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Twin City Fire Insurance Co. v. Leija

Court of Appeals of Arizona, First Division

August 31, 2017

TWIN CITY FIRE INSURANCE COMPANY, Plaintiff/Counter-Defendant/Appellee,
v.
GRACIELA LEIJA, Defendant/Counter-Claimant/Appellant.

         Appeal from the Superior Court in Maricopa County No. CV2012-004506 The Honorable Michael J. Herrod, Judge The Honorable J. Richard Gama, Judge, Retired.

          Jones, Skelton & Hochuli, PLC, Phoenix By Donald L. Myles, Jr., Jefferson T. Collins, Lori L. Voepel Counsel for Plaintiff/Counter-Defendant/Appellee

          Robbins & Curtin, PLLC, Phoenix By Joel B. Robbins, Anne E. Findling Co-Counsel for Defendant/Counter-Claimant/Appellant

          Ahwatukee Legal Office, PC, Phoenix By David L. Abney Co-Counsel for Defendant/Counter-Claimant/Appellant

          Presiding Judge Diane M. Johnsen delivered the opinion of the Court, in which Judge Patricia K. Norris and Judge Jay M. Polk joined. [1]

          OPINION

          Diane M. Johnsen, Judge

         ¶1 Under Arizona law, an injured worker who accepts workers' compensation benefits cannot sue the employer. The worker may sue others responsible for his or her injuries, but the law grants the employer's insurance carrier a lien against any recovery. We hold in this case that when a worker settles a claim against a third party for less than the limits of the third party's insurance, the worker may obtain a judicial determination of whether the carrier's lien should be reduced to account for the employer's comparative fault.

         FACTS AND PROCEDURAL BACKGROUND

         ¶2 Victor Leija was a window washer. He plunged three stories to his death when a scaffold he was trying to erect atop a three-story building collapsed and fell to the ground. His employer's workers' compensation carrier, Twin City Fire Insurance Company, accepted the claim and pays monthly benefits of $1, 857 to Leija's widow and children. Over time, those payments will total some $575, 000.

         ¶3 Leija's family sued several third parties, including the City of Glendale, which owns the building from which Leija fell; the building's property manager and maintenance company; the company that furnished the scaffold; and the company that fabricated it. The Leijas alleged negligence by each of the defendants caused the scaffold to fall; in the case of the City, they alleged breach of a duty to provide anchors to secure the scaffold to the roof of the building. The City and the other defendants identified Leija's employer as a nonparty at fault. As evidence, they pointed to citations the state Division of Occupational Safety and Health issued the employer for failing to repair a defect in the scaffold, failing to properly secure the scaffold to the building and failing to make sure Leija wore a safety harness.

         ¶4 The Leijas eventually settled with all the defendants and recovered a total of $1, 600, 000. All but one paid the limits of their insurance coverage. The exception was the City of Glendale, which was an additional insured on two of the other defendants' policies. The City settled the Leijas' claim without having to draw on its own insurance coverage, which was ample. Twin City did not object to any of the settlements, but asserted a right to fully enforce its lien against the settlement proceeds. It sought reimbursement for what it had paid the Leijas already and full credit against future payments. The Leijas rejected Twin City's demand, arguing the carrier's lien should be reduced due to the employer's comparative fault in the accident.

         ¶5 After negotiations failed, Twin City filed a complaint for "enforcement of lien." The Leijas counterclaimed, alleging Twin City breached its duty of good faith and fair dealing by refusing to reduce its lien to account for employer fault. They also alleged Twin City breached a promise to reevaluate the lien amount after all the settlements were finalized. In the alternative, the Leijas asked the superior court to set a trial to establish the amount of the lien.

         ¶6 Both sides eventually moved for summary judgment. The court rejected the Leijas' contention that a workers' compensation carrier owes a duty of good faith to compromise its lien to account for the employer's comparative fault, but found there was a genuine issue of material fact about whether Twin City breached a promise to consider compromising its lien. The court also ruled that "a separate action after compromise of the third-party claim is not the appropriate vehicle to allocate fault to the workers['] compensation carrier's insured."

         ¶7 After further discovery, Twin City once again moved for summary judgment. This time, the superior court granted the motion, finding no proof that Twin City promised to compromise its lien. The court also denied the Leijas' motion for leave to add claims against Twin City's parent company, The Hartford Financial Services Group, Inc.

          ¶8 We have jurisdiction of the Leijas' timely appeal pursuant to Arizona Revised Statutes ("A.R.S.") sections 12-2101(A)(1) (2017) and -120.21(A)(1) (2017).[2]

         DISCUSSION

         A. Workers' Compensation Liens and ...


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