relief inject additional considerations, such as relative hardship to the parties, a request for an injunction runs afoul of the express language of the statute.

Tucson Lot 4 v Sunquest Info. Sys (11/22/16)

AZ APP 1: OFFER OF JUDGMENT NEED NOT BE REASONABLE TO TRIGGER RULE 68 SANCTION

Parents sued an emergency room physician for malpractice after their son died from a methadone overdose. The defendants made a Rule 68 offer of $10,000.00. The jury found in favor of the doctor.

The parents argued that they should not have to pay the Rule 68(g) sanctions because the offer was made in bad faith. They asserted that the amount offered was not reasonable if measured against the damages that would have been awarded if they had won.

The Court of Appeals held that there was no standard of reasonableness in the rule,  that the sanctions are “both mandatory and punitive”, and that “it is solely within the purview of the parties to prudently evaluate their causes of action and defenses”.

Stafford v Burns (Nov. 29, 2016);    Ariz. R. Civ. P. 68

COURTS TACKLE HOCKEY FAN FIGHTS

I am admitted to the bar in two great states, Arizona and New York.

I have enjoyed hockey since my youth. I well remember listening to Marv Albert call Rangers’ games on our small radio. There were only six teams in the league, New York being the southern-most. That I would one day attend NHL games in Glendale, AZ, was beyond all imagination.

So as I often do when I am not diligently pursuing my clients’ matters, I was amusing myself by reading the output of appellate courts (I admit it: I’m sick). I discovered that, on the same day, courts in both states issued opinions about hockey fan fights.

A youth hockey tournament of 13-year-old players took place in Rome, New York, a/k/a the “Copper City”. The spectators were mostly relatives of the players. The game was marked by on-ice fisticuffs and ejection of one of the coaches.

After the game, two female spectators got into a fight. Although the opinion does not tell us their relationship to the on-ice combatants, it does bring to mind Sara Palin’s speech about hockey moms and pit bulls with lipstick. In the ensuing melee, the plaintiff tried to break up the fight only to get clocked by one woman’s brother.

The plaintiff sued the youth hockey association for failing to maintain order and to enforce its “zero tolerance” policy. New York’s high court held that the criminal conduct of the adults was not a foreseeable consequence of the league’s failure to eject any particular spectator, and so the league was off the hook.

Pink v Rome Youth Hockey Assn (Oct. 25, 2016).

Meanwhile, back in the “Copper State” of Arizona, a Mr. Franklin was intoxicated at a hockey game and began to direct insults and profanities as some of the other spectators. One Blanchard felt a “thud” on his head, and turned to see Franklin making obscene gestures and otherwise acting in a disordered manner. Blanchard punched Franklin in the head, Franklin then spit on Clemett, and Clemett responded by punching Franklin twice in the head.

Franklin then sued Blanchard and Clemett (in New York they call that “chutzpah”). Blanchard and Clemett raised the defense of Franklin’s drunkenness. By Arizona statute (A.R.S. § 12-711), you can’t collect anything for your injury if you are at least half at fault due to intoxication. The judge instructed the jury on this law and Franklin got zilch.

Franklin told the Arizona Court of Appeals that the jury instructions violated a provision in the Arizona constitution that requires questions of contributory negligence to be decided by a jury. The Court of Appeals found that there was “ample evidence Franklin was under the influence of an intoxicating liquor”, and that the jury properly applied the intoxication defense. So, for now, Franklin still gets zilch, and owes appeal costs to boot.

Franklin v Clemett (Oct. 25, 2016).

So in the Empire State and the Copper State, from the Copper City to the Valley of the Sun, players play their hockey, fans get out of hand, and justice is dispensed. It makes me feel somehow whole and connected.

AZ APP 1 : HOA BOARD CANNOT BAN DISSENTING DIRECTOR FROM EXECUTIVE SESSIONS

 

How very good and pleasant it is, when kindred live together in unity! (Psalm 133:1 [NRSV]).

And how nasty it can get when HOA board members can’t get along!

An HOA board member sided with a former association employee who alleged misconduct by the association’s general manager. The allegations were contained in emails that the board reviewed in executive session. The board voted, in executive session, to disavow the email. The dissenting director then proceeded to read the email aloud during public session, prompting an abrupt adjournment. The association’s attorney recommended that the association exclude the dissenting director from future executive sessions, and the board approved a motion to that effect.

After the dissenting director was reelected, the board offered to permit the dissenting director to attend executive sessions if she would agree to keep the discussions confidential. The dissenting director refused, and contended that the offer required that she admit to wrongdoing.

The dissenting director went to court and asked for a preliminary injunction requiring the board to allow her into executive sessions. The Superior Court declined to issue the preliminary injunction, but today the Arizona Court of Appeals reversed.

The appeals court said that the association did not have the authority to blanket ban a director from executive sessions. By doing so it prevented her from participating in management of the association’s affairs as required by statute. The board argued that the board, minus the dissenting director, was simply a special committee, which is allowed by law. The court did not buy that argument. The court noted there was no evidence that any special committee was formed, and that it would be improper to form a committee for the sole purpose of excluding a single director from the board’s deliberations.

The court also noted that the only procedure provided by the association’s governing documents for removal of a director was a recall election. Arizona statutes would have allowed the association to provide other or additional removal procedures.

The court did say that, in other cases, limited exclusion of a director from executive session might be allowed to address the director’s conflict of interest, or alleged misconduct, or litigation involving the director.

The cost of all this to the association is yet to be determined. The Court of Appeals awarded attorneys’ fees to the dissenting director for the appeal only. Whether fees will be awarded for the entire case is to be decided at a later date.

McNally v Sun Lakes (Oct. 13, 2016).

AZ APP 2: LESBIAN SPOUSE EQUAL TO MAN AS PRESUMPTIVE PARENT OF CHILD BORN DURING MARRIAGE

A same-sex couple got married in California. They made a written agreement to have a child by artificial insemination and to be equal parents. After pregnancy was achieved, the couple moved to Arizona. After the child was born, the biological mother returned to work while her spouse stayed home to care for him. Two years later, while Obergefell was still pending in the federal courts, the couple split and petitions for dissolution and parenting were filed in Arizona state courts.

After Obergefell was decided, the Superior Court ruled on a preliminary question of parental rights. Recognizing the importance of the questions, the Court of Appeals, Division Two, accepted special action jurisdiction and issued its opinion today.

A.R.S. § 25-814 states that “a man is presumed to be the father of a child” if the child is born during the marriage. The statute goes on the provide that the presumption “shall be rebutted by clear and convincing evidence”.

The three judge panel ruled that under Obergefell, the only way to constitutionally apply the statute is to apply it in a gender-neutral way. The court also found that that the biological mother was estopped from attempting to rebut the presumption of parenthood. The court found that it would not be equitable to entertain any attempt at rebuttal in light of the couple’s written agreement, written commitment to seek second parent adoption (which was not then available in Arizona), wills recognizing the child as beneficiary, and the fact that the spouse stayed home to care for the child.

The court also concluded that “having two parents to love and support” him was in the child’s best interest.

McLaughlin v Jones (October 11, 2016).

AZ APP 1: BAD FAITH DOES NOT REQUIRE AN EVIL MIND

A motorcyclist was injured in a collision with a car that he claimed stopped short in front of him. The driver of the car had no insurance, so the biker put the claim to his own carrier under his uninsured motorist coverage. The policy limit was $100K. The injuries included an open comminuted tib-fib fracture, a clavicle fracture, and a rotator cuff tear. Medical expenses were $115,667.

Claims staff denied the claim, viewing the motorcyclist as 100% at fault. This does not seem surprising in a rear-end collision case, but the biker’s attorney submitted witness statements indicating that the car was driven erratically and that some fault rested with the car’s driver. Claims staff never interviewed the driver of the car, nor did they interview the other witnesses.

The motorcyclist sued the carrier. An arbitrator found that the damages were $950K, that the car driver was 40% at fault, and that the motorcyclist was entitled to the policy limits.

A jury trial of the motorcyclist’s bad faith claim ensued. The jury awarded $500K as compensatory damages on the bad faith claim and an additional $1 million in punitive damages.

The Court of Appeals, Division One, upheld the bad faith claim but vacated the punitive damages award. The court held that bad faith is not enough to trigger punitive damages. The court noted precedents limiting punitive damages to the most egregious cases where there is proof that the defendant engaged in reprehensible conduct with an evil mind.

The court reviewed the practices of the of the motorcyclist’s insurer, which urged its claims staff “manage the gap” by “paying what we owe” through “quality file handling techniques” while emphasizing “customer satisfaction”. There was no clear and convincing evidence that that insurer had the requisite “evil mind”.

Sobieski v AM Standard (9/29/16)

To see what an evil mind is like, read  Nardelli v Metropolitan (5/1/2012).

AZ SUPREME: NON-HOSPITAL PROVIDER’S LIEN ON TORT RECOVERY WAIVED UNLESS RECORDED WITHIN 30 DAYS OF FIRST SERVICES

The Arizona Supreme Court held that that the term “within thirty days after the patient has received any services relating to the injuries . . .” found in ARS § 33-932(A), means that the lien is lost if it is not recorded “within thirty days after first providing services” (emphasis supplied). This reversed the Court of Appeals, which allowed the lien for services provided within thirty days prior to perfection. The Supreme Court found that the stricter requirement promoted the legislature’s goal of giving adequate notice to personal injury defendants and their insurers. The Court also noted that hospitals, which can perfect their liens within thirty days of discharge, are differently situated because their involvement ends at discharge, while non-hospital providers may provide ongoing care throughout the pendency of the tort claim. So in this case, the late filing non-hospital provider is out of luck.

 

Premier Physicians Group v Navarro (Aug. 30, 2016)

 

 

SALESPERSON CAN BE INDEPENDENT CONTRACTOR; BROKER OFF HOOK FOR CRASH

There’s a lot riding on the question of whether someone is an employee or an independent contractor: eligibility for benefits, tax status, workers’ compensation, and liability, to name a few. The Arizona Court of Appeals, Division One (Phoenix), took up the question of whether a real estate salesperson can be an independent contractor of his or her supervising broker.

A real estate salesperson was returning from a sales appointment when his vehicle crossed the center line and hit a truck. The widow of the truck driver sued the salesperson’s broker on the grounds that the broker, as the employer, was liable for the salesperson’s negligence. The broker contended that the salesperson was an independent contractor. The widow argued that the law requiring licensed salespersons to work under licensed brokers makes the salespersons employees.

The Superior Court and the Court of Appeals ruled that the salesperson was an independent contractor. The court said the law requires the broker to supervise the salesperson’s real estate activities, but does not create the kind of control that would make the broker responsible for the salesperson’s negligent driving.

The Court of Appeals also noted that the definition of “employee” for other purposes, such as workers’ compensation, might be different because of the special definitions found in various statutes.

Santorii v. Martinezrusso (Aug, 23, 2016)

Business owners should know that the Arizona Legislature recently created a “a declaration of independent business status” that proves independent contractor status if signed by the contractor. The statute lists various elements that must be included in the declaration. The declaration is not mandatory. Someone can be an independent contractor without it, but a valid declaration will help to cut off debate in many cases.