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 ...