Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_13-cv-02097/USCOURTS-azd-2_13-cv-02097-3/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

David Ortiz, 

Plaintiff, 

v. 

Zurich American Insurance Company; 

Sedgwick Claims Management Services, 

Inc.; Kelly Thompson; XYZ Corporations; 

John Does 1-26, 

Defendants. 

No. CV-13-02097-PHX-JAT

ORDER 

 Pending before the Court are Zurich American Insurance Company 

(“Defendant”)’s1

 Motion for Summary Judgment RE: Punitive Damages (Doc. 94) and 

Motion to Strike Portions of the Declaration of Everette Lee Herndon, Jr. (Doc. 106). The 

Court has considered the pleadings and now rules on the motions. 

I. Motion to Strike 

The Court first considers Defendant’s motion to strike because, if granted, it 

would narrow the evidence before the Court in considering Defendant’s motion for 

partial summary judgment. In Plaintiff’s response to Defendant’s partial summary 

judgment motion, he submitted a declaration by expert witness Everette Lee Herndon, Jr. 

See (Doc. 100-2). Defendant moves to strike six paragraphs of Mr. Herndon’s 

declaration. See (Doc. 106). 

 

1

 All other Defendants have been dismissed from this action. See (Docs. 9, 31, 57). 

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A. Legal Standard 

 Local Rule of Civil Procedure for the District of Arizona (“Local Rule”) 7.2 

governs the filing of motions to strike and provides that “a motion to strike may be filed 

only if it is authorized by statute or rule . . . or if it seeks to strike any part of a filing or 

submission on the ground that it is prohibited (or not authorized) by a statute, rule, or 

court order.” LRCiv 7.2(m)(1). Further, “[a]n objection to (and any argument regarding) 

the admissibility of evidence offered in support of or opposition to a motion must be 

presented in the objecting party’s responsive or reply memorandum and not in a separate 

motion to strike or other separate filing.” Id. 7.2(m)(2). 

 B. Analysis 

Before reviewing the merits of Defendant’s motion to strike, the Court must first 

determine if the motion is procedurally proper under Local Rule 7.2(m). Defendant 

asserts in its motion that the Court should strike certain portions of Mr. Herndon’s 

declaration because it “violates the Court-ordered expert and discovery deadlines.” 

(Doc. 106 at 2). Thus, Defendant argues that portions of the declaration are prohibited by 

a court order, satisfying Local Rule 7.2(m)(1). 

 On the other hand, Defendant is unable to explain how its motion satisfies Local 

Rule 7.2(m)(2). In essence, Local Rule 7.2(m)(2) bars motions to strike if the objection 

could have been made in a responsive pleading. Here, Plaintiff submitted Mr. Herndon’s 

declaration with his response to Defendant’s motion for partial summary judgment. 

Defendant, therefore, was required to object to Mr. Herndon’s declaration in its “reply 

memorandum and not in a separate motion to strike.” LRCiv 7.2(m)(2). 

 For the foregoing reason, the Court will deny Defendant’s motion to strike. 

II. Factual Background 

 This lawsuit arises from an injury Plaintiff David Ortiz sustained on August 7, 

2012 while he worked as a cook at Starwood Hotels & Resorts (“Starwood”) in Phoenix, 

Arizona. At the time, Starwood was covered by a workers’ compensation insurance 

policy issued by Defendant and adjusted by Sedgwick Claims Management Services, Inc. 

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(“Sedgwick”). Although Plaintiff eventually received the benefits to which he was 

entitled, he encountered several obstacles along the way. As an initial matter, the Court 

must determine the undisputed material facts in this case. 

 A. Parties’ Statements of Facts 

To supplement its summary judgment motion, Defendant filed a Separate 

Statement of Facts in Support of Motion for Summary Judgment (“DSOF”). (Doc. 95). 

Plaintiff then filed a Response to Defendant’s Motion for Partial Summary Judgment RE: 

Punitive Damages (Doc. 98), a Response to Defendant’s Separate Statement of Facts 

(Doc. 99), and his own Separate Statement of Facts (Doc. 100). Finally, Defendant filed a 

Reply in Support of Its Motion for Summary Judgment RE: Punitive Damages (Doc. 103) 

and a Controverting Statement of Facts (Doc. 104). 

 Local Rule 56.1(a) requires that a party moving for summary judgment file a 

separate statement of facts, in addition to the motion, setting forth each material fact on 

which the party relies in support of its motion. LRCiv 56.1(a). In addition, the rule 

requires that each material fact be numbered in a separate paragraph and refer to 

admissible portions of the record for that fact. Id. Similarly, Local Rule 56.1(b) requires a 

party opposing a motion for summary judgment, the non-movant, to file a controverting 

statement of facts in addition to its response to the motion. Id. 56.1(b). In the 

controverting statement of facts, the non-movant must address each of the material facts 

that the moving party put forth and, if disputed, include “a reference to the specific 

admissible portion of the record supporting the party’s position.” Id. Moreover, if the 

non-movant wishes the court to consider “any additional facts that establish a genuine 

issue of material fact,” it must set forth each additional fact in a separately numbered 

paragraph with a reference “to a specific admissible portion of the record where the fact 

finds support.” Id. 

 1. Plaintiff’s “Response to Defendant’s Separate Statement of 

 Facts” (Doc. 99) 

 In addition to its motion for partial summary judgment, Defendant filed its DSOF 

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in compliance with Local Rule 56.1(a), which includes sixty-nine separately numbered 

material facts spanning nine pages. See (Doc. 95). Accompanying his response to 

Defendant’s motion, Plaintiff filed two independent statements of facts, see (Docs. 99, 

100), the first of which attempts to address each of the material facts as set forth in 

DSOF. See (Doc. 99). Plaintiff labelled this filing “Plaintiff’s Response to Defendant’s 

Separate Statement of Facts.” (Id.) Plaintiff, however, did not support any of his 

“disputes” with a citation to the record. See (id.) Local Rule 56.1(b) clearly requires any 

facts that the non-movant disputes to be accompanied with “a reference to the specific 

admissible portion of the record supporting the party’s position.” LRCiv 56.1(b). A 

party’s failure to provide such references permits the Court to: 1) give the party an 

opportunity to properly support or address the fact; 2) consider the fact undisputed for 

purposes of the motion; 3) grant summary judgment if the movant is entitled to it; or 4) 

issue any other appropriate order. Fed. R. Civ. P. 56(e); see Szaley v. Pima Cty., 371 F. 

App’x 734, 735 (9th Cir. 2010) (“The district court permissibly deemed Defendant’s 

statement of facts to be true because Plaintiff failed to comply with Local Rule 56.1(b).”). 

 The Court is not expected or required to scour the record on Plaintiff’s behalf to 

find support for his disputes. See Schneider v. TRW, Inc., 938 F.2d 986, 990 n.2 (9th Cir. 

1991) (“[T]he law of this circuit . . . recognizes that a district court is under no obligation 

to mine the full record for issues of triable fact.”); Nilsson, Robbins, Dalgarn, Berliner, 

Carson & Wurst v. La. Hydrolec, 854 F.2d 1538, 1545 (9th Cir. 1988) (“We hold that 

when a local rule . . . has been promulgated, it serves as adequate notice to nonmoving 

parties that if a genuine issue exists for trial, they must identify that issue and support it 

with evidentiary materials, without the assistance of the district court judge.”). Even after 

examining Plaintiff’s disputes, the Court finds that each alleged dispute either relates to 

an immaterial fact or is flatly unsupported by the record. Accordingly, for purposes of 

this Order, the Court will construe all facts as set forth in DSOF (Doc. 95) as true. See 

Fed. R. Civ. P. 56(e)(2); Szaley, 371 F. App’x at 735. 

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 2. Plaintiff’s “Separate Statement of Facts” (Doc. 100) 

 In addition to his “Response to Defendant’s Separate Statement of Facts,” Plaintiff 

also filed a “Separate Statement of Facts.” See (Doc. 100). This statement of facts does 

not respond to DSOF, but sets forth Plaintiff’s account of the material facts along with 

citations to the record. See (Id.) The Court finds that Plaintiff’s Statement of Facts 

adequately complies with Local Rule 56.1(b) as an attempt to propose “any additional 

facts that establish a genuine issue of material fact.” 

 In order to “assist the Court in tracking the facts at issue and each party’s position 

in response thereto,” Defendant then filed a “Controverting Statement of Facts” in 

response to Plaintiff’s Separate Statement of Facts. (Doc. 104 at 2). Though wellintended, Local Rule 56.1 does not provide for a reply statement of facts or a response to 

the non-moving party’s separate statement of facts. Rather, Local Rule 7.2(m)(2) 

provides that any objection to the non-moving party’s statement of facts must be made in 

a “reply memorandum and may not be presented in a separate responsive memorandum.” 

LRCiv 7.2(m)(2); see EEOC v. Autozone, Inc., 2008 WL 2509302, at *1 (D. Ariz. June 

19, 2008) (“Should a moving party have any objections or replies to arguments or facts 

made in the Response or its supporting statement of facts, these ‘must be included in the 

responding party’s reply memorandum for the underlying motion and may not be 

presented in a separate responsive memorandum.’” (quoting LRCiv 7.2(m)(2))). The 

Local Rules do not contemplate attaching additional exhibits to replies in support of 

summary judgments or filing a separate response to the non-moving party’s statement of 

facts. The Court, therefore, will only consider the objections Defendant made in its Reply 

(Doc. 103) and not those contained in its Controverting Statement of Facts (Doc. 104). 

 Accordingly, for purposes of this Order, the Court will view all facts as described 

in DSOF (Doc. 95) and any properly supported additional facts found in Plaintiff’s 

Separate Statement of Facts (Doc. 100) in the light most favorable to Plaintiff. See 

Ellison v. Robertson, 357 F.3d 1072, 1075–76 (9th Cir. 2004). 

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B. The Undisputed Material Facts 

 The undisputed facts show that Plaintiff suffered an on-the-job injury during an 

incident with his supervisor on August 7, 2012. (Doc. 99 at 1). Although Plaintiff claimed 

that he fell when his supervisor pushed him, two witnesses stated the supervisor merely 

pulled away from a hug, causing Plaintiff to lose his balance. (Id. at 2). The difference is 

of no matter to the outcome of this case. At the time of the incident, Starwood was 

covered by a workers’ compensation insurance policy issued by Defendant and adjusted 

by Sedgwick. (Doc. 100 at 2). 

 For one week following the incident, Plaintiff continued to work without official 

complaint. (Id.) On August 15, 2012, Plaintiff first reported his injury to Starwood and 

started to receive medical treatment from U.S. Healthworks. (Doc. 99 at 1–2). About one 

month after Plaintiff began his medical treatment with U.S. Healthworks, he was referred 

to an orthopedic surgeon. (Id. at 2). On September 19, 2012, Defendant first received 

notice of Plaintiff’s workers’ compensation claim. (Id.) Because Plaintiff had been 

released to “light duty” and continued to work, Sedgwick initially designated Plaintiff’s 

claim as “medical-only” and assigned the claim to an adjuster named Lisa Miller. (Id.). 

 On September 24, 2012, Dr. Brian L. Shafer of Arizona Bone and Joint Specialists 

examined Plaintiff. (Id.) Based on this evaluation, Dr. Shafer advised Plaintiff to undergo 

an MRI to determine whether he injured his right rotator cuff. (Id.) The ensuing MRI 

indicated a full-thickness tear of Plaintiff’s rotator cuff, leading Dr. Shafer to recommend 

reparatory surgery. (Id. at 2–3). Upon receiving an authorization request for surgery, 

Sedgwick re-titled the claim as an “indemnity” claim and transferred it to Kelly 

Thompson (“Thompson”). (Id. at 3). 

 After Thompson took Plaintiff’s statement, obtained witness statements and 

reviewed Plaintiff’s medical records, she requested authority from her supervisor to deny 

the claim. (Id. at 3–4). In her claim note, Thompson provided a myriad of reasons for her 

denial recommendation, including: conflicting accounts of the incident; Plaintiff’s 

existing limp and unsteady intrinsic balance; Plaintiff’s delay in seeking treatment; 

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Plaintiff’s indications of feeling “fine” for one week after the incident; Plaintiff’s prior 

motor vehicle accident that resulted in a shoulder injury; and Plaintiff’s engagement in 

soccer as an extracurricular activity. (Id.) On October 29, 2012, Thompson issued a 

Notice of Claim Status with the Industrial Commission of Arizona (“ICA”) denying 

Plaintiff’s claim. (Id. at 4). Soon thereafter, Thompson told Plaintiff in a telephone 

conversation that his claim was being denied because the circumstances of the incident 

did not fall within the course and scope of his employment. (Id. at 4–5). 

 On November 28, 2012, Plaintiff filed a Request for Hearing before the ICA to 

challenge Sedgwick’s denial of benefits. (Id. at 5). Plaintiff’s principal argument was 

that, contrary to Thompson’s belief, his injury occurred in the course and scope of his 

employment. (Id.) Sedgwick hired Julie Doherty (“Doherty”) of Klein, Doherty, 

Lundmark, Barberich & La Mont, P.C. to defend against Plaintiff’s claim. (Id.) In her 

initial case report, Doherty promised to depose Plaintiff, explore his medical history, 

obtain relevant medical records and schedule an independent medical examination 

(“IME”). (Id.) After Doherty deposed Plaintiff, she advised Thompson that “In my 

opinion, the possibilities are extremely great that the Judge will find for [Plaintiff].” (Id. 

at 6). Doherty also told Thompson that she believed Plaintiff’s injury occurred in the 

course and scope of his employment. (Id.) Thompson disagreed with Doherty, expressly 

rejecting her conclusion that Plaintiff’s injury occurred in the course and scope of his 

employment. (Id.; Doc. 100-14). 

 On January 24, 2013, Thompson retained Scott Houston (“Houston”) of Jardine, 

Baker, Hickman, and Houston to replace Doherty as Sedgwick’s counsel. (Doc. 99 at 6–

7). In Houston’s preliminary case analysis, he questioned whether the “nature of the 

physical injury involved” could cause Plaintiff’s torn rotator cuff and whether the injury 

occurred in the course and scope of Plaintiff’s employment. (Id. at 7; Doc. 95-3 at 119). 

To obtain a second medical opinion, Houston scheduled Plaintiff to undergo an IME by 

Dr. Neil Rockowitz. (Doc. 99 at 7). On February 21, 2013, Dr. Rockowitz issued his IME 

report concluding that, based on the information available for his review, Plaintiff’s 

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injury and need for surgery were related to the August 7, 2012 incident. (Id. at 8). 

 On February 28, 2013, Houston advised Thompson that, based on deposition 

testimony from two witnesses, Plaintiff’s injury likely occurred within the course and 

scope of his employment. (Doc. 100 at 4). Houston also remarked, however, that he 

remained skeptical about “medical causation.” (Doc. 95-3 at 131). Specifically, Houston 

questioned how Plaintiff could have worked for one week without complaint while 

suffering from a torn rotator cuff. (Doc. 99 at 7–8). 

 The first hearing before the ICA occurred on March 6, 2013. (Id. at 8). Plaintiff 

testified that he struck the back of his right shoulder on the lower hinge of the freezer 

door when he fell and denied falling on an “outstretched” arm or elbow. (Id.) After the 

hearing, Houston had a telephonic conference with Dr. Rockowitz to discuss the 

mechanism of injury in light of Plaintiff’s testimony. (Id.) During this conference, Dr. 

Rockowitz—contrary to his earlier IME report—expressed that, based on Plaintiff’s 

testimony, the rotator cuff injury could not have resulted from the incident. (Id. at 8–9). 

 A second ICA hearing took place on June 6, 2013. (Id. at 9). Dr. Shafer testified at 

this hearing and concluded that, although he did not have all of the information relating to 

Plaintiff’s injury available to him at the time of his initial evaluation, the incident as 

described in Plaintiff’s testimony could have caused the rotator cuff injury. (Id.) 

 On June 26, 2013, Dr. Rockowitz testified at the final ICA hearing. (Id.) During 

his testimony, Dr. Rockowitz attested that the mechanism of Plaintiff’s injury could not 

have supplied the necessary force to cause a full thickness tear of his rotator cuff. (Id. at 

10). Instead, he testified that some tension or stress on the extremity would have been 

necessary to cause the injury. (Id.) The case was then submitted for decision. (Id.) 

 On August 29, 2013, Judge Mosesso rendered his decision finding that Plaintiff’s 

claim was compensable. (Id.) Defendant did not appeal the award and accepted Plaintiff’s 

claim. (Id.) Plaintiff then brought this lawsuit alleging the following four claims for 

relief: 1) breach of the duty of good faith and fair dealing as to Defendant; 2) aiding and 

abetting Defendant’s breach of the duty of good faith and fair dealing as to Sedgwick; 3) 

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aiding and abetting Defendant’s breach of the duty of good faith and fair dealing as to 

Thompson; and 4) punitive damages as to Sedgwick, Thompson and Defendant. (Doc. 9). 

In a previous Order, the Court dismissed all of Plaintiff’s claims against Sedgwick and 

Thompson. See (Doc. 57). Plaintiff’s remaining punitive damages claim—against 

Defendant—is the only claim on which Defendant seeks summary judgment. 

III. Summary Judgment Standard 

 Summary judgment is appropriate when “the movant shows that there is no 

genuine dispute as to any material fact and the movant is entitled to judgment as a matter 

of law.” Fed. R. Civ. P. 56(a). “A party asserting that a fact cannot be or is genuinely 

disputed must support that assertion by . . . citing to particular parts of materials in the 

record, including depositions, documents, electronically stored information, affidavits, or 

declarations, stipulations . . . admissions, interrogatory answers, or other materials,” or by 

“showing that materials cited do not establish the absence or presence of a genuine 

dispute, or that an adverse party cannot produce admissible evidence to support the fact.” 

Id. 56(c)(1)(A) & (B). Thus, summary judgment is mandated “against a party who fails to 

make a showing sufficient to establish the existence of an element essential to that party’s 

case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. 

Catrett, 477 U.S. 317, 322 (1986). 

 Initially, the movant bears the burden of pointing out to the Court the basis for the 

motion and the elements of the causes of action upon which the non-movant will be 

unable to establish a genuine issue of material fact. Id. at 323. To be entitled to summary 

judgment, the movant must support its motion with evidence that would entitle it to a 

directed verdict at trial, id. (citing Fed. R. Civ. P. 50(a)); i.e., the party must show that “a 

reasonable jury would not have sufficient evidentiary basis to find for the party on that 

issue.” Fed. R. Civ. P. 50(a). The burden then shifts to the non-movant to establish the 

existence of material fact. Celotex Corp., 477 U.S. at 323. The non-movant “must do 

more than simply show that there is some metaphysical doubt as to the material facts” by 

“com[ing] forward with ‘specific facts showing that there is a genuine issue for trial.’” 

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Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986) (quoting 

Fed. R. Civ. P. 56(e) (1963) (amended 2010)). A dispute about a fact is “genuine” if the 

evidence is such that a reasonable jury could return a verdict for the non-moving party. 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The non-movant’s bare 

assertions, standing alone, are insufficient to create a material issue of fact and defeat a 

motion for summary judgment. Id. at 247–48. However, in the summary judgment 

context, the Court construes all disputed facts in the light most favorable to the nonmoving party. Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir. 2004). 

IV. Punitive Damages Claim 

 1. Legal Standard 

 “Punitive damages primarily further the same objectives underlying criminal law: 

punishing the defendant and deterring the defendant and others from future misconduct.” 

Gurule v. Ill. Mut. Life & Cas. Co., 152 Ariz. 600, 601, 734 P.2d 85, 86 (1987) (en banc) 

(citing Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 330, 723 P.2d 675, 679 

(1986)). In the context of an insurance bad faith claim, punitive damages are available 

only when the evidence reflects, by clear and convincing evidence, “something more” 

than the conduct necessary to establish the tort. Rawlings v. Apodaca, 151 Ariz. 149, 160, 

726 P.2d 565, 576 (1986); see Linthicum, 150 Ariz. at 332, 723 P.2d at 681. More 

specifically, punitive damages are appropriate “when, and only when, the facts establish 

that defendant’s conduct was aggravated, outrageous, malicious or fraudulent.” Id. at 162, 

726 P.2d at 578 (citing Anderson v. Cont’l Ins. Co., 85 Wis. 2d 675, 271 N.W.2d 368 

(1978)). In other words, an “evil mind” must guide an “evil hand.” Id. 

 Notably, while “[i]ndifference to facts or failure to investigate [may be] sufficient 

to establish the tort of bad faith[, such conduct] may not rise to the level required by the 

punitive damage rule.” Id. Rather, in addition to such indifference or failure to 

investigate, the plaintiff must also show that the insurer was “guided by an evil mind 

which either consciously sought to damage the insured or acted intentionally, knowing 

that its conduct was likely to cause unjustified, significant damage to the insured.” Id. Put 

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another way, a court should consider “the nature of the defendant’s conduct, including 

the reprehensibility of the conduct and the severity of the harm likely to result, as well as 

the harm that has occurred[,] . . . [t]he duration of the misconduct, the degree of 

defendant’s awareness of the harm or risk of harm, and any concealment of it.” Hawkins 

v. Allstate Ins. Co., 152 Ariz. 490, 497, 733 P.2d 1073, 1080 (1987). 

 Because an insurer is rarely “willing to take the stand and admit its ‘evil mind,’” 

however, circumstantial evidence is often the only way a plaintiff can prove he is entitled 

to punitive damages. Id. at 498, 733 P.2d at 1081. “Thus, whether the [insurer] intended 

to injure the plaintiff or consciously disregarded the plaintiff’s rights may be suggested 

by a pattern of similar unfair practices.” Id. In any event, the primary question when 

punitive damages are requested is motive, because gross negligence and reckless 

disregard are not enough. See Volz v. Coleman Co., Inc., 155 Ariz. 567, 570–71, 748 P.2d 

1191, 1194–95 (1987). 

 2. Analysis 

 Defendant argues that it is entitled to summary judgment as to Plaintiff’s punitive 

damages claim because Plaintiff is unable to establish that Defendant acted with the 

requisite “evil mind” to support punitive damages. (Doc. 94). Defendant asserts that even 

if its conduct supports Plaintiff’s insurance bad faith allegations, which it does not 

concede, this alone is insufficient for an award of punitive damages. (Id.) 

 To establish a claim for punitive damages, the evidence must show that Defendant 

either: (1) intended to cause injury; (2) engaged in wrongful conduct motivated by spite 

or ill will; or (3) acted to serve its own interests, having reason to know and consciously 

disregarding a substantial risk that its conduct might significantly injure the rights of 

others, even though Defendant had neither desire nor motive to injure. See Bradshaw v. 

State Farm Mut. Auto. Ins. Co., 157 Ariz. 411, 422, 758 P.2d 1313, 1324 (1988). 

 Plaintiff does not appear to contend that either of the first two avenues applies in 

this case. To the extent Plaintiff did so, the Court finds that no evidence has been 

presented to show that Defendant “intended to cause injury” or “engaged in wrongful 

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conduct motivated by spite or ill will.” Accordingly, the Court will focus its analysis on 

the third avenue. In this regard, Plaintiff alleges that Defendant consciously disregarded a 

substantial risk of significant harm to Plaintiff’s rights because it placed its financial 

interests above Plaintiff’s interests by crafting an incentive for claims adjusters to close 

claims without regard to a claim’s merits, “attorney-shopped,” and improperly persuaded 

Dr. Rockowitz to “flip” his opinion regarding medical causation. (Doc. 98). 

 Plaintiff first alleges that a monetary bonus program implemented by Starwood 

and paid to Sedgwick claims adjusters imposed “arbitrary and unreasonable pressure” on 

the adjusters to deny an injured worker’s claim without regard to the claim’s merits. 

(Doc. 98 at 1). Plaintiff contends that the program “improperly” incentivized Thompson 

to deny Plaintiff’s workers’ compensation claim. (Id.)

2

 Even if the allegedly tainted 

program created a slight incentive for claims adjusters to close claims, however, Plaintiff 

presents no evidence that the program encouraged adjusters to deny claims. Further, 

satisfying the minimum “year-end closing ratio” was only one of several conditions to be 

eligible for a bonus. The program included multiple other requirements—such as internal 

audit scores and a maximum 5% reopen rate—that undoubtedly would have been 

compromised if an adjuster closed a claim incorrectly. Finally, there is no evidence that 

Defendant placed “arbitrary or unreasonable pressure” on Thompson or any other claims 

 

2

 As outlined in Plaintiff’s papers (Doc. 98 at 12) and the bonus program itself 

(Doc. 100-8 at 1), the program would seemingly encourage adjusters to not close claims. 

Specifically, the program requires that an adjuster’s “year-end closing ratio must be at 

least 105%” to be eligible for a bonus. (Doc. 100-8 at 1). According to Plaintiff and the 

program description, the “Year-end closing ratio = total # of intake / total # of closures 

during the year.” (Id.) If this equation were applied, however, an adjuster would gain 

nothing by closing a claim, as any increase in “closures” would automatically decrease

the corresponding “year-end closing ratio.” For example, if an adjuster had five “intake” 

claims and “closed” one, her “closing ratio” would be 500% pursuant to this equation. On 

the other hand, if the adjuster closed all five claims, her closing ratio would be 100%. 

Plaintiff presents no evidence explaining this anomaly or illustrating how the program 

was enforced or administered. 

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adjuster to meet the program’s requirements.3 In fact, Thompson testified the program 

was “never presented” to her. (Doc. 100-6 at 5–6). In any event, even if the program was 

unreasonable, Defendant’s actions do not amount to “aggravated, outrageous, oppressive 

or fraudulent” conduct necessary to create a triable issue for the jury. See Rawlings, 151 

Ariz. at 162, 726 P.2d at 578.4

 

 Second, Plaintiff claims that Defendant actively pursued an attorney who would 

“support any reason, no matter how illegitimate, to deny [Plaintiff’s] claim.” (Doc. 98 at 

7). Initially, there is no evidence that Defendant did not have a continuous, subjective 

belief in the merits of its denial of Plaintiff’s claim. At the outset, Thompson denied 

Plaintiff’s claim because she doubted medical causation and believed that the injury did 

not occur in the course and scope of his employment. (Doc. 95-3 at 46–47). The issue of 

medical causation remained a concern for both of Defendant’s retained attorneys, 

Doherty (id. at 99–100) and Houston (id. at 119, 145). Finally, when Dr. Rockowitz was 

apprised of Plaintiff’s sworn testimony regarding the incident, he too questioned medical 

causation. (Doc. 99 at 10). Plaintiff presents no evidence that Defendant’s continuous 

subjective belief in the merits of its denial was motivated by an “evil mind” or that 

Defendant consciously disregarded a substantial risk that its conduct might significantly 

 3

 To support his argument that Defendant placed arbitrary and unreasonable 

pressure on claims adjusters to deny claims, Plaintiff presents the Court with e-mails sent 

by Starwood to Thompson and other claim adjusters. The e-mails intimated that the 

adjusters should “focus on closing” certain claims, including Plaintiff’s, “before the end 

of the year.” (Doc. 100-17). The e-mails do not, however, equate “closing” a claim with 

“denying” a claim, much less prove that Defendant consciously disregarded a substantial 

risk of significant harm to Plaintiff’s rights. While these e-mails may be evidence of bad 

faith, they do not create a dispute of material fact on the issue of punitive damages. 

4

 The Court finds that Nardelli v. Metro Grp. Prop. & Cas. Ins. Co., 230 Ariz. 

592, 277 P.3d 789 (Ct. App. 2012) is inapplicable to Plaintiff’s claim. In Nardelli, the 

Arizona Court of Appeals was presented with evidence that an insurance company 

implemented an “aggressive company-wide profit goal” and “aggressively communicated 

this goal to the claims department (including the office and employees handling [the 

plaintiff’s] claim).” Id. at 605, 277 P.3d at 802. The evidence also showed that the 

monetary benefits given to the claims office were tied to the “average amount paid on 

claims.” Id. Plaintiff presents no similar evidence here. 

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injure Plaintiff’s rights. While reasons for “dilatory” resolution of a claim may ultimately 

be found “groundless or inadequately investigated” resulting in bad faith liability, this 

does not mean that such reasons are sufficient to create an issue of fact for the jury on 

punitive damages. Filasky v. Preferred Risk Mut. Ins. Co., 152 Ariz. 591, 599, 734 P.2d 

76, 84 (1987). “Something more” is required; Plaintiff failed to produce such evidence 

here. 

 Plaintiff’s final argument is that Defendant engaged in misconduct when Houston 

had a second conversation with Dr. Rockowitz to “persuade[] him to change his position 

to support Zurich’s denial of the claim.” (Doc. 98 at 7).5

 Plaintiff presents no evidence to 

support this allegation. On the other hand, Houston testified that the purpose of the 

conversation was to inform Dr. Rockowitz of Plaintiff’s ICA testimony regarding the 

mechanism of injury. (Doc 104-1 at 22).6

 Without evidence of “something more,” 

Houston’s ancillary conversation with Dr. Rockowitz to determine the credibility of a 

 5

 Plaintiff also appears to argue that Houston’s initial scheduling of the IME with 

Dr. Rockowitz constituted illicit conduct. (Doc. 98 at 2, 7). Plaintiff, however, fails to 

recognize that no IME had been performed at this time. Without evidence of bad faith or 

unreasonableness, an insurer acts within its rights by scheduling a preliminary IME. See 

Ariz. Rev. Stat. § 23-1026 (2015); Ariz. Admin. Code § R20-5-114 (2013); Mendoza v. 

McDonald’s Corp., 222 Ariz. 139, 159, 213 P.3d 288, 308 (Ct. App. 2009) (implying that 

seeking an IME is not automatically bad faith). Moreover, Plaintiff’s attempt to create a 

material fact dispute by citing a letter expressing Houston’s “hope[ that] Dr. Rockowitz 

will support our argument” is not enough. (Doc. 99 at 7). No reasonable juror could 

conclude that a party’s mere “hope” for a certain outcome is sufficient to support a 

finding of “aggravated, outrageous, malicious or fraudulent” conduct by clear and 

convincing evidence. 

6

 The evidence Plaintiff cites for his argument that this conversation was nefarious 

actually bolsters Houston’s testimony. See (Doc. 100-22 at 3). Namely, the evidence 

shows that after Houston learned for the first time that Plaintiff’s arm was not extended 

when he fell, he wrote to Thompson that “this piece of evidence will be critical to Dr. 

Rockowitz. . . . I will arrange for a telephonic conference with Dr. Rockowitz to see if 

this changes his opinion regarding the rotator cuff tear noted.” (Id.) Plaintiff presents no 

evidence that Dr. Rockowitz already knew of the mechanism of the injury, nor does the 

IME report suggest as much. See (Doc. 115). Rather, the evidence aligns with Houston’s 

testimony that he merely wanted to know whether Plaintiff’s testimony would have a 

bearing on Dr. Rockowitz’s prior opinion. 

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viable defense was not “aggravated, outrageous, malicious or fraudulent” conduct as 

required for punitive damages. See Rawlings, 151 Ariz. at 162, 726 P.2d at 578.7

V. Conclusion 

 The Court concludes that the evidence presented does not warrant a reasonable 

inference that Defendant acted with an “evil mind” mandated by Arizona law to establish 

punitive damages. While Plaintiff’s evidence may rise to the level of bad faith liability, 

no evidence exists from which a reasonable juror could conclude that Defendant knew of 

the evil of its actions, or that it acted from spite, or that Defendant’s conduct was so 

outrageous that it presented an unacceptable risk of tremendous harm to Plaintiff.8

 The 

 7

 Plaintiff argues that Demetrulias v. Wal-Mart Stores, Inc., 917 F. Supp. 2d 993 

(D. Ariz. 2013) directly resembles Plaintiff’s claim and should be followed. In 

Demetrulias, however, the plaintiff offered significantly more evidence to support her 

punitive damages claim than Plaintiff does here. In particular, the plaintiff in Demetrulias

offered evidence that her supervisor falsely told the IME physician that there was 

surveillance footage demonstrating her ability to work. Id. at 1011. Plaintiff offers no 

similar evidence here. 

8

 The Court does not find Newman v. Select Specialty Hosp.-Ariz., Inc., No. 1 CACV 13-0665, 720 Ariz. Adv. Rep. 12, 2015 Ariz. App. LEXIS 174 (Ct. App. Sept. 1, 

2015) to be applicable to this case. In Newman, the Arizona Court of Appeals reversed 

the trial court’s decision to grant a hospital defendant’s motion for a directed verdict on 

the issue of punitive damages. Id. at ¶ 15. The plaintiff, a hospital patient, had presented 

evidence at trial that the hospital was aware of the plaintiff’s injuries and required 

treatment, had internal policies imposing a detailed course of conduct on hospital 

personnel, failed to follow direct treatment orders from the plaintiff’s doctor, and was 

consciously aware that failing to uphold the treatment standards risked severely 

exacerbating the plaintiff’s condition. Id. at ¶ 13. Despite this knowledge, the hospital 

“continued to pursue a course of conduct that could severely exacerbate [the plaintiff’s] 

wounds.” Id. at ¶ 14. 

In this case, the evidence Plaintiff presents simply does not show by clear and 

convincing evidence that Defendant consciously disregarded a substantial risk of 

significant harm to Plaintiff when it denied Plaintiff’s claim. Specifically, in contrast with 

Newman where the hospital knew that a substantial risk of significant harm to the 

plaintiff was the patent consequence of disregarding the doctor’s treatment orders and the 

hospital’s mandatory protocols, the evidence of a substantial risk of significant harm was 

absent in this case. Dr. Shafer’s initial surgery authorization request noted that surgery 

would provide Plaintiff “the best chance to improve his pain and maximize his function 

both short-term and long-term.” (Doc. 95-3 at 73). Simply suggesting that a treatment 

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Court, therefore, will grant Defendant’s motion for summary judgment as to the punitive 

damages claim. 

 For the foregoing reasons, 

 IT IS ORDERED that Defendant’s Motion to Strike Portions of the Declaration 

of Everette Lee Herndon, Jr. (Doc. 106) is denied. 

 IT IS FURTHER ORDERED that Defendant’s Motion for Summary Judgment 

Re: Punitive Damages (Doc. 94) is granted. 

 Dated this 25th day of September, 2015. 

 

option is a patient’s “best chance,” however, is not equivalent to pronouncing that a 

“significant risk of substantial harm” will result by foregoing the treatment. The Court is 

not willing to make this stretch to uncover a material fact dispute for the jury. 

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