Personal injury settlements are personal and not community property unless the settlement includes damages for economic losses such as earnings or loss of consortium damages. Husband had an unnecessary pacemaker surgery. Husband and wife filed suit against the doctor, hospital, and pacemaker manufacturer and recovered $2 million in compensatory and $5.4 million in punitive damages against the pacemaker manufacturer. (The trial court reduced a $60 million award for punitive damages.) Case then settles for $6.6 million of which $2.2 million was attributable to personal injuries. (We round out these numbers but wonder how $2 million in compensatory damages became $2.2 million. The court also notes the math does not add up and $1.2 million is missing.) Most of the funds were used to fund an annuity, and we guess this was structured to avoid taxes. Wife then files for divorce and argues she is entitled to some of the monies not specifically attributable to husband’s personal injury. The annuity payments went to husband during his lifetime and then to wife for her lifetime. When payments were made before the divorce, the funds were placed in a joint account. Husband argues the monies are all his as his wife’s interest in the funds was contingent upon his death and this arrangement was a postnuptial agreement. The court holds the underlying settlement agreement with the manufacturer does not provide a specific allocation of the settlement monies and the annuity itself is not a postnuptial agreement. The case is sent back to the trial court, and if the trial court cannot allocate, the court should go with the presumption of community property. We expect an actual settlement agreement between the two will happen before then. As for the larger question as to whether punitive damages are community or separate property, the suggestion is to closely at the compensatory damage award and go from there. One point on style: Justice Montgomery’s use of footnotes is distracting and raise questions the court is not answering. The footnotes may be there to swat away the flies, but they cause our minds to wonder where they will land.
State Farm Mut. Ins. Co. v. Orlando (CA1 8.15.23)
The UIM statute, A.R.S. 20-259.01 was the topic of the last post, and now Division 1 has weighed in on whether an insurer can exclude an accident caused by an off-highway vehicle. Plaintiff passenger was riding on an ATV on the dunes outside of Yuma when it rolled. Passenger collected from the driver and then demanded UIM coverage from her insurer State Farm. State Farm’s policy states an “underinsured motor vehicle” does not include an offroad vehicle (nor is such coverage required under Arizona’s Financial Responsibility Act). State Farm argued the UIM statute does not compel coverage for vehicles that are not operated on the highways. Because there is case history agreeing with State Farm but involving uninsured motorist claims, the court distinguishes UM cases because the statute says UM coverage is “subject to the terms and conditions of the policy” and such language is not included when the legislature defined UIM coverage. The court gives us a side-by-side comparison of the UM/UIM statute while informing us the UIM coverage refers to an “accident” without reference to a motor vehicle at all. The court ascribes the difference in language as especially meaningful. The court backs up its analysis by quoting the overly broad statement in Cundiff that there are no exceptions to UIM coverage (except stacking as we discussed last week). The court rules for the insured but agrees with the dismissal of her bad faith claim which was tacked on the coverage claim and undeveloped in the trial court. This statute has been a favorite at the legislature, and we will see if the Fifty-sixth Legislature is inclined to correct such interpretations.
Franklin v CSAA Gen. Ins. Co. (7.28.23)
Reading a Justice Lopez opinion is a struggle. His opinion for the court in Franklin v. CSAA Gen. Ins. Co. begins with conclusions, and he then defends these conclusions with a rulist-textualist interpretation whether he is considering a statute, a prior case, or an insurance policy. He throws punches but they do not land because his writing style is weak. Using a dictionary, he interprets the word “purchased,” and of course we find an obligatory reference to Scalia and Garner’s bible on statutory interpretation. Scalia penned the trite chiasmus: “the rule of law is a law of rules.” Keep this in mind while reading Justice Lopez’s opinion or any opinion from this court.
Where a single automobile insurance policy insures multiple vehicles, the Arizona Supreme Court holds the insured can collect underinsured motorist coverage (UIM) for each separate vehicle listed and stack the limits unless an insured strictly complies with ARS 20-259.01 (H). This intra-policy stacking has never been the law in Arizona. One may thus question the court pronouncing it is considering the statute’s context, history, and purpose. One may also question whether insurers are using creative policy drafting intended to evade statutory requirements since insurers do not appear to be type 4 personalities. Subpart H is simple enough: “If multiple policies or coverages purchased by one insured on different vehicles apply to an accident or claim, the insurer may limit the coverage so that only one policy or coverage, selected by the insured, shall be applicable to any one accident.” There is no need for an insurer to be creative. The next sentence in subpart H includes a cure if the selection right is not spelled out in the policy: “If the policy does not contain a statement that informs the insured of the insured’s right to select one policy or coverage as required by this subsection, within thirty days after the insurer receives notice of an accident, the insurer shall notify the insured in writing of the insured’s right to select one policy or coverage.” This cure, the court determines, alters the policy after the fact and allowing this violates contract law. We’re confused. If we look at the contract, the coverage limit applies whether there is one or ten vehicles — but that’s being creative. If we are deciding how we read the UMA today, a larger question looms: Giving a rulist/textualist interpretation, where does one find the notion of portability upon which all of this depends?
Arizona Appellate Blog 