Automobile Insurance SubrogationAutomobile Total Loss ThresholdsDeductible ReimbursementDiminution of ValueFirst Come, First Served: Subrogating Multiple Claims in Excess of Policy LimitsFuneral Procession Traffic LawsImputing Contributory Negligence of Driver to Vehicle OwnerLaws Regarding Using Cell Phones/Headphones/Texting While DrivingLoss Of UseMed Pay/PIP SubrogationOwner Liability For Stolen VehiclesPayment of Sales Tax After Vehicle Total LossPedestrian and Crosswalk LawsRental Car Company Physical Damage and Loss of Use ClaimsRental Car Company’s Liability Insurance Primary or ExcessSlower Traffic Keep RightSudden Medical Emergencies While DrivingSuspension of Drivers’ LicensesUse of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Federal , State, and Local Governmental EntitiesMunicipal/County/Local Governmental Immunity and Tort LiabilityState Sovereign Immunity And Tort Liability
General Tort Laws/StatutesAnti-Indemnity StatutesContribution ActionsContributory Negligence/Comparative FaultDog Bite LawsEconomic Loss DoctrineParental ResponsibilitySpoliationStatute of LimitationsStatute of Limitations Exceptions
Health Insurance SubrogationHealth and Disability Insurance
InvestigationAdmissibility of Expert TestimonyPre-Suit Disclosure of Liability Policy Limits in Third-Party ClaimsRecording Conversations
Product Liability SubrogationProduct Liability Law
Property Subrogation“Matching Regulations” And Laws Affecting Homeowners Property ClaimsCondominium/Co-Op Waiver of Subrogation LawsDamage to Property Without Market ValueGeneral Contractor Overhead And Profit Payments In First-Party ACV Property Damage ClaimsLandlord/Tenant Subrogation
Subrogation GenerallyAnti-Subrogation RuleCriminal RestitutionMade Whole DoctrineMedical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Workers’ CompensationEmployee Leasing LawsHospital Lien LawsOCIP/CCIP Subrogation In Workers’ Compensation Construction CasesRecovery Of Increased Workers’ Compensation Premiums By EmployerWhich Workers’ Compensation “Benefits” Can Be Subrogated?Workers’ Compensation Subrogation Waiver EndorsementsWorkers’ CompensationWorkers’ Compensation Claims by Undocumented Employees
Automobile Insurance Subrogation
Automobile Total Loss Thresholds
Total Loss Formula (TLF). A vehicle is a total loss when the vehicle’s ACV is equal to or less than the cost of repairs plus the salvage value.
Insurer determines if it is uneconomical to repair vehicle. It then is a salvage vehicle. A.R.S. § 28-2091(T)(4).
Automobile: Pro-Rata. Ariz. Admin. Code § R20-6-801(H)(4). “Insurers shall, upon claimant’s request, include first-party claimant’s deductible, if any, in subrogation demands. Subrogation recoveries shall be shared on proportionate basis with first-party claimant, unless deductible amount has been otherwise recovered. No deduction for expenses can be made from deductible recovery unless outside attorney is retained to collect such recovery. The deduction may then be for only pro-rata share of allocated loss adjustment expense.”
An insurer is not required to add an insured’s deductible or uninsured loss to its subrogation action; maintaining two separate suits (i.e., one by insured and another by insurer) is not considered a “splitting of actions.” Commercial Union Ins. Co. v. Lewis & Roca, 902 P.2d 1354 (Ariz. 1995).
Deductible must be included in any subrogation demand.
Diminution of Value
First Party: Arizona does not allow for first-party recovery, as the courts have determined that an insured’s measure of damages is not the difference in the market value of the auto immediately before and after the collision. Johnson v. State Farm Mut. Auto. Ins. Co., 754 P.2d 330 (Ariz. App. 1988).
Third Party: Courts agree with jurisdictions that have “generally held that the measure of compensation to the owner of a negligently damaged motor vehicle may include the cost of repair and proven residual diminution in fair market value.” Farmers Ins. Co. of Arizona v. R.B.L. Inv. Co., 138 Ariz. 562, 564, 675 P.2d 1381, 1383 (Ariz. Ct. App. 1983). “When the property is repaired or restored, however, the measure of damages includes the cost of repair with due allowance for any difference between the value of the property before the damages and the value after repairs, as well as the loss of use.” Oliver v. Henry, 227 Ariz. 514, 516-17, 260 P.3d 314, 316-17 (Ct. App. 2011) (citing Restatement (Second) of Torts § 928 (1977)).
First Come, First Served: Subrogating Multiple Claims in Excess of Policy Limits
Arizona has not expressly recognized a duty on the part of an insurer to manage policy limits when there are multiple plaintiffs. To the extent there is such a duty, however, an insurer satisfies its duty when it promptly and in good faith interpleads its policy limits into the court, naming all known claimants in the action, and continues to provide a defense to its insured.McReynolds v. American Com. Ins. Co., 235 P.3d 278, 280 (Ariz. App. 2010). The McReynolds case stated:
We think the favored approach to managing multiple claims in excess of the policy limits must include some provision for certainty to insureds, insurers, and litigants short of submitting each case to a jury. In that regard, as a matter of Arizona law, we hold that (1) the prompt, good faith filing of an interpleader as to all known claimants with (2) payment of the policy proceeds into the court and (3) the continued provision of a defense for the insured as to each pending claim, acts as a safe harbor for an insurer against a bad faith claim for failure to properly manage the policy limits (or give equal consideration to settlement offers) when multiple claimants are involved and the expected claims are in excess of the applicable policy limits. Id.
Funeral Procession Traffic Laws
The law allows a funeral escort vehicle driver holding a class D driver’s license and exhibiting a red or red and blue light to (1) direct the vehicles in the procession and other vehicles approaching the procession to stop, proceed, or make any necessary movements without regard to any traffic control device, and (2) exceed the speed limit by up to 15 miles per hour to overtake the procession so it can direct traffic at the next intersection. All other vehicles and pedestrians, except emergency vehicles, must yield the right-of-way to funeral processions. Vehicles in the procession must exercise due care. Ariz. Rev. Stat. § 28-776.
Imputing Contributory Negligence of Driver to Vehicle Owner
Imputed Contributory Negligence Law: Negligence of the driver will not be imputed to or bar recovery of damages by an owner/passenger unless special relationship, such as master and servant or joint enterprise, exists. Reed v. Hinderland, 660 P.2d 464 (Ariz. 1983).
Vicarious Liability/Family Purpose Doctrine: No Vicarious Liability Statute.
Family Purpose Doctrine applies when: (1) there is a family with sufficient unity so that there is a head of the family; (2) the vehicle is furnished by the head of the family to a member of the family; and (3) the vehicle is used by the family member with the implied or express consent of the head of the family for a family purpose. Young v. Beck, 231 P.3d 940 (Ariz. App. 2010), aff’d, 251 P.3d 380 (Ariz. 2011).
Sponsor Liability for Minor’s Driving: A.R.S. § 28-3160: If a minor is guilty of negligence or willful misconduct while driving a motor vehicle, liability will be imputed to the person who signed the minor’s application for a drivers’ license.
The Family Purpose Doctrine is not abrogated by A.R.S. § 28-3160. See Country Mut. Ins. Co. v. Hartley, 204 Ariz. 596, 65 P.3d 977 (Ct. App. Div. 1 2003).
Laws Regarding Using Cell Phones/Headphones/Texting While Driving
Cell Phone/Texting: Ariz. Stat. § 28-914. The new law becomes effective on January 1, 2021. It prohibits the following use of cell phones: (1) holding a cell phone in any way while talking on the phone, including propping it up with a shoulder; (2) watching any kind of video or recording a video, and (3) writing, sending, or reading any text-based communication including a text, instant message or e-mail.
Other Prohibitions: None.
Comments: The following cell phone use is allowed in Arizona while driving: swiping a phone screen to make or accept a phone call. using a handheld cell phone to call 911, talking on the phone if using an earpiece, headphone device or device worn on a wrist, using voice-based communication, such as a talk-to-text function, using a handheld cell phone while stopped at a traffic light or stoplight, and using a GPS system.
Loss Of Use
Loss of Use: Yes. Loss of use is recoverable. Farmers Ins. Co. v. R.B.L. Inv. Co., 675 P.2d 1381 (1983). Arizona courts have not set a standard for calculation of loss of use damages, but follows the Restatement of Torts. Aztlan Lodge No. 1 v. Ruffner, 155 Ariz. 163, 745 P.2d 611 (1987); City of Phoenix v. Bellamy, 153 Ariz. 363, 366, 736 P.2d 1178 (App. 1987), which uses rental value to calculate loss of use damages. R.B.L. at 1384. Case law tends to support that reasonable evidence of rental value alone would be sufficient without actual vehicle rental. No Arizona case specifically speaks on loss of use for total loss vehicles. In lieu of Arizona case law, the Restatement allows loss of use when vehicle is a total loss. Restatement (First) of Torts § 927 (Comment on Claus (b)).
Lost Profits: Yes. As long as the evidence provides some reasonable basis for estimating the amount of lost profits. Gilmore v. Cohen, 95 Ariz. 34, 386 P.2d 81 (1963); Martin v. LaFon, 100 P.2d 182 (1940); Hercules Drayage Co. v. Chanco Leasing Corp., 540 P.2d 724, 727 (Ariz. App. 1975); Pac. Office Automation, Inc. v. Duran, 2017 WL 629245 (Ariz. App. 2017).
Med Pay/PIP Subrogation
Med Pay and PIP: No direct subrogation right. Assignment of personal injury cause of action is prohibited. Allstate Ins. Co. v. Druke, 576 P.2d 489 (Ariz. 1978).
- Carrier can perfect lien against any third-party recovery for Med Pay benefits in excess of $5,000 by recording lien within 60 days after payment with the office of the county recorder where the accident occurred. A.R.S. § 20-259.01(J). Copies of lien with relevant info must be sent to insured and all third parties.
Made Whole: Not applicable. However, § 20-259.01(J) requires insurer to compromise its Med Pay lien “in a fair and equitable manner”.
Statute of Limitations: The two (2) year personal injury statute of limitations runs from the date of the accident. A.R.S. § 12-542. The two (2) year statute of limitations for UM subrogation runs from the date of first payment. A.R.S. § 12-555(D).
Owner Liability For Stolen Vehicles
Key In The Ignition Statutes: N/A
Common Law Rule: The duty of one who leaves his key in an unattended vehicle does not extend to a plaintiff injured in an accident with the converter of the car. Shafer v. Monte Mansfield Motors, 372 P.2d 333 (1962) (this case involves unattended dealership lot).
Payment of Sales Tax After Vehicle Total Loss
First-Party Claims: All insurance policies must make prompt, fair, and equitable settlements applicable to both first and third-party total loss claims. This includes either (1) offering a replacement auto with all applicable “taxes, license fees, and other fees” paid, or (2) making cash settlement which includes all applicable taxes, license fees, and other fees. Ariz. Admin. Code § R20-6-801(H)(1).
Third-Party Claims: Third-party insurers must follow the same rules as first-party insurers. Any deviation from those rules must be supported by documentation giving particulars of the vehicle’s condition, and all deviations must be “measurable, discernible, itemized, and specified as to dollar amount.” Ariz. Admin. Code § R20-6-801(H)(1)(C).
Pedestrian and Crosswalk Laws
A.R.S. § 28-792: Vehicle must yield right-of-way to pedestrian in crosswalk when pedestrian is in vehicle’s half of road or so close as to make it dangerous. Pedestrian must not exit curb and into path of car when it is impossible for vehicle to yield.
A.R.S. § 28-793: Pedestrian crossing outside crosswalk must yield to traffic. At intersections where there are traffic signals, pedestrian must not cross unless they are in a crosswalk.
Summary: Statute that requires pedestrians crossing at places other than crosswalks to yield to vehicles applies to all persons but could not be the basis of attributing contributory negligence to a three-year-old child. Esquivel v. Nancarrow, 104 Ariz. 209, 450 P.2d 399 (Ariz. 1969). In wrongful death action against motorist brought by representatives of pedestrian, it was prejudicial error to not instruct jury as to duty of pedestrian not crossing in a crosswalk. Kauffman v. Schroeder, 116 Ariz. 104, 568 P.2d 411 (Ariz. 1977).
Rental Car Company Physical Damage and Loss of Use Claims
Recovery From Renter: Recovery of physical damage and loss of use are not prohibited or otherwise regulated. Terms of rental agreement control. Collision Damage Waivers not regulated. CDW which states that renter is responsible for part of the damage is enforceable.
Recovery From Third-Party: Case law allows for loss of use recovery by owner of commercial truck leasing company (dump truck). Nothing specifically for rental cars. Proof of the fact of damages must be higher than proof of the extent of the damages. Hercules Drayage Co., Inc. v. Chanco Leasing Corp., 540 P.2d 724 (Ariz. App. 1975). In Hercules, the court allowed loss of use (used interchangeably with loss of profits in the decision) based on the president of a truck leasing drayage (logistics term which involves shipping goods short distances via ground freight) company showing the jury on a piece of paper. He determined the profit per truckload per day for the projected 90 working days the truck could have been used until a replacement truck could be obtained. The Hercules company was in the business of transporting volcanic cinder from Yuma to the San Diego area, so the fact that they were damaged by the taking of the truck is beyond question. Where vehicle from dealer’s lot was damaged, dealer was awarded interest expense while the car was in the repair shop and couldn’t be sold. Farmers Ins. Co. v. R.B.L. Investment Co., 675 P.2d 1381 (Ariz. App. 1983).
Rental Car Company’s Liability Insurance Primary or Excess
Summary: Car rental company’s liability policy is primary up to the state’s minimum financial responsibility limits. Ariz. State. § 28-2166C. Exception exists if the rental agreement states otherwise in 10-pt. font, it is acknowledged by the renter, and this is revealed to the renter at the time a reservation is made online by the renter.
Slower Traffic Keep Right
Statute: A.R.S § 28-721 (b) and A.R.S. § 28-723
Summary: Arizona requires motorists to drive in the right lane, except when overtaking and passing another vehicle proceeding in the same direction; when the right half of a roadway is closed while under construction or repair; on a roadway divided into three marked traffic lane; or on a roadway designated for one-way traffic. Slower traffic must keep right. Arizona requires motorists to drive in the right lane, except when overtaking and passing another vehicle proceeding in the same direction; when the right half of a roadway is closed while under construction or repair; on a roadway divided into three marked traffic lane; or on a roadway designated for one-way traffic. Slower traffic must keep right.
Sudden Medical Emergencies While Driving
Sudden Incapacitation Defense. If some unforeseen emergency or Act of God occurs which overpowers the judgment of the driver, or renders him incapable of control, so he is not capable of independent action or controlling a motor vehicle, and as a result injuries are inflicted upon another or his property, then such driver is not negligent. Goodrich v. Blair, 646 P.2d 890 (Ariz. App. 1982); Garcia v. Saavedra, 2015 WL 2412106 (Ariz. App. 2015).
Loss of control of vehicle must (1) be caused by a physical incapacitation, and (2) have occurred suddenly and unforeseeably. Pac. Employers Ins. Co. v. Morris, 275 P.2d 389 (1954).
Suspension of Drivers’ Licenses
Administrative Suspension: In the event that there is no insurance coverage, it is necessary to file a civil suit with the Clerk of the Superior Court and obtain a judgment against the uninsured tortfeasor. A.R.S. § 28-4141. Failure to produce proof of insurance may result in suspension of the driver’s license and/or registration for three (3) to twelve (12) months. A.R.S. § 28-4135.
Judgment: A damaged party or subrogated insurer can file a certified copy of a final judgment with the department, and the director must immediately suspend the individual’s license. A.R.S. § 28-4072. The license will remain suspended until the judgment is satisfied or if the judgment creditor fails to renew the judgment. A.R.S. § 12-1611.
Contact Information: Arizona Dept. of Transportation, Motor Vehicle Division, Mail Drop 555M, Insurance Unit, P.O. Box 2100, Phoenix, AZ 85001-2100, (602) 255-0072, https://azdot.gov/motor-vehicle-services
Use of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Authority: A.R.S §§ 44-1292 to 1294.
Summary: The insurer must provide the claimant with a written notice attached to the repair estimate that “aftermarket” parts are being proposed for use in the repair of the vehicle. The insurer’s estimate must be in an amount that can be reasonably expected to satisfactorily repair the damage and restore the vehicle to its pre-collision condition. See Regulatory Bulletin 2003-9, 2003 WL 24891856 (AZ INS. BUL.), 2. Additionally, any non-OEM parts must be identified with a brand name or logo, and such name or logo should be left visible if practicable after the installation of the part.
Federal , State, and Local Governmental Entities
Municipal/County/Local Governmental Immunity and Tort Liability
Actions Against Public Entities or Public Employees Act: Public entities are granted absolute immunity for the exercise of a judicial, legislative, or a discretionary function. A.R.S. § 12-820.01 (1984). “Public entity” means the state or any political subdivision of the state. A.R.S. § 12-820(7).
Notice Deadlines: All actions against public entities or public employees shall be brought within one (1) year after the cause of action. A.R.S. § 12-821. Claims against the State shall be filled within 180 days after the action occurs. A.R.S. § 12-821.01. Deemed denied if no response within 60 days.
Claims/Actions Allowed: Liability determined by nature of act performed.
Policymaking vs. Operational: Operational acts concern routine, everyday matters not involving broad policy factors. Policymaking acts involve whether one general course of action over another.
Comments/Exceptions: Absolute immunity granted for (1) Judicial/Legislative functions; and (2) Administrative functions involving government policy. A.R.S. § 12-820.01(A) (No Easy Test). Unless there is gross negligence, qualified immunity granted for actions listed in § 12-820.02(A).
Damage Caps: None. No law shall limit the amount of damages to be recovered for causing the death or injury of any person. Ariz. Const. Art. II, § 31. No punitive damages against the State. A.R.S. § 12-820.04.
State Sovereign Immunity And Tort Liability
Tort Claims Act: Actions Against Public Entities or Public Employees Act. Public entities are granted absolute immunity for the exercise of a judicial, legislative, or discretionary function. A.R.S. § 12-820.01 (1984).
Notice Deadlines: All actions against public entities or public employees shall be brought within one year after the cause of action. A.R.S. § 12-821. Claims against the State shall be filed within 180 days after the action occurs. A.R.S. § 12-821.01.
Claims/Actions Allowed: A public entity is not liable for losses that arise out of an act or omission determined to be a criminal felony by a public employee unless the public entity knew of the employee’s propensity for that action. This subsection does not apply to acts or omissions arising out of the operation or use of a motor vehicle. A.R.S. § 12-820.05.
Comments/Exceptions: If absent proof of a public employee’s gross negligence or intent to cause injury, public entities have qualified immunity for:
(1) The failure to make an arrest or to retain an arrested person;
(2) An injury to the driver of a vehicle that is caused by a violation by another driver; and
(3) Preventing the sale of a handgun to a person who may lawfully possess a handgun, etc.
See A.R.S. § 12-820.02 for other exceptions.
Damage Caps: None.
No law shall limit the amount of damages to be recovered for causing the death or injury of any person. Ariz. Const. Art. II, § 31. No punitive damages against the State. A.R.S. § 12-820.04.
General Tort Laws/Statutes
Prohibits Broad Indemnity for private contracts. Prohibits Intermediate Indemnity for public contracts. Prohibits Additional Insureds for public contracts. Applies to Construction or Architect / Engineer Contracts. A.R.S. §§ 32-1159, 34-226, 41-2586.
Exception to all three statutes: Subcontractor (indemnitor) may indemnify person not a party to the construction contract and who, as an accommodation, enters into an agreement with the subcontractor that permits the subcontractor to enter on or adjacent to its property to perform the construction contract for others.
Pure Several Liability. Generally, defendants are held severally liable, except when tortfeasors are acting in concert or there is an issue of vicarious liability. A.R.S. § 12-2506; Yslava v. Hughes Aircraft Co., 936 P.2d 1274 (Ariz. 1997).
Arizona adopted a pure comparative fault tort system as part of its enactment of the Uniform Contribution Among Tortfeasor’s Act (“UCATA”), A.R.S. § 12-2501, et seq. Since 1988, the doctrine of joint and several liability has been abolished making contribution actions rare under the statute. Bill Alexander Ford v. Casa Ford, 931 P.2d 1126 (Ariz. App. 1996). No right of contribution when a single tortfeasor settles a plaintiff’s claim against him.
Unless acting in concert or hazard wastes involved. There is no right of contribution where a settling defendant’s liability is several only. Contribution is allowed only in rare instances where joint and several liability. PAM Transport v. Freightliner Corp., 893 P.2d 1295 (Ariz. 1995).
Equitable contribution (arising without regard to the contribution statute) is still viable. Mut. Ins. Co. v. American Cas. Co., 938 P.2d 71 (Ariz. 1996).
The statute of limitations is three (3) years from date of payment or judgment. A.R.S. § 12-541.
Contributory Negligence/Comparative Fault
Pure Comparative Fault. Damaged parties can recover even if 99% at fault. Plaintiff’s awarded damages will be reduced by his share of the fault.
A.R.S. § 12-2505.
Dog Bite Laws
No “One Bite” Rule. Owner strictly liable for bites occurring while dog is at large (§ 11-1020) or while in a public place (§ 11-1025). Only defense is provocation. A cause of action brought pursuant to Arizona’s dog bite statute is governed by the one-year limitations period contained in § 12-541, subsection 3. The negligence statute of limitations is two years.
Economic Loss Doctrine
Intermediate Rule. The ELD bars recovery in tort for damage only to a defective product (i.e., economic losses such as repair costs, diminished value, or lost profits), provided there is no damage to person or other property. Three factors must be looked at to determine whether contract or tort law provides the remedy for a product defect which causes damage to the product only: (1) the nature of the product defect that caused the loss to the plaintiff; (2) the manner in which the loss occurred; and (3) the type of loss for which the plaintiff seeks redress. Salt River Project Agric. Improvement & Power Dist. v. Westinghouse Elec. Corp., 694 P.2d 198 (Ariz. 1984) (unreasonable risk of harm), abrogated on other grounds by, Phelps v. Firebird Raceway, Inc., 111 P.3d 1003 (Ariz. 2005). If a defect causes a product to malfunction and the malfunction affects the product which catches on fire and is completely destroyed, the property damage to the product itself would be recoverable in strict tort liability action, since the defect would be unreasonably dangerous to person or property and cause accidental damage to other property. Salt River Project, supra. A plaintiff may recover under tort theory if the loss was the result of an unreasonably dangerous defect in the product supplied by the manufacturer and the loss occurred by fire in a sudden accident which was of the type which could endanger persons and other property. Salt River Project, supra. The gist of a products liability tort case is not that the plaintiff failed to receive the quality of product he expected, but that the plaintiff has been exposed, through a hazardous product, to an unreasonable risk of injury to his person or property. Cloud v. Kit Manufacturing, 563 P.2d 248 (Ariz. 1977) (losses resulting from a sudden accident and those occurring from a slow process of deterioration). However, where economic loss is accompanied by damage to other property, strict tort liability applies. Salt River Project, supra. When a construction defect causes only damage to the building itself, or other economic loss, common law contract remedies alone provide relief. Travelers Indem. Co. v. Crown Corr, Inc., 2011 WL 6780885 (D. Ariz. 2011). Damage to speakers in a stadium being constructed was not considered “other property” such as to fall within the exception to the ELD. Salt River Project Agr. Imp. and Power Dist. v. Westinghouse Elec. Corp., 694 P.2d 198 (Az. 1984).
Willful Misconduct. A parent is liable for a child’s willful or malicious damage to person or property, including theft or shoplifting. A.R.S. § 12-661.
Minor Driving. If minor is guilty of negligence or willful misconduct while driving a motor vehicle, liability will be imputed to the person who signed the minor’s application for a drivers’ license. A.R.S § 28-3160.
Child must be under 18-years-old. Parent’s liability is limited to $10,000.
Independent Tort Action: Arizona does not recognize an independent claim for either negligent or intentional spoliation of evidence. Tobel v. Travelers Ins. Co., 988 P.2d 148, 156 (Ariz. App. 1999).
Sanctions/Adverse Inference: Generally speaking, innocent failure to preserve evidence does not warrant sanction or dismissal. Souza v. Fred Carriers Contracts, Inc., 955 P.2d 3, 6 (Ariz. App. 1997). However, litigants have a duty to preserve evidence which they know or reasonably should know is relevant or reasonably calculated to lead to the discovery of admissible evidence and likely to be requested during discovery or the subject of a pending discovery request. Id.
Issues concerning destruction of evidence and appropriate sanctions therefore should be decided on a case-by-case basis, considering all relevant factors. Id. In doing so, the court noted the destruction of potentially relevant evidence occurs along a continuum of fault and the resulting penalties should vary correspondingly. Id., quoting Welsh v. United States, 844 F.2d 1239, 1246 (6th Cir. 1988).
Statute of Limitations
Personal Property 2 Years A.R.S. § 12-542
Personal Injury/Death 2 Years A.R.S. § 12-542
Breach of Contract/Written 6 Years A.R.S. § 12-548
Breach of Contract/Oral 3 Years A.R.S. § 12-543
Breach of Contract/U.C.C./Goods 4 Years A.R.S. § 47-2725
Statute of Repose/Products N/A N/A*
Statute of Repose/Real Property) 8 Years A.R.S. § 12-552**
Breach of Warranty 4 Years A.R.S. § 47-2725
Workers’ Comp Third Party Case 2 Years A.R.S. § 23-1023(D)
Statute of Limitations Exceptions
*8 Years from substantial completion of improvement to real property; 9 years if defect is discovered in the 8th year. A.R.S. § 12-552.
**None. Previous Statute of Repose was 12 Years after original sale. However A.R.S. § 12-551 was declared unconstitutional in Hazine v. Montgomery Elevator, 861 P.2d 625 (Ariz. 1993).
Health Insurance Subrogation
Health and Disability Insurance
Statute of Limitations: 2 Years. A.R.S. § 12-542.
Subrogation of Medical and Disability Benefits are not allowed. Piano v. Hunter, 840 P.2d 1037 (Ariz. App. 1992). With exceptions for certain claims against uninsured motorists, A.R.S. § 20–259.01 and subrogation rights of political subdivisions required by law to furnish medical care and treatment. A.R.S. § 12–962. Common Fund Doctrine does apply. LaBombard v. Samaritan Health Sys., 195 Ariz. 543, 548, 991 P.2d 246, 251 (Ct. App. 1998).
Admissibility of Expert Testimony
Admissibility Standards: Daubert
Case/Statutory Law: A bill (2010 Legis. Bill Hist. AZ H.B. 2492) was introduced to adopt Daubert standard. It became § 12-2203, which requires expert opinions to be “the product of reliable principles and methods” and requires experts to have “reliably applied the principles and methods to the facts of the case.” It also requires courts to apply the Daubert standard.
Frye/Logerquist is no longer the standard governing the admissibility of expert testimony in Arizona; the Daubert/Kumho Tire reliability test is.
In 2010, Arizona changed the standard from Frye to Daubert. In 2011, the Arizona Supreme Court adopted Rule 702 – identical to the Federal Rule 702 – effective 1/1/12, which says:
A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.
Pre-Suit Disclosure of Liability Policy Limits in Third-Party Claims
Duty To Disclose: No
Failure to Disclose A Basis For Bad Faith: In Arizona, some courts have held that the insured may have an affirmative duty to initiate and effectuate settlement in cases where liability is clear, and the injuries are so serious that a judgment in excess of the policy limits is likely. The Arizona Supreme Court held that an insured must give its insured’s interests “equal consideration” as its own in a third-party bad faith analysis. Clearwater v. State Farm Mut. Auto. Ins. Co., 792 P.2d 719, 722 (Ariz. 1990). The factors to consider are the strength of the injured claimant’s case against the insured; failure to properly investigate the evidence against the insured; failure to inform the insured of a compromise offer; and the amount of financial risk borne by each party for failure to settle. Prior the filing of a lawsuit, insurers do not have to reveal policy limits. There is no statute in Arizona that mandates this. Once a lawsuit is filed then the information regarding the amount of insurance coverage available is discoverable.
One-Party Consent: An individual not involved in or present during a communication must have the consent of at least one party to record an electronic or oral communication. Arizona also permits a telephone “subscriber” (the person who orders the phone service and whose name is on the bill) to tape (intercept) calls without being a party to the conversation and without requiring any notification to any parties to the call. Ariz. Rev. Stat. Ann. § 13-3012(9); § 13-3012(5)(c).
Product Liability Subrogation
Product Liability Law
Statute of Limitations/Repose: 2 years for personal injury and wrongful death. A.R.S. § 12-542.
Liability Standards: Negligence, Strict Liability, Warranty, Other.
Fault Allocations: Pure Comparative. A.R.S. § 12-2505.
Non-Economic Caps/Limits On Actual Damages: No.
Punitive Y/N and Limits: Yes.
Heeding Presumption?: Yes, vanishing presumption. Golonka v. General Motors Corp., 65 P.3d 956, 968-69 (Ariz. App. 2003); Dole Food Co. v. N. Carolina Foam Industries, Inc., 935 P.2d 876, 883 (Ariz. App. 1996).
Innocent Seller Statute: Indemnity Statute.
Joint and Several Liability: No. A.R.S. § 12-2506.
Available Defenses: Misuse; Alteration; Learned Intermediary; Inherently Unsafe Products; State of Art; Preemption; Seatbelts; Alcohol/Drugs; Sophisticated User.
Restatement 2nd or 3rd?: Both.
“Matching Regulations” And Laws Affecting Homeowners Property Claims
Caselaw: Although the “non-matching” term in the policy was unambiguous, there remains a question as to whether the policy’s terms are a violation of the “reasonable expectations doctrine”. Trudel v. Am. Family Mut. Ins. Co., No. CV-12-1208-PHX-SMM, 2014 WL 4053405 (D. Ariz. Aug. 15, 2014).
Condominium/Co-Op Waiver of Subrogation Laws
Associations must maintain property and liability insurance, but the insurance policy must waive subrogation against a unit owner or member of the household of a unit owner. A.R.S. § 33-1253(d)(2).
Damage to Property Without Market Value
Service Value: “He [judge] may consider the cost of the property when new, the length of time it was used, its condition at the time of loss or injury, the expense to the owner of replacing it with another item of like kind and in a similar condition, and any other factors that will assist in assessing the value to the owner at the time of the loss or injury.” Devine v. Buckler, 603 P.2d 557 (App. 1979).
Intrinsic Value: “If goods have no market value, their actual worth to the owner is the test.” Devine v. Buckler, 603 P.2d 557 (Ariz. Ct. App. 1979).
Sentimental Value: “…the trial court … instructing the jury on the measure of damages would be the actual value, based on money loss, of the goods converted, plus interest, but excluding any sentimental or fanciful value, expressly stating the damages could in no case exceed the actual value of the goods, as pleaded by the plaintiff in her complaint.” Jones v. Stanley, 233 P. 598 (Ariz. 1925).
General Contractor Overhead And Profit Payments In First-Party ACV Property Damage Claims
Payment and Depreciation OF GCOP/Sales Tax: If the services of a general contractor are reasonably likely, GCOP must be paid as part of the carrier’s ACV settlement/payment. You can’t require that the cost actually be incurred before paying it. Tritschler v. Allstate Ins. Co., 144 P.3d 519 (Ariz. App. 2006). In Zuckerman v. Transamerica Ins. Co., 650 P.2d 441 (Ariz. 1982), the Supreme Court intimates that GCOP may not be deducted. “Actual cash value” coverage includes any cost that an insured would be reasonably likely to incur in repairing or replacing a covered loss, regardless of whether the insured intended to repair or replace the property. It is an estimate of the needed repairs. Since the determination of ACV is not based upon what the insured actually pays to repair or replace the damaged property, the amount an insured ultimately spends to make needed repairs, if any, is irrelevant. Tritschler, supra.
In Bond v. Am. Family Mut. Ins. Co., 2008 WL 477873 (D. Ariz. 2008), the court found that the policy required the carrier to GCOP in the ACV payments it made. In Lukes v. Am. Family Mut. Ins. Co., 455 F. Supp.2d 1010 (D. Ariz. 2006), the court rejected an argument that an insurer does not have to pay sales tax in an ACV payment unless and until the plaintiff actually replaces the contents.
Arizona has avoided per se rules and has taken a more flexible case-by-case approach, holding that a tenant’s liability to the landlord’s insurer for negligently causing a fire depends on the intent and reasonable expectations of the parties to the lease as ascertained from the lease as a whole. General Accident Fire & Life Assurance Corp. v. Traders Furniture Co., 401 P.2d 157 (Ariz. App. 1981).
In Arizona, the ASR is often the name given to and confused with the common law rule long followed in Arizona, known also as the “Anti-Assignability Rule”, which states that, absent a statute, an assignment of a cause of action for personal injuries against a third-party tortfeasor is void and unenforceable. Harleysville Mutual Ins. Co. v. Lea, 410 P.2d 495 (Ariz. App. 1966). Arizona also follows the more traditional ASR – an insurer cannot subrogate against its own insured to assert the claim of its named insured, even though it doesn’t often refer to it by that name. Transp. Indem. Co. v. Carolina Cas. Ins. Co., 652 P.2d 134 (Ariz. 1982). An entity that is an insured under the liability portion of an auto policy and, therefore, protected by the ASR for claims under the liability policy, can still be subrogated against under the collision portion of the policy. KnightBrook Ins. Co. v. Payless Car Rental Sys., Inc., 2015 WL 1754685 (D. Ariz. 2015). An individual hired to transport a vehicle is not an “insured” under the vehicle owner’s auto policy collision coverage, meaning that subrogation against the hired individual is permitted. Amica Mut. Ins. Co. v. Auto Driveaway Co., 831 P.2d 882 (Ariz. App. 1992). Where a policy expressly limits coverage to the named dealership, an individual who borrows the vehicle from a dealership is not an insured under the dealership’s collision policy, even if the policy extends coverage to the borrowed vehicle. Highlands Ins. Co. v. Fischer, 595 P.2d 186 (Ariz. App. 1979). In Auto Driveaway Co., a shipper’s insurer sued a common carrier, seeking reimbursement of money the insurer paid to the shipper for damage to her auto which occurred while it was being transported by a driver hired by the common carrier. The trial court entered summary judgment for the insurer and the carrier appealed. The Court of Appeals held that the driver of vehicle was not an “insured” under the auto collision policy, therefore, the shipper’s insurer could subrogate against the common carrier. In Fischer, the defendants contracted with a dealership to pay the market value of a substitute vehicle if it were destroyed, and subsequently received a substitute vehicle while their vehicle was repaired. The substitute vehicle was subsequently destroyed in an accident and the Court ruled that the dealership’s collision insurer could subrogate against the defendants because the dealership’s policy expressly limited coverage to the named insured on the policy and the defendants were not the named insureds despite the coverage being extended to substitute vehicles.
An Arizona court can award criminal restitution, to be paid by the defendant, to not only the person directly harmed by a defendant, but also to “any person who suffered an economic loss caused by the defendant’s conduct.” A.R.S. § 13-804.
Arizona courts have recognized that if the individual immediately affected by the defendant’s conduct has their losses paid by an insurer, they have not suffered an “economic loss” under the statute. Therefore, the insurance company indemnifying their insured for losses as a result of a defendant’s criminal conduct is in the same position of economic loss their insured. State v. Morris, 839 P.2d 434 (Ariz. App. 1992). An insurance company can be classified as a victim under Arizona case law.
Made Whole Doctrine
Arizona law does not discuss application of the Made Whole Doctrine in the subrogation context. It does mention and apply the somewhat similar Doctrine of Superior Equities in a suretyship situation, however. Liberty Mutual Ins. Co. v. Thunder Bank, 555 P.2d 333 (Ariz. 1976). The 9th Circuit (which includes Arizona) has adopted the Made Whole Doctrine into federal common law as the default rule with regard to health insurance subrogation. Barnes v. Indep. Auto Dealers Ass’n of Cal. H&W Ben. Plan, 64 F.3d 1389 (9th Cir. 1995). Therefore, under federal common law in the 9th Circuit, absent language to contrary in the Plan, a health Plan cannot enforce its subrogation rights unless the Plan beneficiary is fully compensated and made whole for his or her injuries. Id. Of course, that deals with federal law. Note, however that with regard to Med Pay subrogation, § 20-259.01(J) requires an insurer to compromise its Med Pay lien in a “fair and equitable manner.”
Medical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Collateral Source Rule: Arizona broadly recognizes the CSR. Payments made to plaintiff from other sources are not credited against the tortfeasor’s liability, although they cover all or a part of the harm for which the tortfeasor is liable. Lopez v. Safeway Stores, Inc., 129 P.3d 487 (Ariz. App. 2006).
Recovery Of Medical Expenses Rule: Plaintiffs can submit evidence of and recover the full amount of reasonable medical expenses that they are billed, without any reduction for write-offs or write-downs. The court did not distinguish between Medicare, Medicaid, or private insurance write-offs. A write-off is considered a collateral source. CSR usually applied in cases where plaintiff recovers amounts that he has already been compensated by his insurer, but it applies when, due to a healthcare provider’s gratuitous treatment or write-downs, a plaintiff neither incurs nor is responsible for payment of the reasonable value of medical services, but nonetheless can claim and recover compensation for that value from the tortfeasor. Lopez v. Safeway Stores, Inc., 129 P.3d 487 (Ariz. App. 2006).
Related Law/Comments: Plaintiff may not use CSR in medical negligence case. Defendant can introduce collateral sources and jury can offset any verdict. Plaintiff can then show that recovery is subject to subrogation or lien. Although statute allows the admission of such evidence, there is no guarantee that the jury will necessarily use that evidence in deciding an award of damages. A.R.S. § 12-565(A). In a case of first impression, the Supreme Court held that necessary medical expenses that were paid by an HMO to treat an insured were incurred by the insured within the meaning of auto policy coverage for all reasonable expenses actually incurred by an insured person, even though the insured was not directly and legally liable and would receive a windfall from the auto insurer. Samsel v. Allstate Ins. Co., 59 P.3d 281 (Ariz. 2002). In first-party Med Pay claims, the Med Pay carrier is responsible for paying only the “reasonable expenses incurred for necessary medical services”, and not the original billed amounts. Jimenez v. Progressive Preferred Ins. Co., 2020 WL 2037113 (D. Ariz. 2020).
Employee Leasing Laws
Arizona’s statute dictates that a professional leasing organization is given protection under the Exclusive Remedy Rule as a co-employer of the worker. A.R.S. § 23-901.08. However, in order to be given immunity under the Exclusive Remedy Rule, the parties must be in compliance with various regulations and rules regarding employee leasing.
Hospital Lien Laws
Statute: Arizona Revised Statutes §§ 33-931 – 936 Health Care Provider Liens.
Perfecting Lien: In order to protect a lien in Arizona, the executive officer, licensed health care provider or agent of a health care provider shall:
(1) Before or within 30 days of discharge, record in the office of the recorder of the county where the provider is located, a verified statement in writing setting forth name and address of patient as it appears on provider’s records; name and location of provider; name and address of executive officer or agent of provider; dates or range of dates of services provided by provider; amount due; for providers other than hospitals or ambulance services, to the best of their knowledge, name and address of all persons, firms, corporations and their insurance carriers who may be liable for injuries for which the injured party received treatment. § 33-932(A).
(2) The claimant must mail, within five days of recording the lien, a copy of the lien to the injured party. For providers other than hospitals or ambulance services, the claimant shall also mail a copy of the lien to all persons, firms, corporations and their insurance carriers who may be liable for the injuries for which the injured party received treatment. § 33-932(C).
Comments: A hospital or ambulance service lien that is not recorded within the time prescribed in § 33-932(A) is still effective against any settlement or judgment if the lien is recorded 30 days before the settlement is agreed to or the judgment is paid unless the lien is recorded in a county where liens are accessible on the internet. In those counties, if the lien is not recorded or accessible on the internet at least 30 days before the settlement is agreed to or the judgment is paid, the lien may not be enforced. § 33-932(D). The recording of a lien by a hospital serves as notice to all parties who may be liable, whether or not they are named in the lien. § 33-932(C). The lien does not attach to any workers’ compensation benefits. § 33-935. A release of claims on which an assignment or lien is given is not valid or effective unless the lienholder executes a release of that lien. § 33-934. Once a lien has been satisfied, the lienholder must issue a release of lien or be subject to liability of $100 plus actual damages. § 33-936.
OCIP/CCIP Subrogation In Workers’ Compensation Construction Cases
OCIP Law: No statute or case law specifically dealing with effect of OCIP/CCIP. “Owner-controlled or wrap-up insurance” means a series of insurance policies issued to cover this state and all of the contractors, subcontractors, architects, and engineers on a specified contracted work site for purposes of general liability, property damage, and workers’ compensation. They are allowed on public works projects of over $50 million. A.R.S. § 41-621.
Statutory Employer Law: If an employer retains supervision or control over subcontractor, and the work is “a part or process in the trade or business of the employer,” the employees of such subcontractors are deemed statutory employees of the original employer. A.R.S. § 23-902(B). Such “statutory employers” are entitled to immunity to third-party actions under the Exclusive Remedy Rule. Word v. Motorola, Inc., 662 P.2d 1031 (Ariz. App. 1982), rev’d on other grounds, 662 P.2d 1024; Livingston v. Citizen’s Utility, Inc., 481 P.2d 855 (Ariz. 1971).
Comments: If an employer procures work to be done by a contractor over whose work the employer retains supervision or control, and the work is “a part or process in the trade or business of the employer,” the employees of such subcontractors are deemed statutory employees of the original employer. A.R.S. § 23-902(B). This type of work is further defined as “a particular work activity that in the context of an ongoing and integral business process is regular, ordinary or routine in the operation of the business or is routinely done through the business’ own employees.”
Recovery Of Increased Workers’ Compensation Premiums By Employer
Recovery For Increased Premiums? Undecided.
Statute/Case Law: State of Arizona, et al., v. American Tobacco Company, Inc., et al., 1997 WL 34627233 (Ariz. Super. 1997).
Rule Summary: In Tobacco Litigation, defendant moved to dismiss State’s effort to recovery for increased health insurance premiums arising out of employee’s use of tobacco arguing that it was considered too remote to permit recovery. The court denied the motion, stating, “The Court has found no Arizona law which would justify dismissal of these claims for damages at this stage of the proceedings. Cases from other jurisdictions are not persuasive at this stage of the proceedings because of Arizona’s strong body of law holding that proximate cause issues are primarily issues of fact.” (Defendant’s brief cited Northern States Contracting Co. v. Oakes, 253 N.W. 371 (Minn. 1934)).
Which Workers’ Compensation “Benefits” Can Be Subrogated?
No statute, regulation or case decision on point. Section 23-1023(D) provides as follows:
…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.
“Compensation” includes both disability and medical benefits. Bernhart v. Indus. Commn., 26 P.3d 1181 (Ariz. App. 2001).
As of October 1, 2018, Arizona requires compliance with ODG Guidelines. See the state of Kentucky and the Preamble above for an argument that the subrogated carrier can recover the “case manager’s” fee for development of a “treatment plan,” utilizing the ODG guidelines.
Workers’ Compensation Subrogation Waiver Endorsements
Subrogation Statute: A.R.S. § 23-1023(D)
Waiver Allowed? A.R.S. § 23-1023(D)
Effect Of Waiver Endorsement on Carrier’s Right To Assert A Lien On Claimant’s Recovery: A waiver of subrogation endorsement in the workers’ compensation policy also waives the carrier’s right to “reimbursement” out of a recovery made by the employee. Olivas v. United States, 506 F.2d 1158 (9th Cir. 1974).
Other Applicable Law: None.
Statute of Limitations: 2 Years. A.R.S. § 23-1023(D).
Can Carrier Sue Third Party Directly: Yes, after 1 year.
Right to Intervene: Yes.
Recovery from UM/UIM Benefits: No.
Subrogation Against Medical Malpractice: Yes.
Subrogation Against Legal Malpractice: No.
Recovery Allocation/Equitable Limitations: (1) Litigation Costs; (2) Employer Reimbursement; (3) Balance to Plaintiff.
Employer Contribution/Negligence: No, the contribution lien is reduced by the percentage of the employer’s fault determined by jury (trial, not settlement).
Attorney’s Fees/Costs: No, the lien is not subject to reduction for attorney’s fees.
Future Credit: Yes, the lien is also reduced by the employer’s percentage of fault.
Auto No-Fault: No.
Workers’ Compensation Claims by Undocumented Employees
Statute: The term “employee” includes “aliens.” Ariz. Rev. Stat. § 23-901(6)(b).
Case Law: State court ruling of limited precedential value. Tiger Transmissions v. Industrial Commission of Arizona, No. 1 CA-IC 02-0100 (May 29, 2003).
Comments/Explanation/Other: The term “employee” includes “aliens and minors legally or illegally permitted to work for hire.”