This opinion is a basic white paper telling practitioners when a cause of action accrues. On negligent procurement and promissory estoppel, the Court holds a cause of action accrues when an insured incurs its own litigation costs in defending an uncovered claim. Simple enough. But there are ways getting around a statute of limitations including the discovery rule. Satamian argued that until he obtained the claim file, he did not know that the excluded watercraft had been identified by the agent. The Court disagrees. A cause of action accrues when plaintiff knows of should have known the what and who elements of causation. The insured knew “who” its agent was from the beginning. When the defense was not picked up, the plaintiff knew what wrong occurred with resulting damages. When an insured incurs costs defending against an uncovered claim, the cause of action accrues and applies to both negligent procurement and promissory estoppel. Under promissory estoppel, a detriment occurs when coverage is denied, and the insured is forced to fund its own defense.  

The Court further knocks down Satamian’s contention that the “final judgment accrual rule” in bad faith cases applies to its negligence and promissory estoppel claims. The final judgment accrual rule in third-party bad faith is limited to cases “in which the alleged injury was exclusively an adverse litigation decision.” The final judgment rule applies in first-party bad faith cases because a final denial is necessary to establish the existence of bad faith. Finally, the Court mentions the assignment to Satamian does not change the analysis because after the assignment, Satamian stands in the shoes of the insured. The Court includes the usual cases we see on accrual: Walk v. Ring, 202 Ariz. 310 (2002); Doe v. Roe, 191 Ariz. 313 (1998); Lawhon v. L.B.J. Inst. Supply Inc., 159 Ariz. 179 (App. 1988); Amfac Distrib. Corp. v. Miller, 138 Ariz. 152 (1983); Com. Union Ins. v. Lewis & Roca, 183 Ariz. 250 (App. 1995); Ariz. Mgmt. Corp. v. Kallof, 142 Ariz. 64 (App. 1984), etc. 

In denying a request for fees, the Court explains it reviewed this case because of its “unique context involving negligent procurement claims, Arizona’s accrual jurisprudence has not been a paragon of clarity; and second, relatedly, RPS and the lower courts erroneously adopted inapposite bad faith jurisprudence to resolve the accrual issues in this case.” A mouthful of words. Not sure what the Court means by “erroneous adopted inapposite bad faith jurisprudence” since each of the lower courts also considered and rejected Satamian’s arguments.

here is the link

Most of this case against the various public entities is dismissed for failure to comply with the notice of claim statute. (The court tells us the minor plaintiffs were dismissed without prejudice and are not subject to the appeal. Remember a minor’s wrongful death claim is tolled. Porter v. Triad of Ariz., L.P., 203 Ariz. 230 (App. 2002)). The notices did not include sufficient facts as to the liability claims. The notices were identical and include broad statements that the defendants failed “to follow all laws, prevent dangerous conditions, to protect against hazards, not to create a dangerous condition, to warn of dangerous conditions, and to otherwise assure the safety of the Sanchez Family claimants.”  Against the State, the notice states the State Dept. of Liquor Licenses issued a liquor license, and renewed the license “despite it being open and obvious through their advertising and website that Billy Jack’s (the bar) seeks to overserve their customers.” The court holds this notice sufficiently states liability facts only against the State. The court of appeals distinguishes Backus v. State, 220 Ariz. 101 (2009) (“sufficiency of facts” requirement applies to liability but not damages). Nothing new here. (There is also a procedural mess caused by multiple judgments that the court has to sort through.)

The more important issue is whether the State has a duty. The court holds the Arizona statutes governing liquor licenses create a duty. By statute, the State extensively regulates alcohol and can suspend a license. Further, the immunity statute grants qualified immunity for failure to revoke or suspend a permit, license, etc. A.R.S. 12-820.02. Since the immunity applies only to negligence claims, plaintiff can still make a claim for gross negligence. (Rather strange to infer a cause of action from an immunity statute.) This draws a dissent from Judge Eppich. Judge Eppich emphasizes most of these statutes cited by Judge Eckerstrom regulate the conduct of the licensee not the State. The question of duty turns on whether a public agency’s conduct is such that it has endeavored to provide specific protection to a particular person. Here, the class is the general public, and Judge Eppich agrees with the state that the statutory authority is akin to general law enforcement powers, which provide no actionable duty to protect any individual member of the public. We expect to see a petition for review.  

The City of Scottsdale owns several swimming pools. In 2016 Neptune complained the City’s contract with a non-profit group called SAC for operating the swimming leagues should be open for bidding. Neptune asserted SAC was not paying a fair value for the contract and violated the Gift Clause. The City ignored this and renewed a three year contract with SAC thus continuing a 50-year relationship. But as that contract was expiring, the City for the first time issued a Request for Proposal. Neptune and SAC submitted proposals. City employees used a grading matrix and initially said SAC’s proposal scored substantially higher. Not true. The City then said it was a virtual tie and came up with other reasons for awarding the contract once again to SAC. Then when this was questioned, the City cancelled the RFP and stated the City was not required to use the RFP process. Neptune filed suit.

The Arizona Supreme Court holds the Gift Clause does not require competitive bidding or accepting the highest bid although the competitive bid process is a factor as to the market value of the license. The focus is on whether a public entity gets more than it gives. The Gift Clause is violated if the “give” and “get” are grossly disproportionate. Public entities may also consider nonpecuniary factors. “In sum, the Gift Clause serves to check mismanagement of public resources, but it does not require a public entity to maximize profits in every transaction.” Neptune did not prove a violation of the Gift Clause. The Court recognized, however, that failing to follow its own rules and cancelling the RFP may violate the public interest and be an abuse of discretion. The RFP is different from an invitation to bid on a contract where a public entity is required to award a contract “to the lowest responsible and responsive bidder.”  An RFP allows for discretion. While the City was not required to award Neptune the contract, “We conclude that disputed issues of material fact exist as to whether the City acted with a ‘fixed intent’ to award the license to SAC throughout the RFP process and engaged in favoritism by canceling the RFP after Neptune submitted the more advantageous proposal.” The Court runs through a list of questionable actions and remands the case for further consideration.  On remand, the trial court has been given pretty good reasons for finding an abuse of discretion.

link to opinion