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Doneson v. Farmers Insurance Exchange

Court of Appeals of Arizona, Second Division

October 3, 2018

Samuel G. Doneson, Plaintiff/Appellant,
Farmers Insurance Exchange, a California reciprocal or interinsurance exchange; Farmers Insurance Company of Arizona, Inc., an Arizona corporation, Defendants/Appellees.

          Appeal from the Superior Court in Pima County No. C20170429 The Honorable Catherine Woods, Judge.

          Jackson & Oden P.C., Tucson By Todd Jackson and Goldberg & Osborne LLP, Tucson By David J. Diamond Counsel for Plaintiff/Appellant

          Gordon Rees Scully Mansukhani LLP, Phoenix By Andrew S. Jacob, Aaron P. Rudin, and Calvin E. Davis Counsel for Defendants/Appellees

          Chief Judge Eckerstrom authored the opinion of the Court, in which Judge Brearcliffe and Judge Espinosa concurred.



         ¶1 Samuel Doneson appeals from the trial court's order granting a motion filed by appellees Farmers Insurance Exchange and Farmers Insurance Company of Arizona, Inc. (collectively "Farmers") to dismiss the complaint against them. For the following reasons, we affirm the judgment of the trial court.

         Factual and Procedural Background

         ¶2 "In reviewing a trial court's decision to grant a motion to dismiss, we assume the truth of the facts asserted in the complaint." Sw. Non-Profit Housing Corp. v. Nowak, 234 Ariz. 387, 4 (App. 2014). In February 2016, Doneson was injured in an automobile accident. He incurred approximately $22, 000 in medical expenses, a portion of which was paid by workers' compensation benefits. He recovered $15, 000 from a third-party tortfeasor and, pursuant to A.R.S. § 23-1023(D), was required to reimburse his workers' compensation insurer in the amount of $8, 750.

         ¶3 At the time of the accident, Doneson was an insured under an automobile liability insurance policy issued by Farmers. The policy included a "medpay" provision that provided coverage for injuries sustained in an automobile accident. That policy contained an exclusion for "bodily injury" that "[o]ccurr[ed] during the course of employment if workers' or workmen's compensation benefits are required." Doneson submitted a claim for $5, 000 in medical bills, which Farmers denied.

         ¶4 Doneson filed a complaint in the superior court alleging claims of breach of contract, declaratory relief, insurance bad faith, and interference with contract. Farmers filed a motion to dismiss the complaint, asserting the medpay claim was properly denied under the workers' compensation exclusion. The trial court granted Farmers's motion and dismissed the complaint with prejudice. Doneson appealed. We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).

         Motion to Dismiss

         ¶5 We review a trial court's grant of a motion to dismiss for failure to state a claim under Rule 12(b)(6), Ariz. R. Civ. P., de novo. Blankenbaker v. Marks, 231 Ariz. 575, ¶ 6 (App. 2013). Doneson claims the trial court erred in finding the workers' compensation exclusion barred his claim, arguing that the court should have considered other factors including the intent of the parties, public policy considerations, and extrinsic evidence, rather than enforcing the exclusion on the basis that it was unambiguous. The interpretation of a contract is a question of law that we review de novo. Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588, ¶ 9 (App. 2009).

         ¶6 The sole issue on appeal is whether the policy exclusion providing for no coverage when "workmen's compensation benefits are required" applies when, as here, the injured worker has recovered from a third-party tortfeasor and reimbursed the employer's insurer for workers' compensation benefits pursuant to A.R.S. § 23-1023(D). Farmers asserts that benefits are "required" when an injured employee is entitled to receive workers' compensation benefits regardless of whether the employee "sought, was ever paid, or was later required to reimburse workers' compensation benefits." Doneson claims that when an insured party reimburses a workers' compensation insurer for the benefits received, the insured has taken nothing, and therefore benefits were essentially not "required." Doneson asserts the trial court erred in failing to consider parol evidence supporting his interpretation of the provision.

         ¶7 In determining whether to consider parol evidence to interpret a contract, a "judge first considers the offered evidence and, if he or she finds that the contract language is 'reasonably susceptible' to the interpretation asserted by its proponent, the evidence is admissible to determine the meaning intended by the parties." Taylor v. State Farm Mut. Auto. Ins. Co.,175 Ariz. 148, 154 (1993). In interpreting a contract, we seek to effect the intent of the parties and ...

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