Ortiz v. Carolina Casualty Insurance Company

• Court: District Court, D. Arizona
• Decided: October 3, 2022
• Docket: 2:22-cv-00370
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Juvenal Ortiz, as Personal Representative No. CV-22-00370-PHX-ESW of the Estate of Manuel Ortiz and Maria 10 Espinoza, ORDER

11 Plaintiffs,

12 v.

13 Carolina Casualty Insurance Company, Berkley Net Underwriters, LLC; and Aaron 14 Mott,

15 Defendants. 16 17 18 On July 29, 2022, the Court granted in part and denied in part Defendants’ Motion 19 to Dismiss (Doc. 20). (Doc. 29). Pending before the Court is Defendants’ “Motion for 20 Clarification and Reconsideration of Disposition on Motion to Dismiss” (Doc. 35), 21 Plaintiffs’ Response (Doc. 39), and Defendants’ Reply (Doc. 40). 22 I. DISCUSSION 23 A. Procedural History 24 As recounted in the Court’s July 29, 2022 Order, this action arises out of Manuel 25 Ortiz’s claim for workers’ compensation following an injury occurring while working for 26 TK Brooks Contracting, Inc. On March 10, 2022, Mr. Ortiz and his wife, Maria Espinoza, 27 filed a Complaint (Doc. 1) against (i) the workers’ compensation insurer, Carolina Casualty 28 Insurance Company (“CCIC” or “Carolina Casualty”); (ii) Berkley Net Underwriters, LLC 1 (“Berkley Net”), a third-party administrator that processes insurance claims on behalf of 2 CCIC; and (iii) Aaron Mott (“Mott”), the insurance adjuster who handled Mr. Ortiz’s 3 workers’ compensation claim. 4 On March 30, 2022, Defendants filed a Statement Noting Death (Doc. 9), which 5 indicated that on March 29, 2022, defense counsel was notified that Mr. Ortiz had died. 6 On May 17, 2022, a First Amended Complaint was filed by Ms. Espinoza and Juvenal 7 Ortiz, as personal representative of the Estate of Manuel Ortiz (the “Estate”). (Doc. 17). 8 Ms. Espinoza and the Estate are collectively referred to herein as the “Plaintiffs.” The 9 Court subsequently granted Plaintiff leave to file a Second Amended Complaint. 10 The Second Amended Complaint (Doc. 28) contains seven counts. Counts One, 11 Two, and Three are asserted by both Plaintiffs. Count One alleges that Defendant CCIC 12 breached its duty of good faith and fair dealing, and Counts Two and Three allege that 13 Defendants Berkley Net and Mott aided and abetted that breach. (Id. at 8-11). Counts 14 Four, Five, and Six present loss of consortium claims asserted by Ms. Espinoza. (Id. at 12- 15 13). Count Seven asserts a claim for punitive damages. (Id. at 13). 16 The Court concurred with Defendants’ argument in their Motion to Dismiss that Ms. 17 Espinoza does not have standing to assert a claim for insurance bad faith and granted 18 Defendants’ Motion to Dismiss as to Counts One through Three asserted by Ms. Espinoza. 19 (Doc. 29 at 4). The Court, however, denied the Motion to Dismiss as to Counts One 20 through Three asserted by the Estate. (Id. at 5). Consequently, the Court also denied 21 Defendants’ Motion to Dismiss as to Ms. Espinoza’s loss of consortium claims presented 22 in Counts Four through Six, which the Court found are derivative of the Estate’s claims in 23 Counts One through Three. (Id. at 4-5). Finally, the Court denied Defendants’ Motion to 24 Dismiss as to Plaintiffs’ punitive damages claim presented in Count Seven. (Id. at 5). 25 B. Analysis of Defendants’ “Motion for Clarification and Reconsideration of Disposition on Motion to Dismiss” (Doc. 35) 26 Motions for reconsideration should be granted only in rare circumstances. See 27 Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003). “Reconsideration is appropriate if 28 the district court (1) is presented with newly discovered evidence, (2) committed clear error 1 or the initial decision was manifestly unjust, or (3) if there is an intervening change in 2 controlling law.” School Dist. No. 1J, Multonomah County, 5 F.3d 1255, 1263 (9th Cir. 3 1993); see also LRCiv 7.2(g)(1) (“The Court will ordinarily deny a motion for 4 reconsideration of an Order absent a showing of manifest error or a showing of new facts 5 or legal authority that could not have been brought to its attention earlier with reasonable 6 diligence.”). Such motions should not be used for the purpose of asking a court “to rethink 7 what the court had already thought through – rightly or wrongly.” Defenders of Wildlife v. 8 Browner, 909 F. Supp 1342, 1351 (D. Ariz. 1995) (internal quotation marks and citation 9 omitted). 10 In their pending Motion (Doc. 35), Defendants request that the Court (i) clarify its 11 ruling as to the aiding and abetting claims asserted against Defendants Berkley Net and 12 Mott and (ii) reconsider its conclusion that the Second Amended Complaint has sufficiently 13 pleaded damages that are not barred by Arizona’s survival statute, ARIZ. REV. STAT. § 14- 14 3110. 1. Sufficiency of Allegations in Counts Two and Three (Aiding and 15 Abetting CCIC’s Breach of Duty of Good Faith & Fair Dealing as to 16 Defendants Berkley Net and Mott) 17 The Court’s July 29, 2022 Order states that “Defendants’ Motion to Dismiss will be 18 denied as to Counts One through Three asserted by the Estate.” (Doc. 29 at 5). In the 19 “Conclusion” section, the Court stated that it is “granting Defendants’ Motion to Dismiss 20 (Doc. 20) as to Counts One through Three asserted by Ms. Espinoza” and “denying 21 Defendants’ Motion to Dismiss (Doc. 20) as to the claims asserted by the Estate in the 22 Second Amended Complaint.” (Doc. 29 at 6). Implicit in this ruling is the denial of 23 Defendants’ request to dismiss Counts Two and Three in their entirety. The Court’s Order 24 expressly notes that the Court made its rulings “[a]fter reviewing the parties’ briefing 25 (Docs. 20, 21, 25)[.]” (Id. at 2). 26 Defendants request that “the Court clarify its decision regarding the sufficiency of 27 the complaint to state a claim by the Estate for aiding and abetting insurance bad faith, and 28 dismiss Counts II and III in their entirety.” (Doc. 35 at 2). Defendants state that “the Court 1 did not address or even mention, let alone affirmatively resolve, CCIC’s argument that 2 these claims were not properly pled.” (Doc. 40 at 2). It is noted that Federal Rule of Civil 3 Procedure 52(a)(3) provides that the Court “is not required to state findings or conclusions 4 when ruling on a motion under Rule 12 or 56 or, unless these rules provide otherwise, on 5 any other motion.” See also Mitchell v. Occidental Ins., Medicare, 619 F.2d 28, 30 (9th 6 Cir. 1980) (explaining that pursuant to Rule 52, “no findings [of fact and law] are necessary 7 in judgments on motions to dismiss.”); Ringgold v. Brown, No. 2-12-CV-00717-JAM- 8 JFM, 2017 WL 2214957, at *2 (E.D. Cal. May 19, 2017) (“As is permitted under Rule 9 52(a)(3), the Court granted Defendants’ Motions to Dismiss, with prejudice, without 10 stating findings or conclusions.”). The Court grants Defendants’ request for clarification 11 as follows: the Court denied Defendants’ request to dismiss Counts Two and Three as it 12 found that the Second Amended Complaint sufficiently alleged that Berkely Net and Mott 13 aided and abetted CCIC in CICC’s purported breach of the duty of good faith and fair 14 dealing. 15 The Court construes Defendants’ Motion (Doc. 35) as seeking reconsideration of 16 the Court’s rejection of their argument that the aiding and abetting claims in Counts Two 17 and Three are insufficiently pled. As correctly recounted in Plaintiffs’ Response to the 18 Motion to Dismiss: Plaintiffs have alleged that Berkley Net Underwriters, 19 LLC (“Berkley Net”) and Aaron Mott aided and abetted 20 Carolina Casualty. Specifically, even after the ICA ordered Defendants to pay the long-overdue benefits, Defendants, 21 including Berkley Net and Mott, “continued to dispute the 22 benefits” by “seeking reconsideration and filing a special action with the Court of Appeals, without any reasonable basis 23 to do so.” Further, Berkley Net and Mott substantially assisted 24 or encouraged Carolina Casualty in delaying or denying the claim without a reasonable basis. 25 (Doc. 21 at 14) (footnotes omitted). 26 Plaintiffs’ Response also correctly recounts that “although the Arizona Court of 27 Appeals and this court have reached divergent results in factually similar cases regarding 28 this issue, case law supports Plaintiffs’ claims against Berkley Net and Mott.” (Id.) 1 (footnote omitted).1 For instance, Plaintiffs’ Response cites Haney v. ACE Am. Ins. Co., 2 No. CV-13-02429-PHX-DGC, 2014 WL 1230503 (D. Ariz. Mar. 25, 2014). (Doc. 21 at 3 16). In Haney, District Judge David Campbell found the plaintiff’s allegations that the 4 defendant insurance agent “substantially assisted or encouraged [the insurer] in delaying 5 or denying the claim without a reasonable basis” sufficiently stated a separate act by the 6 defendant agent “which could amount to aiding and abetting.” 2014 WL 1230503, at *5; 7 see also Vates v. ACE Am. Ins. Co., No. CV-18-3976-PHX-DMF, 2019 WL 13198215, at 8 *3 (D. Ariz. Sept. 17, 2019) (stating that “[t]his Court agrees with the Judge Campbell’s 9 decision [in Haney] finding that similar allegations ‘sufficiently pleads separate action by 10 [the claims adjustor] which could amount to aiding and abetting’”). 11 In considering Defendants’ Motion to Dismiss, the Court was persuaded by 12 Plaintiffs’ arguments regarding the sufficiency of the allegations in Counts Two and Three. 13 Defendants have not presented newly discovered evidence, cited any intervening change 14 in controlling law, and have not shown that the Court’s rejection of Defendants’ argument 15 that Counts Two and Three are insufficiently pled was clear error or manifestly unjust. The 16 Court denies Defendants’ request to reconsider their argument that the aiding and abetting 17 claims in Counts Two and Three are insufficiently pled. 18 2. Recoverable Damages 19 Defendants do not dispute that “[u]nder Arizona law, a claim under the survival 20 statute may be brought only by a decedent’s estate.” Gotbaum v. City of Phoenix, 617 F. 21 Supp. 2d 878, 883 (D. Ariz. 2008). Pursuant to ARIZ. REV. STAT. § 14-3110, “damages 22 for pain and suffering of [the deceased] injured person shall not be allowed.” In their 23 Motion to Dismiss, Defendants asserted that the Estate was seeking pain and suffering 24 damages. (Doc. 20 at 5). Defendants argued that since such damages are not allowed, the 25 Estate’s claims in Counts One through Three must be dismissed. (Id.). Plaintiffs responded 26 by stating:

27 1 “Although federal courts in this district have consistently held that Arizona law would permit a claim against an adjuster for aiding and abetting her employer’s bad faith, 28 no conclusive Arizona case law exists.” Lambert v. Liberty Mut. Fire Ins. Co., No. 2:14- CV-00521-JWS, 2014 WL 5432154, at *3 (D. Ariz. Oct. 24, 2014). 1 Prior to his death, Mr. Ortiz incurred economic damages as a result of Defendants’ misconduct. After Defendants 2 wrongfully denied Mr. Ortiz’s worker’s compensation claim, 3 Mr. Ortiz was forced to hire an attorney to adjudicate his claim. Indeed, Mr. Ortiz’s counsel initiated a worker’s compensation 4 lawsuit and assisted him in obtaining workers’ compensation 5 benefits. Mr. Ortiz subsequently filed a bad faith insurance lawsuit. During the pendency of the bad faith lawsuit, Mr. 6 Ortiz passed away. Since Mr. Ortiz’s death, Mr. Ortiz’s estate 7 has sought to recover “other forms of financial loss,” including punitive and exemplary damages, recovery of expert witness 8 fees, recovery of attorney’s fees, taxable costs, and pre- and 9 post-judgment interest. For example, Plaintiffs alleged that Mr. Ortiz was “forced to hire and pay multiple lawyers” to help 10 Plaintiffs secure the workers’ compensation benefits to which 11 they were entitled. Thus, unlike estates that sought to recover only “pain and suffering,” Mr. Ortiz’s estate seeks to recover 12 the economic harm Mr. Ortiz suffered before he died. 13 Therefore, Mr. Ortiz’s claim for economic harm may be asserted by his estate. 14 (Doc. 21 at 12) (footnotes omitted). In their Reply, Defendants reiterated their assertion 15 that the Estate was seeking pain and suffering damages. (Doc. 25 at 6). 16 In considering Defendants’ Motion to Dismiss, the Court was persuaded by the 17 above argument in Plaintiffs’ Response. In its July 29, 2022 Order, the Court noted that 18 the Second Amended Complaint (i) asserts that Plaintiffs “were forced to hire and pay 19 multiple lawyers to help them secure the workers’ compensation benefits to which they 20 were (and are) entitled” and (ii) seeks “other general damages alleged and proved at the 21 time of trial.” (Doc. 29 at 5). The Court rejected Defendants’ argument that the Second 22 Amended Complaint must be dismissed for failure to allege a category of recoverable 23 damages. 24 In their Motion for Reconsideration, Defendants argue that fees incurred in the 25 Industrial Commission of Arizona are not recoverable in a bad faith action. (Doc. 35 at 3). 26 Defendants cite an Arizona Court of Appeals case, Mendoza v. McDonald’s Corp., 213 27 P.3d 288, 298 (Ariz. 2009), for the proposition “‘the full range of available tort damages 28 caused by [an insurer]’s bad faith’ includes ‘damages for pain and suffering, lost earnings, 1 and medical expenses.’” (Doc. 35 at 3). Defendants observe that the plaintiff in Mendoza 2 did not request “ICA-related attorneys’ fees, the jury was not instructed on the possibility, 3 and the Arizona Supreme Court did not include them in its description of ‘the full range of 4 available tort damages.’” (Id. at 4). Yet Mendoza does not state that available tort damages 5 in an insurance bad faith case are limited to damages for pain and suffering, lost earnings, 6 and medical expenses.2 Mendoza does not state that attorney’s fees incurred prior to 7 bringing a bad faith claim that are proximately caused by an insurer’s bad faith are 8 unrecoverable as a matter of law. The fact that the plaintiff in Mendoza did not seek to 9 recover such fees does not establish that the fees are unrecoverable as a matter of Arizona 10 law. 11 Defendants also cite Schwartz v. Farmers Ins. Co. of Ariz., 800 P.2d 20, 22-23 (Ariz. 12 App. 1990) for the proposition that “‘[t]he recoverable attorney’s fees’ in an insurance bad 13 faith action ‘are, of course, limited to those incurred to pursue the contract claim.’” (Doc. 14 35 at 3) (emphasis in original). Defendants conclude that “[f]ees incurred in the ICA are 15 not in furtherance of the breach of contract, and therefore cannot be awarded as tort 16 damages.” (Id.). 17 Plaintiffs contend that Defendants’ argument conflates the Estate’s ability to recover 18 Mr. Ortiz’s economic harm and statutory attorney’s fees. (Doc. 39 at 4). Plaintiffs state: Here, the Estate seeks to recover the out-of-pocket expenses 19 Mr. Ortiz was forced to pay as a result of Defendants’ conduct. 20 Put differently, Defendants’ denial of benefits proximately caused Mr. Ortiz to have to hire an attorney to assist him with 21 obtaining workers’ compensation benefits. Thus, the Estate’s 22 ability to recover economic damages for Mr. Ortiz’s economic harm does not turn on whether Mr. Ortiz was entitled to recover 23 statutory attorneys’ fees. These two routes of recovery are 24 different. Indeed, the Ninth Circuit has recognized that there is a distinction “between . . . out-of-pocket litigation costs, 25 including attorney fees, that directly result from the 26 objectionable conduct” and “compensable damages.”

27 2 The Arizona Court of Appeals has held that “[a]ctual damages for a loss of or injury to credit are recoverable” in an insurance bad faith action. Farr v. Transamerica 28 Occidental Life Ins. Co. of California, 699 P.2d 376, 381 (Ariz. App. 1984) (citing Mead v. The Johnson Group, Inc., 615 S.W. 2d 685 (Tex. 1981)). 1 Moreover, in cases involving “[a] bad faith claim by an injured employee against his or her employer’s workers' compensation 2 carrier,” the insured is entitled to recover ordinary tort 3 damages. Thus, the economic harm Ortiz incurred may be recovered by his estate. 4 (Doc. 39 at 4-5) (footnotes omitted). 5 The Arizona Court Appeals case Schwartz, which Defendants rely on, cites 6 California Supreme Court case Brandt v. Superior Ct., 693 P.2d 796, 798 (Cal. 1985). 7 Schwartz, 800 P.2d at 23. Although the Arizona Court of Appeals cited Brandt for an issue 8 that is not on point, the Court has reviewed Brandt and finds the following excerpt 9 persuasive: 10 When an insurer’s tortious conduct reasonably compels the 11 insured to retain an attorney to obtain the benefits due under a policy, it follows that the insurer should be liable in a tort 12 action for that expense. The attorney’s fees are an economic 13 loss—damages—proximately caused by the tort. . . . These fees must be distinguished from recovery of attorney’s fees qua 14 attorney’s fees, such as those attributable to the bringing of the 15 bad faith action itself. What we consider here is attorney’s fees that are recoverable as damages resulting from a tort in the 16 same way that medical fees would be part of the damages in a 17 personal injury action. 18 Brandt, 693 P.2d at 798; see also Chemstar, Inc. v. Liberty Mut. Ins. Co., 42 F.3d 1398 19 (9th Cir. 1994) (stating that “Brandt fees are tort damages”). 20 In addition, it is noted that the Second Amended Complaint alleges that “Plaintiffs 21 have suffered financial harm and damage to [Mr. Ortiz’s] credit as a result of Defendants’ 22 denials and repeated delays.” (Doc. 28 at 7, ¶ 18). “Actual damages for a loss of or injury 23 to credit are recoverable” in an insurance bad faith action. Farr v. Transamerica 24 Occidental Life Ins. Co. of California, 145 Ariz. 1, 6, 699 P.2d 376, 381 (Ariz. App. 1984) 25 (citations omitted). It is further noted that Federal Rule of Civil Procedure 54(c) provides 26 that with the exception of default judgments, “[e]very other final judgment should grant 27 the relief to which each party is entitled, even if the party has not demanded that relief in 28 1|| its pleadings.”? See also In re Bennett, 298 F.3d 1059 (9th Cir. 2002) (“So long as a party 2|| is entitled to relief, a trial court must grant such relief despite the absence of a formal || demand in the party’s pleadings.”); Cancellier v. Federated Dep’t Stores, 672 F.2d 1312, 1319 (9th Cir. 1982) (finding that a plaintiff need not include in his or her complaint a 5|| “specific prayer for emotional distress or punitive damages” in order to give the opposing || party proper notice of the claim); Ryan v. Mesa Unified Sch. Dist., 195 F. Supp. 3d 1080, 7\| 1088 (D. Ariz. 2016) (“Rule 54(c) allows the court to award monetary damages to Plaintiffs 8 || on Count III if they prove facts entitling them to such relief, even though they failed to plead such a request in their complaint.”); United States v. Nat’l City Lines, 134 F. Supp. 350, 355 (N.D. Ill. 1955) (explaining that a “plaintiff is not bound to prove all that he 11 || alleges, nor is he limited in a judgment in his favor to the relief he has demanded in his 12 || complaint’). 13 Defendants have not presented newly discovered evidence, cited any intervening change in controlling law, and have not shown that the Court’s conclusion that the Second 15 || Amended Complaint pleads recoverable damages was clear error or manifestly unjust. The 16 || Court denies Defendants’ request to reconsider the Court’s conclusion that Plaintiffs || pleaded recoverable damages. 18 Il. CONCLUSION 19 Based on the foregoing, 20 IT IS ORDERED granting in part and denying in part Defendants’ “Motion for Clarification and Reconsideration of Disposition on Motion to Dismiss” (Doc. 35) as set forth herein. . 23 Dated this 3rd day of October, 2022. C4 pS Abe □□ Eileen S. Willett United States Magistrate Judge 25 > Defendants take issue with the Second Amended Complaint’s Prayer for Relief, || which states in part that Plaintiffs are seeking an award for “compensatory damages for physical pain and suffering, mental and emotional distress, anxiety, and all other general 27 damages alleged and proved at the time of trial.” (Doc. 28 at 14) Plaintiffs’ failure to explicitly state in the Prayer for Relief that they are seeking damages for economic harm does not warrant dismissal of the Second Amended Complaint.

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