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Glazer v. State

Court of Appeals of Arizona, First Division

May 16, 2017

DIANA GLAZER, Plaintiff/Appellant,
v.
STATE OF ARIZONA, Defendant/Appellee.

         Appeal from the Superior Court in Maricopa County No. CV2009-001261 The Honorable Jo Lynn Gentry, Judge

          The Leader Law Firm, Tucson By John P. Leader Aiken & Scoptur, S.C., Milwaukee, WI By Timothy Aiken Zachar Law Firm, P.C., Phoenix By Christopher J. Zachar Co-Counsel for Plaintiff/Appellant.

          Arizona Attorney General's Office, Phoenix By Daniel P. Schaak, Fred Zeder Counsel for Defendant/Appellee.

          Presiding Judge Randall M. Howe delivered the opinion of the Court, in which Judge Lawrence F. Winthrop and Judge Jon W. Thompson joined.

          OPINION

          HOWE, Judge.

         ¶1 This appeal is from a trial court order holding that interest on a $7.8 million judgment against the State shall accrue pursuant to A.R.S. § 41-622(F), which allows for accrual at a lower interest rate than the statutory rate during an appeal of a judgment paid out of the Risk Management Revolving Fund. Diana Glazer, to whom that judgment was awarded, argued that the reduced interest rate should not apply because the judgment was originally paid out of the Construction Insurance Fund. The State argued that the lower interest rate should apply because although it initially made payment from the Construction Insurance Fund due to an administrative error, once the State recognized the error, it rectified the error by reimbursing the Construction Insurance Fund from the Risk Management Revolving Fund.

         ¶2 Because the judgment against the State was ultimately paid out of the Risk Management Revolving Fund, the trial court did not err by applying the reduced interest rate described in A.R.S. § 41-622(F) for the duration of the appeal. However, because the State's insurance carrier will reimburse the State for $800, 000 of that judgment, the reduced interest rate applies only to $7 million of the judgment. Accordingly, we affirm the trial court's order that A.R.S. § 41-622(F) applies, but reverse the order's application of the statute to the entire judgment.

         FACTS AND PROCEDURAL HISTORY

         ¶3 In 2007, Glazer was seriously injured in a head-on, crossover collision with another vehicle on Interstate 10 that killed her husband and young daughter. Glazer sued the State, which designed and maintained the interstate, for negligence in failing to construct a median between the westbound and eastbound lanes to prevent crossover collisions. After a nine-day jury trial, the jury awarded Glazer a verdict of $7.8 million.

         ¶4 Glazer subsequently lodged her proposed form of judgment, which provided for "interest at the legal rate of prime plus one percent (currently 4.25%) per annum" from the date of the jury's verdict until paid in full. The State objected, arguing that the proposed judgment did not account for the possibility that a lower interest rate could apply while the case was pending appeal. Although the legal interest rate normally applies, A.R.S. § 41-622(F) allows interest to accrue at a reduced rate during appeal for judgments paid from the Risk Management Revolving Fund. Glazer agreed, responding that the interest rate during the time of an appeal may be at a reduced rate, "but only so long as the Judgment is ultimately paid out of the 'Risk Management Revolving Fund.' If the Judgment is ultimately paid from elsewhere, [the legal rate] remains applicable." However, the trial court entered the judgment against the State with interest to accrue at the legal rate.

         ¶5 The State then moved to amend the court's judgment, arguing again that it improperly failed to account for a reduced interest rate on the judgment while the case was appealed. Glazer objected, arguing that the court could not issue an order on "possibilities, " and that the reduced rate would apply only after the State paid the judgment and proved that the monies came from the Risk Management Revolving Fund. The trial court granted the State's motion and subsequently entered an amended judgment providing that "A.R.S. § 41-622(F) may supplant the normal statutory interest rate during the pendency of an appeal."

         ¶6 After the trial court entered its amended judgment, the State appealed on issues unrelated to the interest rate. When this Court affirmed the trial court's judgment, the State petitioned for review to the Arizona Supreme Court. That court also affirmed the trial court's judgment and issued its mandate in the summer of 2015. Accordingly, the Arizona Department of Administration's ("Department") risk management section began to process the payment of the judgment. The State is self-insured up to $7 million, meaning that the State pays for judgments against it out of its own funds up to that amount. Anything over that amount is covered by an excess insurance policy with the State's insurance carrier. Because amounts above $7 million are paid for through reimbursements from the insurance carrier, the Department generated a "risk management payment request" for each of three installments totaling the entire $7.8 million judgment. Each of those requests reflected that the loss type was "GEN-CIF, " a designation made for general liability losses that arise from claims relating to a roadway's design. The loss type code does not instruct which account payment should come from though, so the requests must also include an account code. Each of the three requests for the Glazer payments reflected the payment account number of the Risk Management Revolving Fund.

         ¶7 A Department adjuster approved the requests on May 14, 2015, and forwarded them for further approval by two other authorized supervisors. After receiving the additional approvals, the requests were sent to a financial services technician for processing. Upon receiving the requests, the technician noticed the "GEN-CIF" loss type. Interpreting "CIF" to mean that the payment should come from the Construction Insurance Fund, the technician changed the payment account number from the Risk Management Revolving Fund to that of the Construction Insurance Fund. This was the last recorded change to the requests and was made without approval from any of the authorized adjusters or supervisors that had previously approved the requests. Three days later, the Department issued three checks to satisfy the judgment. The Department realized the payment error two months later in July 2015. To rectify it, a Department risk manager transferred $7.8 million from the Risk Management Revolving Fund to the Construction Insurance Fund to reimburse it.

         ¶8 In August 2015, Glazer requested a status conference to determine the applicable interest rate on the judgment, stating that the parties disagreed on whether the legal or the reduced rate applied. Specifically, the State argued that the reduced rate should apply because it corrected its mistake and transferred the debt to the proper account. Glazer argued that the higher rate applied because the State failed to prove that it paid the judgment out of the Risk Management Revolving Fund. Glazer also argued that even if A.R.S. ยง 41-622(F) applied, the statute's purpose of saving the State money would not be served ...


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