Merkens v. Federal Insurance (CA1 5/21/15)

Explaining a procedural requirement for a bad-faith claim in workers’ compensation.

Merkens received workers compensation benefits after inhaling a toxic substance at work. An IME eventually said she wasn’t harmed so Federal terminated the benefits. She sued it for breach of contract and bad faith. Federal moved for summary judgment, arguing that she first had to challenge its decision before the Industrial Commission. The Superior Court granted the motion; she appealed. The Court of Appeals affirms.

The court first reviews the history of workers’-compensation bad faith. “To date, the Arizona cases addressing a bad faith claim in the workers’ compensation context have involved injured workers who had or were pursuing a compensability determination before the Industrial Commission.” “Here, however, Merkens did not seek a determination from the Industrial Commission that she was entitled to continuing benefits. Instead, she claims she is entitled, in her superior court action, to recover the unpaid compensation and medical benefits related to her injury caused by Federal’s termination of her benefits, as well as related tort damages.”

And that’s why her claim fails. “Even if we assume [bad faith], the finder of fact would have to make a compensability determination to find that Federal unreasonably terminated Merken’s benefits.” But “the Industrial Commission has the exclusive jurisdiction to determine whether the injured worker is entitled to benefits and the amount of those benefits.” Franks (1985), allowing workers’-compensation bad faith, did not – and could not because its constitutional law – change that.

The court also affirms the trial court’s denial of fees, and itself denies costs, on hardship grounds. That would be unremarkable except that the court sees fit to throw in that “the hardship [was] caused by Federal’s decision.” So Federal “caused” Merken to be poor by not paying her money she has shown no right to? And if she did have workers’-comp benefits, that would be enough to defeat a claim of hardship? We wonder what the court thinks the quoted phrase adds to the opinion.

(link to opinion)

Gallagher v. Tucson Unified SD (CA2 5/13/15)

Holding that although a statute requires school districts to do background checks, if they don’t then another statute protects them from the results of hiring known sexual predators to work with your children.

A teaching assistant was convicted of creating child pornography using one of his profoundly-disabled young students. It turned out that the assistant’s last employer had fired him for making inappropriate advances. The student’s parents sued TUSD for negligent hiring and supervision. TUSD won summary judgment based on 12-820.05(B). The parents appealed; the Court of Appeals affirms.

The statute: “A public entity is not liable for losses that arise out of and are directly attributable to an act or omission determined by a court to be a criminal felony by a public employee unless the public entity knew of the public employee’s propensity for that action.” A special action taken earlier in this case established that the public entity’s knowledge must be actual, not constructive. The trial court dismissed the parents’ claim that TUSD was vicariously liable for the assistant’s acts. But they argued that the statute does not apply to their action against TUSD for its own negligence.

The court rules that it does. There was no evidence of actual knowledge. Evidence suggested, the parents contended, that TUSD hadn’t (in violation of a statute) contacted the previous employer; if so, the court indicates, that would simply confirm its lack of actual knowledge. The statute “does not include any language that would limit the public entity’s immunity based on the type of action or inaction by the entity that contributed to the injury.” Because it considers the statute clear the court declines to consider the parents’ arguments based on legislative history, policy, and comparison with other statutes.

The court omits any language along the lines of “this results in asinine policy but it’s the legislature’s fault, not ours.” Although we don’t approve of gratuitous shots at legislators and do approve of respect for statutes, some acknowledgment that the result is problematic would give us greater assurance that the court sees the problem. The suspicion is of course that to bureaucrats their immunity for violations is a feature, not a bug.

(link to opinion)

Glazer v. State of Arizona (5/8/15)

In this case the Supreme Court construes a statute against the plaintiff but finds a way – thanks to interesting tactics by the defendant — to preserve her large verdict.

Glazer’s decedents were killed and she was injured when a car crossed the median and hit theirs head-on. She sued the State because there was no median barrier. The defense was, under 12-820.03, that the lack of a barrier was state of the art when the road was built. The trial court refused to grant the State JMOL on that and the jury found for Glazer. The Court of Appeals affirmed.

Glazer argued, and those courts agreed, that the statute didn’t apply because she wasn’t arguing that the road was unsafe when built in 1967 but that it was unsafe when the accident happened in 2007. The State petitioned for review.

The statute says:

Neither a public entity nor a public employee is liable for an injury arising out of a plan or design for construction or maintenance of or improvement to highways, roads, streets, bridges, or rights-of-way if the plan or design is prepared in conformance with generally accepted engineering or design standards in effect at the time of the preparation of the plan or design, provided, however, that reasonably adequate warning shall be given as to any unreasonably dangerous hazards which would allow the public to take suitable precautions

The Supreme Court concludes, basically, that the statute means what it says. The claim did arise out of the original, barrier-less design. “Nothing in § 12-820.03 precludes its application if injuries occur after material changes to travel over a roadway make the most-recent plan or design substandard.” Requiring that the State monitor all roads and change those that have arguably become substandard is just what the statute was intended to prevent. (That doesn’t apply to regular maintenance and repair, which the statutes specifically require.)

But the statue also requires the State to warn of unreasonably dangerous conditions. The court rules that under these facts Glazer’s claim could have gone forward on that basis. The State claimed that Glazer waived that by not arguing it to the jury (which seems a silly mistake until you start to think about what “suitable precautions” she could have proved the Glazers would have taken). “But the proponent of an affirmative defense . . . [is] required to prove . . . compliance with all aspects.” The State also, picking up on Glazer’s problem, argues that no warning would have enabled “suitable precautions” but it “failed to present any evidence to permit the jury to make that determination” (apparently the plaintiff’s approach lulled it into thinking it needn’t address the issue). The State did not ask for a new trial so the court can’t now give it one; the trial court’s ruling (though based on the wrong reason) was not error so the court affirms.

Justice Bales dissents from the first part of this, agreeing with the lower courts, but concurs with the second.

(link to opinion)