This is about the extent to which the nature of an insurer’s business practices can make it liable for punitive damages in a bad-faith case.

Plaintiff, riding a motorcycle, was seriously injured when he hit an uninsured car that slowed suddenly in front of him. He made a UM claim to Defendant. Its claims rep talked to the car’s driver, who claimed that she signaled a turn and had to slow for a pedestrian. The representative didn’t talk to the three motorcyclists with Plaintiff, who would have cast doubt on the driver’s story, on the theory that they would be “biased” – in other words, that they would have cast doubt on the driver’s story. (Plaintiff himself didn’t remember what happened.) The representative assigned 100% of the fault to Plaintiff and closed the claim. A year later, Plaintiff’s lawyer sent a policy-limits demand; a new claims rep reviewed the file, didn’t interview any of the witnesses, and denied the claim again. Plaintiff sued for breach of contract; the car driver was found 40% at fault. That was enough to exceed Defendant’s limits, which it paid. Plaintiff then sued for bad faith; a jury awarded compensatory damages and $1 million in punitives. Defendant appealed.

The Court of Appeals affirms the compensatory damages. Plaintiff had “presented sufficient evidence from which the  jury could conclude that [Defendant’s] investigation of the claim was not reasonable.”

The real issue was punitive damages. Plaintiff’s theory on punitives was that the claims reps denied it because of “undue pressure . . . to promote company profits at the expense of insureds.” Plaintiff relied on Nardelli, which allowed punitives when the company made the income and even the job of each claims rep contingent on strictly limiting each claim. Plaintiff contended that various aspects of Defendant’s practices were as bad; examining them at length (“each case will depend on its own distinct facts”), the court disagrees.  “An insured seeking punitive damages must show clear and convincing evidence that the insurer’s concern for profits drove the company to breach its duty . . . .” There was no evidence that, as in Nardelli, adjusters were pressured to reduce claims for reasons of profit. Their manger was given goals and strategies for monitoring claims but “keeping statistics on resolution of claims and looking to their ‘bottom line’ are reasonable internal procedures.” That defendant had a profit-sharing plan for all its employees was not the same as basing adjusters’ pay on their claims payouts.  

Plaintiff also argued that Defendant knew he was in particular need because had been out of work for a year because of the accident. “But knowledge of the harm that denial of a claim will cause an insured, without evidence without evidence the insurer deliberately ignored the insured’s ‘rights and needs,’ is not sufficient to establish . . . ‘evil mind’. . .”  It would be more accurate to point out that the justifiable denial of a claim does not cause harm in any legal sense but the opinion is paraphrasing Linthicum, the author of which paid rare attention to such minutiae.

The court affirms the trial court’s award of Rule 68 sanctions but in light of the reversal of punitive damages remands its award of attorney’s fees for reconsideration.

(Opinion: Sobieski v. American Standard)

The question is “whether an employer owes a duty of care to the child of an employee who contracts mesothelioma from asbestos brought home on the employee’s work clothes.” The answer is “no.”

Plaintiff lived with his father from 1952 to 1966. He was diagnosed with mesothelioma in 2013 and sued the successor of his father’s employer, alleging negligence. Defendant argued that it owed him no duty; the trial court agreed and granted summary judgment. Plaintiff appealed.

The Court of Appeals affirms.The court recognizes, and in fact insists upon, what our courts often still do not: in Arizona duty is based not, as of old, on the foreseeability of  injury but instead on the relationship between the parties and on public policy.

Plaintiff tried to establish a special relationship using property theories. Restatement (Third) 54 imposes a duty on landowners for “artificial conditions or conduct” posing a risk of harm to persons not on the land. But, this, according to the Restatement, is “special application” of Rest. 7, which imposes a duty on everybody whenever there’s a risk of harm, which effectively writes “duty “ out of the law, and which our Supreme Court has rejected for that reason. Restatement (Second) 371 is similar to 54 but requires that the landowner realize or should realize that his activity poses an unreasonable risk. “Section 371 thus hinges on foreseeability, which is not part of the duty analysis under Arizona law. . . . We thus decline to apply” it. Burns v. Jaquays (1987) discussed liability for asbestos blown from one property to another, which Plaintiff argued also applied to his case, but the court says that Burns was not a negligence or duty opinion.

“A duty of care can also originate in public policy arising from statutes or common law . . . . Absent either, we typically will not find a duty based in public policy.” Plaintiff did not cite statutes or common law other than as mentioned above. He argued instead that he satisfied some additional public-policy factors mentioned in Bloxham (2002) (which in turn had quoted them from an out-of-state case). The court disagrees, being primarily concerned with the huge and unlimited liability involved in giving a claim to anyone who is around anyone who was on anyone else’s property and allegedly came into contact with some substance.

The mesothelioma industry has litigated these “take-home exposure” cases in other jurisdictions, with varying results. Plaintiff of course cites those favorable to the theory. The court reviews them  and concludes that they based duty on foreseeability of harm. “Those courts that do not focus on foreseeability have declined to find a duty.”

(Opinion: Quiroz v. Alcoa)

The court concludes that real-estate salespeople are not employees of their brokerage for tort purposes.

A real-estate salesman, while on the job, caused a car accident that killed Plaintiff’s decedent. She sued the brokerage firm for which he worked on the basis of  respondeat superior. The firm moved for summary judgment, arguing that the salesman was an independent contractor. The trial court granted the motion; Plaintiff appealed.

The Court of Appeals affirms.

Plaintiff cited R4-28-1109(D) of the Administrative Code: a broker “is responsible for the acts of all . . . salespersons . . . acting within the scope of their employment.” But other regulations require the broker to supervise only licensed activities and the handling of forms and records, so “a broker’s responsibility is more limited than that of an employer that supervises all aspects of an employee’s work.” In addition, though real-estate salespersons are “employees” for purposes of workers comp and unemployment, the Arizona Supreme Court has declined to apply that to tort law;  “cases arising under . . . social legislation are not necessarily authorities for principles giving rise to common law liability . . .”

Plaintiff cited an illustration from Restatement §220 (elements of employer-employee relationship) to the effect that a real-estate salesman who causes an accident makes his broker liable but not his principal. The court says that the point of the illustration is the part about the principal, for purposes of which it simply assumes that the broker is an employee.

The court also declines to hold that Defendant had a non-delegable duty. Nothing in Arizona law requires even a duty, much less a non-delegable one.

Plaintiff also contended that in this particular case there was a question of fact about the relationship. The court, after reviewing the facts, disagrees.  

(Opinion: Santorii v. MartinezRusso)