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S& Paving and Construction, Inc. v. Berkley Regional Insurance Co.

Court of Appeals of Arizona, First Division

May 12, 2016

S&S PAVING AND CONSTRUCTION, INC., an Arizona corporation, Plaintiff/Appellant
v.
BERKLEY REGIONAL INSURANCE COMPANY, a Delaware corporation, Defendant/Appellee

Appeal from the Superior Court in Maricopa County No. CV 2013-055438 The Honorable Michael D. Gordon, Judge

Carmichael & Powell, P.C., Phoenix By Trysta M. Puntenney, David J. Sandoval Counsel for Plaintiff/Appellant

Jennings, Haug & Cunningham, LLP, Phoenix By Chad L. Schexnayder, Robert John Lamb Counsel for Defendant/Appellee

Judge Margaret H. Downie delivered the opinion of the Court, in which Presiding Judge Andrew W. Gould and Judge John C. Gemmill joined.

OPINION

DOWNIE, Judge:

¶1 S&S Paving and Construction, Inc. ("S&S") appeals the dismissal of its bad faith claim against Berkley Regional Insurance Company ("Berkley"). We hold that a surety on a payment bond issued under Arizona's "Little Miller Act" may not be sued for bad faith and therefore affirm the judgment of the superior court.

FACTS AND PROCEDURAL HISTORY

¶2 The City of Prescott retained Spire Engineering, LLC ("Spire") to act as general contractor for the Demerse Avenue Overlay Project ("the Project"). Berkley issued a payment bond for the Project. See Ariz. Rev. Stat. ("A.R.S.") § 34-222(A)(2) (requiring payment bonds for public projects).

¶3 In October 2011, S&S's attorney sent a demand letter to Berkley, stating that S&S had performed paving work for the Project pursuant to its subcontract with Spire and had not been paid $23, 763. Berkley acknowledged the claim, requested additional information, and advised that its review of S&S's demand "does not toll the running of any statute of limitations or other time period."

¶4 S&S provided Berkley with the requested information, which included a proof of claim. Berkley acknowledged receipt of the documentation in December 2011 and stated that it needed to ascertain Spire's position regarding S&S's claim, after which it would communicate further. Berkley reiterated that its investigation of the claim "in no way waives or alters any rights, interests or defenses that we may have under our bond or applicable law." No further communication occurred between the parties until May 2013, when counsel for S&S sent another demand letter, and Berkley responded that S&S's claim was untimely.

¶5 In November 2013, S&S sued Berkley for breach of contract and bad faith.[1] Berkley moved for summary judgment on both claims. The superior court ruled that the breach of contract claim was barred by the statute of limitations. See A.R.S. § 34-223(B) (one-year statute of limitations for public work payment bonds). The court also dismissed S&S's bad faith claim, concluding there was no "contractual relationship or special relationship for the claim to survive." The court denied S&S's motion for reconsideration and awarded Berkley attorneys' fees.

¶6 S&S timely appealed. We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and -2101(A)(1).

DISCUSSION

¶7 We review a grant of summary judgment de novo. Chalpin v.Snyder, 220 Ariz. 413, 418, ¶ 17 (App. 2008). Summary judgment is appropriate if "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Ariz. R. Civ. P. 56(a). We will affirm the judgment if it is correct for any reason. Ariz. Bd. of Regents ...


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