A party here pays the price for skirting the rules in what it probably thought was a clever way.

The defendants filed a Notice of Non-Parties at fault that was broad, vague, and that had the effect of hiding their defense rather than disclosing it. The trial court struck the defense and entered summary judgment for the plaintiff.

Cendejas negligently started a fire that burned down the house of Scottsdale’s insured. Scottsdale, after paying the claim, sued Cendejas. Cendejas named, as non-parties at fault, a contractor “to the extent that it performed any work . . . which may have caused or contributed to the fire,” “any subcontractor” on the same basis, and “any building inspector” “to the extent that . . .[inspection’] failed to determine [sic] an inappropriately installed building component to the extent such components are determined to have caused or contributed to the fire.”

After the deadline for non-party-at-fault notices had expired, defendant’s expert (Joe Sesniak – a crackerjack witness, by the way) opined that the fire spread because the attic installation had been installed backwards. Sesniak had done his investigation – and had presumably come to this conclusion – years before. This had not been disclosed, so the court granted Scottsdale’s motion to strike it.

Rule 26(b)(5) requires that the notice “provide the identity, location, and the facts supporting the claimed liability” of the no-party at fault. Although not entirely grammatical, the rule is  pretty clear.

The justifications that the defense tried to offer for its Notice  mirror those that lawyers presumably have in their minds when they file such things. The court pointed out what should go without saying but obviously doesn’t. No, the notice isn’t good enough simply because it does describe, more or less, what turns out later to the be defense. No, it isn’t good enough because the other side could eventually have found the defense by doing discovery into all the people and subcontractors who “may have contributed” to the fire because of a problem with some “building component.” No, the non-party-at-fault statute doesn’t give you the absolute right to point the finger at somebody else whether you obey the procedural rules or not.

The court does indicate, as prior cases have held, that late notice because of justifiable late discovery of the non-party defense may be allowable.

The court decided that the trial judge had calculated pre-judgment interest from the wrong date and remanded for recalculation. The case will still cost the defendant’s carrier nearly $100,000 more than the original claim.

It would be nice to think that this opinion will stop the practice of filing ambiguous, obscure, catch-all non-party notices. But we know too many lawyers who aren’t that nice.

You still can’t fight City Hall – especially when its County and State Hall.

Koepnick leased state trust land between Apache Junction and Florence for agricultural use. Pinal County wanted a right-of-way over the property for a new road. But to get one it would have had to pay Koepnick over $750,000 for improvements he had built that would be disrupted by it. Then the Commissioner of the State Land Department – our friend Mr. Winkleman from a few posts ago – decided to reclassify the land as “commercial” rather than “agricultural.” This had the effect of cancelling the lease and allowing the County to do what the documents arguably showed it wanted to do: get the right-of-way without paying Koepnick anything. Koepnick cried foul but the Arizona Land Board of Appeals and the Superior Court affirmed the decision, hence this appeal.

Koepnick’s principal argument, apparently, was that the Commissioner couldn’t declare the land “commercial” because that was the wrong category. The County envisioned that it would largely be given over to residential use. The statutes have three categories: “commercial,” “agricultural,” and “homesite.” Koepnick argued that “homesite” was therefore the proper category.

The court reasoned that before you can live in a house someone first has to build it, building houses is a commercial enterprise, therefore land to be used for homesites is “commercial,” not “homesite.” That is the Land Department’s interpretation of the statutes; the court adopted it, which it may do if the construction  is “reasonable and consistent with statutory language.” How the Land Department’s view is more reasonable and consistent than Koepnick’s is not crystal clear.

Koepnick argued that the government’s activity was the result of a deal between the County and the State to cheat him. But various government employees who had written notes to that effect testified that they were wrong, or misunderstood, or that they don’t think that they meant that though they can’t really recall. Those of you who do government litigation have heard that sort of thing before. If you don’t, you may wonder how it could ever pass the smell test; the answer is that its easier when there’s no jury to do the sniffing.

Koepnick also argued that the Commissioner violated his constitutional and statutory obligations to ensure that Koepnick be compensated for the improvements; under the circumstances of this reclassification, there is apparently no particular prospect of that happening. The court decided that there was a “conflict” between the Commissioner’s duties to the trust and to the lessee that the Commissioner had in this case “resolved” in a manner within his discretion. How the Commissioner’s voluntary act creates a conflict in his duties that allows him to ignore some of them is a bit murky.

This decision seems to have been pretty much a foregone conclusion after both the Board of Appeals and the Superior Court upheld the Commissioner. The court on appeal had to accept the facts established below. Courts routinely adopt the relevant agency’s interpretations of the statutes it works with. Does that mean that Max Koepnick wasn’t shafted by crafty bureaucrats? Well, appellate decisions don’t answer every question.

Insurance companies complain that our courts are too hard on them. Once in a while, though, something like this comes along.

Monterey, a home-builder, sued one of its subs, BBP Concrete. Federated insured BBP. Federated denied coverage but defended BBP under a reservation of rights. Eventually, Monterey and BBP decided to resolve disputes they had against each other by agreeing that nobody would pay anything to anybody.

Federated then moved to intervene to pursue a subrogation claim against Monterey, arguing that it should recover the costs and fees it had spent defending BBP because Monterey’s claim was, according to Federated, groundless. The trial court denied intervention, figuring that Federated could bring the subro claim as a separate action; the Court of Appeals reversed and remanded with instructions that require the trial court to allow the intervention.

The court held, first, that the settlement between BBP and Monterey did not bind Federated, even though a subrogee stands in the shoes of the subrogor and even though the Monterey-BBP settlement specifically released the defense costs. The court cited cases from other jurisdictions for the proposition that once the tortfeasor is informed of the subrogation rights, they cannot be released by the insured. This is a novelty to Arizona law; whether the cases cited actually stand for that proposition on these facts is an exercise we leave for the reader.

Next, the court decided what Federated really wanted — even though it had never thought to ask for it — was a reasonableness hearing under USAA v. Morris, 154 Ariz. 113, and that Morris required that it get one.  (Morris allows the insured to settle a claim without the insurer’s approval when the insurer reserves its rights.) This is true even though the settlement did not result in any additional liability to Federated. At the hearing the burden will be on Monterey to prove, under the court’s new subrogation law, that it did not have notice of the subro claim (which it clearly did according to the facts recited by the court) and/or that, under Morris, the settlement was reasonable. If it fails to prove these things, Federated can proceed with its claim (which will presumably requre proving that Monterey’s claim was meritless).

This of course gives the insurer the best of both worlds. It can deny coverage yet still prevent or manipulate settlement by using the threat of subrogation for defense costs. And this is done under the cover of a case — Morris — that was supposed to prevent it from doing just this sort of thing.