Justia Insurance Law Opinion Summaries

In this case concerning the meaning and application of a standard title insurance policy exclusion (Exclusion 3(a)) designed to cover any defects, encumbrances, or adverse claims created or suffered by the insured in the context of construction lending, holding that this Court's opinion in First American Title Insurance Co. v. Action Acquisitions, LLC, 218 Ariz. 394 (2008), sets forth the proper interpretation and application Exclusion 3(a).In its underlying rulings, the trial court invoked Action Acquisitions to interpret Exclusion 3(a) in the construction lending context. The court of appeals reversed, instead applying the bright-line rule articulated in BB Syndication Services, Inc. v. First American Title Insurance Co., 780 F.3d 825 (7th Cir. 2015). The Supreme Court reversed in part and vacated the judgment in part, holding (1) this Court adopts Action Acquisitions' causation test for Exclusion 3(a)'s applicability; and (2) the court of appeals erred in applying the BB Syndication approach. View "Fidelity National Title Insurance Co. v. Osborn III Partners, LLC" on Justia Law

The Supreme Court vacated the opinion of the court of appeals affirming the judgment of the trial court, after a jury trial, in this tort action for first-party insurance bad faith, holding that the trial court erred in instructing the jury on waiver and mitigation of damages.Plaintiff sued Defendant for insurance bad faith. Defendant denied liability and asked the trial court to instruct the jury on waiver, in the form of a contract waiver instruction, and mitigation of damages. The trial court granted Defendant's request for both jury instructions, and the jury returned a verdict for Defendant. The court of appeals affirmed. The Supreme Court reversed, holding that the waiver jury instruction was misleading and prejudicial to Plaintiff, requiring a remand for a new trial. View "Cavallo v. Phoenix Health Plans, Inc." on Justia Law

The Supreme Court held that while the broad evidence rule is not applicable in Arizona such that that an insurer and/or fact-finder may consider labor depreciation as a pertinent factor in determining the term "actual cash value" in a homeowner's insurance policy, this Court does not categorically preclude application of the broad evidence rule with respect to other homeowners' insurance policies where appropriate.Plaintiffs purchased a homeowners insurance policy from Defendant that did not define the terms "actual cash value" or "depreciation." When Plaintiffs' home received water damage Defendant accepted coverage for the loss. Plaintiffs then filed a complaint alleging that Defendant underpaid them and other similarly situated insureds by depreciating both materials and labor when calculating property damage claims under their respective homeowners' insurance policies. The federal district court certified two questions to the Supreme Court. The Supreme Court answered (1) under the terms of the policy at issue, an insurer may not depreciate the cost of labor when determining actual cash value, and the broad evidence rule does not apply; and (2) there is no bar to application of the broad evidence rule where the terms of the policy do not dictate otherwise in the context of other homeowners' insurance policies in Arizona. View "Walker v. Auto-Owners Insurance Co." on Justia Law

The Supreme Court accepted certified questions from the United States Court of Appeals for the Ninth Circuit in this arbitration dispute, holding that direct benefits estoppel cannot be invoked in a garnishment action to bind the judgment creditor to the terms of the contract because applying the doctrine in this context would contravene Arizona's statutory garnishment scheme.Specifically, the Court answered that in a garnishment action by a judgment creditor against the judgment debtor's insurer claiming that coverage is owed under an insurance policy where the judgment creditor is not proceeding on an assignment of rights, the insurer cannot invoke the doctrine of direct benefits estoppel to bind the judgment creditor to the terms of the insurance contract. View "Benson v. Casa De Capri Enterprises, LLC" on Justia Law

The Supreme Court answered a question certified by the United States Court of Appeals for the Ninth Circuit by holding that, under a policy without a contractual duty to defend, the objective reasonableness of an insurer's decision to withhold consent is assessed from the perspective of the insurer, not the insured.National Union Fire Insurance Company of Pittsburgh, PA, which insured Apollo Education Group, Inc.'s directors and officers for liability up to $15 million under a policy that included no duty to defend the insured if sued. A class action suit against Apollo resulted in an agreement to settle. Apollo refused to consent to the settlement but entered into the agreement. Apollo then sued National Union to recover the settlement amount, alleging breach of contract and bad faith. The district court granted summary judgment to National Union. On appeal, the Ninth Circuit certified the question to this Court. The Supreme Court held that an insurer must, in deciding whether to consent to a settlement, give the matter full and fair consideration, but need not approve a settlement simply because the insured believes it is reasonable. View "Apollo Education Group, Inc. v. National Union Fire Insurance Co." on Justia Law

When asked to decide the rate at which interest on a $7.8 million judgment Plaintiff obtained against the State accrued pending appeal, the Supreme Court held that the interest rate prescribed by Ariz. Rev. Stat. 41-622(F) applied to the judgment.Plaintiff filed this negligence action against the state, and the jury awarded her $7.8 million. The State’s appeal was unsuccessful. While the judgment was supposed to be paid from the State’s Risk Management Revolving Fund, the judgment was erroneously paid from the Construction Insurance Fund (CIF). When the mistake was discovered, the CIF was reimbursed from the Revolving Fund. In 2015, the parties filed cross-motions for summary judgment to resolve the calculation of post-judgment interest. At issue was whether, because the judgment had initially been paid from the CIF, it was subject to the rate of interest prescribed by Ariz. Rev. Stat. 44-1201(B) instead of the lower rate prescribed by section 44-622(F) for judgments paid from the Revolving Fund. The superior court concluded that the lower rate applied. The Supreme Court affirmed, holding that section 41-622(F) applied to the entire judgment, including any portion for which the State may be reimbursed by its excess insurance coverage. View "Glazer v. State" on Justia Law

A policy exclusion for personal liability “under any contract or agreement” does not apply to relieve an insurer of its duty to defend its insured, an alleged builder-vendor, against a claim for negligent excavation brought by the home buyer because the negligence claim arose from the common law duty to construct the home as a reasonable builder would.After rockslides damaged his property, the home buyer sued the alleged builder-vendor, asserting breach of contract, negligence, and fraud-based claims and alleging that the rockslides were the result of improper excavation during construction. The builder-vendor’s insurer declined the tender of defense on grounds that there was no coverage under the relevant insurance policies. The builder-vendor sought damages and declaratory relief. The superior court granted summary judgment in favor of the insurer. The court of appeals reversed, concluding that the policy’s “contractual liability” exclusion did not apply. The Supreme Court affirmed, holding that the contractual liability exclusion did not relieve the insurer of its duty to defend the builder-vendor against the home buyer’s negligence claim. View "Teufel v. American Family Mutual Insurance Co." on Justia Law

Arizona equitable indemnity law does not incorporate the Restatement (First) of Restitution section 78 because it conflicts with Arizona’s general equitable indemnity principles.Michael Bovre rented a vehicle from Payless Car Rental System Inc. Payless offered Bovre supplemental liability insurance (SLI) under a policy provided by KnightBrook Insurance Co. Bovre caused an accident while driving the rental vehicle that injured Lorraine and Robert McGill. The McGills sued Bovre. The parties settled. Bovre assigned to the McGills his claims against KnightBrook and Payless for their alleged failure to provide supplemental liability insurance (SLI) and agreed to an adverse judgment. Thereafter, the McGills sued Payless and KnightBrook seeking to recover the judgment. The McGills and KnightBrook entered into a settlement in which the McGills’ claims against Payless were assigned to KnightBrook, which paid the McGills the $970,000 SLI policy limit. KnightBrook then filed an action in federal court against Payless, asserting an equitable indemnification claim for the $970,000 it paid McGills. Relying on the First Restatement section 78, the district court ruled that KnightBrook was entitled to equitable indemnification from Payless for the $970,000 SLI policy limits. On appeal, the Ninth Circuit certified two questions to the Supreme Court. The court answered the first question as set forth above, which rendered moot the second question. View "KnightBrook Insurance Co. v. Payless Car Rental System Inc." on Justia Law

The United States Court of Appeals for the Ninth Circuit certified certain questions to the Supreme Court regarding what impact, if any, a lender’s full-credit bid made at an Arizona trustee’s sale has on an insurer’s liability under standard form title insurance policies. The policy provisions at issue were (1) Section 2, which provides that coverage continues in force when an insured acquires the property in a foreclosure sale but the amount of coverage is reduced by all payments made; (2) Section 9, which provides that payments of principal or the voluntary satisfaction or release of the mortgage reduce available insurance coverage, except as provided under Section 2(a); and (3) Section 7, which explains how the insurer’s liability is calculated. The Supreme Court answered the certified questions as follows: (1) Section 2 applies when a lender purchases property by full-credit bid at a trustee’s sale; (2) the full-credit bid does not constitute a “payment” under Sections 2 or 9 of the policy; and (3) accordingly, the full-credit bid neither terminates nor reduces coverage under Section 2 or Section 7. View "Equity Income Partners, LP v. Chicago Title Insurance Co." on Justia Law

Arizona's Uninsured/Underinsured Motorist Act (UMA) requires all insurers writing motor vehicle liability policies to also offer underinsured motorist (UIM) coverage that covers all persons insured under the policy. Any exceptions to UIM coverage not permitted by the UMA are void. Insurer in this case sought a declaratory judgment that it had validly denied Insured's UIM claim. Insured was injured while a passenger on a motorcycle driven by her husband, the named insured on a separate motorcycle policy issued also by Insurer. The Supreme Court held (1) the UMA required Insurer to provide UIM coverage for Insured under the auto policy, where Insured's total damages exceeded the amount of her tort recovery from her husband under the husband's motorcycle policy; and (2) the UMA did not permit Insurer to refuse to provide Insured with UIM coverage under her auto policy because she was partially indemnified as a claimant under the liability coverage of the separate motorcycle policy issued by Insured to her husband, whose negligence contributed to her injuries. View "Am. Family Mut. Ins. Co. v. Sharp" on Justia Law