Court Opinion

ID: 9555910
Source: CourtListenerOpinion
Date Created: 2023-08-15 17:04:25.83744+00
Date Added: 2024-06-11T15:36:32.018677
License: Public Domain

IN THE
             ARIZONA COURT OF APPEALS
                              DIVISION ONE

        STATE FARM AUTOMOBILE INSURANCE COMPANY,
                      Plaintiff/Appellee,

                                     v.

               JACEY LEE ORLANDO, Defendant/Appellant.

                           No. 1 CA-CV 22-0447
                             FILED 8-15-2023

           Appeal from the Superior Court in Maricopa County
                          No. CV2020-006088
              The Honorable Katherine M. Cooper, Judge

    AFFIRMED IN PART; VACATED AND REMANDED IN PART

                                  COUNSEL

Hill Hall & DeCiancio PLC, Phoenix
By David W. Bell
Counsel for Plaintiff/Appellee

Mick Levin PLC, Phoenix
By Mick Levin
Counsel for Defendant/Appellant
                      STATE FARM v. ORLANDO
                         Opinion of the Court

                               OPINION

Judge James B. Morse Jr. delivered the opinion of the Court, in which
Presiding Judge Maria Elena Cruz and Judge Daniel J. Kiley joined.

M O R S E, Judge:

¶1            Jacey Lee Orlando challenges the superior court's grant of
summary judgment to State Farm Automobile Insurance Company ("State
Farm") on her breach of contract and insurance bad faith counterclaims. We
reject State Farm's argument that cases interpreting Arizona's uninsured
motorist ("UM") statute compel the superior court's grant of summary
judgment on Orlando's underinsured motorist ("UIM") claim. Because
Arizona's UIM statute does not allow the off-highway vehicle exclusion
allowed under the UM statute, we vacate and remand for further
proceedings on Orlando's breach of contract claim. But because Orlando
has failed to show any genuine issue of material fact as to bad faith, we
affirm summary judgment on that claim.

            FACTS AND PROCEDURAL BACKGROUND

¶2           Orlando, a passenger on an all-terrain vehicle ("ATV"), was
injured during a February 2018 rollover accident in California's Imperial
Sand Dunes. After receiving policy limits from the driver's insurer,
Orlando made an UIM claim on her State Farm automobile insurance policy
("Policy").

¶3            On June 10, 2019, counsel for State Farm wrote Orlando's
counsel stating that "it does not appear that [the Policy] provides [UIM]
coverage" because the ATV was not an "underinsured motor vehicle" under
the Policy:

      Underinsured Motor Vehicle does not include a land motor
      vehicle:

      2. designed for use primarily off public roads except while on
      public roads[.]

      …

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                       STATE FARM v. ORLANDO
                          Opinion of the Court

      We will pay compensatory damages for bodily injury an
      insured is legally entitled to recover from the owner or driver
      of an underinsured motor vehicle.

      The bodily injury must be:

      1. sustained by an insured; and

      2. caused by an accident that involves the operation,
      maintenance, or use of an underinsured motor vehicle as a
      motor vehicle.

State Farm's counsel cited two cases addressing UM coverage—Chase v.
State Farm Mutual Automobile Insurance Co., 131 Ariz. 461 (App. 1982), and
West American Insurance Co. v. Pirro, 167 Ariz. 437 (App. 1990)—to maintain
that, when read together, Arizona's Financial Responsibility Act ("FRA"),
A.R.S. §§ 28-4001 to -4153, and Uninsured/Underinsured Motorist Act
("UMA"), A.R.S. § 20-259.01, "do not compel coverage for vehicles that are
not intended to be operated on the highways." Stating that it appeared
"Arizona courts have already decided this issue in the context of [UM]
coverage," State Farm's counsel invited Orlando to provide contrary
"information or analysis" if she disagreed with State Farm's conclusion.

¶4             Orlando did not respond. State Farm's counsel followed up
in writing four months later, again inviting a response. Seven months after
that, State Farm sued seeking a declaratory judgment that the Policy did not
provide UIM coverage for the ATV accident. Orlando counterclaimed,
alleging breach of the Policy and for bad faith.

¶5             State Farm moved for summary judgment, contending the
Policy did not provide UIM coverage because the ATV was not an
"underinsured motor vehicle." State Farm also contended Orlando had
presented no evidence to support a bad faith claim. Orlando opposed the
motion, arguing, as relevant to this appeal, that the Policy definition could
not limit UIM coverage because "exceptions to [UIM] coverage not
permitted by the [UMA] are void." Orlando also offered a declaration from
her expert witness, Frederick Berry, who she contended had detailed "over
twenty different explanations from which a reasonable jury could find
sufficient evidence to find that State Farm has acted in bad faith."

¶6           The superior court granted State Farm's motion. The court
concluded the ATV was not an "underinsured motor vehicle" under the
Policy because it was "designed for use primarily off public roads" and the
accident did not occur on a public road. The court further concluded the

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                        STATE FARM v. ORLANDO
                           Opinion of the Court

UMA did not bar the definition's limitation on UIM coverage because it was
"nearly identical to [definitions] approved of in Pirro and Chase." It further
concluded that Orlando had presented "no evidence that State Farm acted
unreasonably in the handling of Orlando's claim or knew that it was acting
unreasonably or with reckless disregard that such knowledge could be
imputed to it." The court also awarded State Farm attorney fees and costs.

¶7            Orlando moved for a new trial, contending Pirro and Chase
did not apply because they addressed UM, not UIM, coverage. She also
again cited the Berry declaration to argue fact questions remained as to
whether State Farm processed her claim in bad faith. The court denied
Orlando's motion. Orlando timely appealed. We have jurisdiction under
A.R.S. § 12-2101(A)(5)(a).

                               DISCUSSION

¶8            Summary judgment is appropriate when there is "no genuine
dispute as to any material fact and the moving party is entitled to judgment
as a matter of law." Ariz. R. Civ. P. 56(a). We review a grant of summary
judgment de novo and view the evidence and reasonable inferences in a
light most favorable to Orlando as the non-moving party. Zambrano v. M &
RC II LLC, 254 Ariz. 53, 58, ¶ 9 (2022).

¶9             The interpretation of an insurance contract is a question of
law we review de novo. First Am. Title Ins. Co. v. Action Acquisitions, LLC,
218 Ariz. 394, 397, ¶ 8 (2008). "[T]he insurer bears the burden to establish
the applicability of any exclusion." Keggi v. Northbrook Prop. & Cas. Ins. Co.,
199 Ariz. 43, 46, ¶ 13 (App. 2000).

I.     Breach of Contract Claim.

¶10           Two statutory subsections of the UMA govern "uninsured
motorist coverage," and "underinsured motorist coverage." See A.R.S.
§ 20-259.01(E), (G). While similar, the subsections are not identical.

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                       STATE FARM v. ORLANDO
                          Opinion of the Court

 Uninsured Motorist Coverage              Underinsured Motorist Coverage

 "Uninsured motorist coverage",           "Underinsured motorist coverage"
 subject to the terms and conditions of   includes coverage for a person if
 that coverage, means coverage for        the sum of the limits of liability
 damages due to bodily injury or          under all bodily injury or death
 death if the motor vehicle that caused   liability bonds and liability
 the bodily injury or death is not        insurance policies applicable at the
 insured by a motor vehicle liability     time of the accident is less than the
 policy that contains at least the        total damages for bodily injury or
 limits prescribed in § 28-4009. For      death resulting from the accident.
 the purposes of uninsured motorist       To the extent that the total
 coverage, an uninsured motorist          damages      exceed      the    total
 does not include a person who is         applicable liability limits, the
 insured under a motor vehicle            underinsured motorist coverage
 liability policy that complies with      provided in subsection B of this
 § 28-4009.                               section is applicable to the
                                          difference.
 A.R.S. § 20-259.01(E) (emphasis
 added).                         A.R.S. § 20-259.01(G) (emphasis
                                 added).

The legislature provided for notable differences in these two statutory
subsections. For example, UM coverage may be "subject to the terms and
conditions" of the policy but the UIM subsection allows for no similar
limitation. Id. And UM coverage provides for damages "caused" by a
"motor vehicle" but UIM provides coverage for damages "resulting from
[an] accident," without reference to a motor vehicle. Id.; see A.R.S.
§ 20-259.01(D) (defining "uninsured motor vehicles"). The UMA requires
every insurer who writes motor vehicle liability policies to offer UIM
coverage. A.R.S. § 20-259.01(B); Brown v. State Farm Mut. Auto. Ins. Co., 163
Ariz. 323, 327 (1989). "[T]he legislature intended a broad application of UIM
coverage to provide benefits up to the policy limits whenever the insured
is not indemnified fully by the available limits of liability." Taylor v.
Travelers Indem. Co. of Am., 198 Ariz. 310, 315, ¶ 15 (2000). "[E]xceptions to
[UIM] coverage not permitted by the statute are void." Cundiff v. State Farm
Mut. Auto. Ins. Co., 217 Ariz. 358, 360, ¶ 9 (2008) (quoting Taylor, 198 Ariz.
at 315, ¶ 13).

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                        STATE FARM v. ORLANDO
                           Opinion of the Court

¶11            State Farm relies on Chase and Pirro to support its
"underinsured motor vehicle" Policy definition. In Chase, the plaintiff was
struck by a golf cart that crashed into a model home garage. 131 Ariz. at
462. The plaintiff sought UM benefits, but his insurer denied coverage
based on an "uninsured motor vehicle" policy definition similar to the
definition at issue here:

       [T]he term uninsured motor vehicle shall not include:

       ....

       (A) land motor vehicle designed for use principally off public
       roads except while being used on public roads . . . .

Id. The plaintiff argued the FRA obligated "owners or operators to purchase
insurance covering liability incurred both on and off the public highway."
Id. at 464. While we held that the FRA and UMA should be read together,
we concluded the FRA was "silent as to any requirement that insurance
policies obtained to provide proof of financial responsibility also cover
off-road accidents." Id. at 465.

¶12            Because the UMA did not define "uninsured motor vehicle" at
that time, we looked to the definition section of Arizona's transportation
statutes, which defined "vehicle," in relevant part, as a "device in, upon or
by which any person or property is or may be transported upon a public
highway" and "motor vehicle" as a "self-propelled vehicle" with exceptions
not relevant to this case. Id. (quoting A.R.S. § 28-101). We cited several out-
of-state cases supporting the conclusion that a vehicle designed for off-road
use was not a "motor vehicle" unless it was used on a public road:

       [W]e must conclude that the term is intended to include
       motor vehicles which should be insured under the Act but are
       not, and motor vehicles which, though not subject to
       compulsory insurance under the Act, are at some time
       operated on the public highways. Only in these instances is
       the uninsured motorists provision serving its intended
       purpose of complementing the original Act and furthering the
       financial protection accorded thereby to persons injured by
       motor vehicles on the public highways. This purpose would
       not be served by interpreting the uninsured motorists
       provision so as to cover accidents involving motor vehicles
       not subject to compulsory insurance and which occur on
       private property.

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                        STATE FARM v. ORLANDO
                           Opinion of the Court

Id. at 468 (quoting Autry v. Aetna Life & Cas. Ins. Co., 242 S.E.2d 172, 175
(N.C. Ct. App. 1978)).1

¶13           Pirro involved a similar "uninsured motor vehicle" definition
that excluded from UM coverage vehicles "[d]esigned mainly for use off
public roads while not on public roads." 167 Ariz. at 438. We cited the
FRA's requirement at that time which required "[e]very motor vehicle
operated on any highway in this state . . . be covered by" some form of liability
insurance. Id. (citing then-A.R.S. § 28-1521(A)). From there, we reasoned
that because "liability insurance need only cover motor vehicles operated on
highways and," because UM coverage "is intended to provide the reciprocal
or mutual equivalent of automobile liability coverage under the [FRA] and
automobiles that are not intended to be operated on the highways need not
be covered by liability insurance, . . . excluding such vehicles from [UM]
coverage does not violate" public policy. Id. As the dune buggy at issue in
Pirro was designed for off-road use and was not on a highway when the
accident occurred, we held the insurer was not obligated to provide UM
coverage. Id. at 438-39.

¶14            The UMA now defines "uninsured motor vehicle" to include,
"subject to the terms and conditions of that coverage, . . . any insured motor
vehicle if the liability insurer of the vehicle is unable to make payment on
the liability of its insured, within the limits of the coverage, because of
insolvency." A.R.S. § 20-259.01(D). And the FRA now defines "motor
vehicle" to mean "a self-propelled vehicle that is registered or required to
be registered under the laws of this state," but only motor vehicles
"operated on a highway in this state" are subject to its requirements. A.R.S.
§§ 28-4001(3), -4135(A).

¶15          The parties agree (1) the ATV at issue was registered in
Arizona as an off-highway vehicle, and (2) the accident occurred in the
Imperial Sand Dunes in California. If this case involved UM coverage, then
the reasoning of Chase and Pirro—that insurers need not provide UM
coverage for accidents involving vehicles not subject to the FRA's
requirements—would apply.

¶16           Orlando points out, however, that UM and UIM coverages
"are separate and distinct and apply to different accident situations." A.R.S.
§ 20-259.01(H). Orlando relies on Cundiff, where our supreme court held

1      The current FRA exempts golf carts "used in the operation of a golf
course or only incidentally operated or moved on a highway." A.R.S.
§ 28-4132(8).

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                        STATE FARM v. ORLANDO
                           Opinion of the Court

that workers' compensation benefits could not be offset against available
UIM benefits. 217 Ariz. at 361, ¶ 12. The court distinguished a prior UM
case that allowed a similar offset if the insured was fully compensated
because "[t]he statutory provision defining UM coverage expressly
provides that such coverage is 'subject to the terms and conditions of that
coverage,' while the [statutory] provision defining UIM coverage does not
provide a similar limitation." Id. at 361-62, ¶ 14 (citations omitted) (quoting
A.R.S. § 20-259.01(E)); cf. Terry v. Auto-Owners Ins. Co., 184 Ariz. 246, 249-50
(App. 1995) (allowing for a workers' compensation offset provision in an
UM policy as long as it did not prevent full recovery of damages).

¶17            The definition at issue in this case is a "term and condition" of
the Policy. State Farm nonetheless contends "the same public policy
considerations apply to underinsured motorist coverage as to uninsured
motorist coverage," citing Higgins v. Fireman's Fund Insurance Co., 160 Ariz.
20, 22 (1989). We reject this argument for two reasons. First, we look to
public policy when interpreting a statute only if the statutory language is
unclear. See Liebsohn v. Hobbs, 254 Ariz. 1, 4, ¶ 10 (2022) (noting courts only
consider a statute's "subject matter and purpose" if its language "has more
than one reasonable meaning"). The UM statutory subsection provides that
coverage may be "subject to the terms and conditions of that coverage."
A.R.S. § 20-259.01(E). The UIM statutory subsection does not. A.R.S.
§ 20-259.01(G).     When the legislature includes language allowing
conditions for one type of coverage and does not include such language for
another type of coverage, "it does so with the intent of ascribing different
meanings and consequences to that language." Workers for Responsible Dev.
v. City of Tempe, 254 Ariz. 505, 511, ¶ 21 (App. 2023) (quoting Comm. for Pres.
of Established Neighborhoods v. Riffel, 213 Ariz. 247, 249-50, ¶ 8 (App. 2006)).
State Farm does not identify the ambiguity created by the different
statutory texts.

¶18            Second, the public policy stated in Higgins—that "innocent
members of the public who have purchased underinsured motorist
coverage are entitled to coverage as if the offending driver was insured in
the amount of the underinsured policy limit"—does not aid State Farm in
this case. 160 Ariz. at 23. We also stated in Higgins that the UMA "does not
permit the insurer to void the coverage by . . . exceptions not permitted in
the statute." Id.; see State Farm Mut. Auto. Ins. Co. v. Duran, 163 Ariz. 1, 3
(1989). The only express limit on UIM coverage in the UMA—the
anti-stacking provision of A.R.S. § 20-259.01(H)—does not apply. Am. Fam.
Mut. Ins. Co. v. Sharp, 229 Ariz. 487, 491, ¶ 12 (2012); see Franklin v. CSAA
Gen. Ins. Co., --- Ariz. ---, ---, ¶¶ 9-24 (July 28, 2023) (interpreting the anti-
stacking provision for UIM coverage). And State Farm does not contend

                                        8
                        STATE FARM v. ORLANDO
                           Opinion of the Court

Orlando received full compensation from the driver's liability insurance.
See A.R.S. § 20-259.01(G) (noting UIM coverage applies "[t]o the extent that
the total damages exceed the total applicable liability limits").

¶19           State Farm also cites several cases that permitted UIM
insurers to define who is a named insured, contending that "public policy
does not restrict the parties' right to agree on who is an insured." Beaver v.
Am. Fam. Mut. Ins. Co., 234 Ariz. 584, 586, ¶ 8 (App. 2014) (cleaned up)
(quoting Am. States Ins. Co. v. C & G Contracting, Inc., 186 Ariz. 421, 426
(App. 1996)). This is consistent with the text of the UMA, which provides
that UIM coverage "extends to and covers all persons insured under the
policy." A.R.S. § 20-259.01(B). State Farm cites no UMA language that
allows insurers to limit UIM coverage based on the vehicle or vehicles
involved in an accident. Cf. Taylor, 198 Ariz. at 316, ¶ 16 ("First party UIM
insurance follows and protects the person, not the vehicle.").

¶20           For these reasons, we hold that the Policy's "underinsured
motor vehicle" definition cannot limit or bar UIM coverage based on the
type of vehicle involved. See Sharp, 229 Ariz. at 492, ¶ 16 ("Subsection (G)
requires an insurer to provide UIM coverage, '[t]o the extent that the total
damages exceed the total applicable liability limits.' Any policy provision
to the contrary is void and unenforceable."). We therefore vacate the grant
of summary judgment on Orlando's breach of contract claim and remand
for further proceedings on that claim.

II.    Bad Faith Claim.

¶21           Orlando also challenges the grant of summary judgment on
her bad faith claim. An insurer owes a duty to act in good faith for its
insured's benefit, and a breach of that duty may result in a claim for the tort
of bad faith. Sobieski v. Am. Standard Ins. Co. of Wis., 240 Ariz. 531, 534, ¶ 10
(App. 2016). But "an insurer's reasonable but incorrect policy interpretation
does not, by itself, constitute bad faith." Desert Mountain Props. Ltd. P'ship
v. Liberty Mut. Fire Ins. Co., 225 Ariz. 194, 215, ¶ 94 (App. 2010). To defeat
State Farm's motion for summary judgment, Orlando had to present
"sufficient evidence from which reasonable jurors could conclude that in
the investigation, evaluation, and processing of the claim, the insurer acted
unreasonably and either knew or was conscious of the fact that its conduct
was unreasonable." Zilisch v. State Farm Mut. Auto. Ins. Co., 196 Ariz. 234,
238, ¶ 22 (2000).

¶22          Orlando relies on Berry's declaration to contend genuine
issues of material fact remain as to whether State Farm acted in bad faith.

                                       9
                        STATE FARM v. ORLANDO
                           Opinion of the Court

Orlando's controverting statement of facts contained two paragraphs
discussing Berry's declaration. The first paragraph stated the following:

       Berry concluded that "State Farm has misused its power of
       money, time, superior knowledge and litigation tolerance as
       it provided sub-standard claim service to [Orlando]. In its
       claim evaluation and later in its claim investigation, State
       Farm was not prompt and thorough and did not give equal
       consideration to the interests of [Orlando] as it gave its own
       interests."

The cited page from Berry's declaration repeats this same language. Such
conclusory statements, however, are insufficient to withstand summary
judgment. See Nolde v. Frankie, 192 Ariz. 276, 282, ¶ 28 (App. 1998) (stating
affidavits that "provide mere conclusory statements" are insufficient to
defeat a motion for summary judgment); Florez v. Sargeant, 185 Ariz. 521,
526 (1996) ("[A]ffidavits that only set forth ultimate facts or conclusions of
law can neither support nor defeat a motion for summary judgment.").

¶23              The second paragraph stated that Berry had "outlined over
twenty deficiencies in State Farm's handling of . . . Orlando's claim." But
neither that paragraph nor Berry's declaration sets forth specific facts to
support any of the alleged deficiencies. See Ariz. R. Civ. P. 56(e) (requiring
affidavits offered in opposition to summary judgment to "set forth specific
facts showing a genuine issue for trial"). For example, Berry stated that he
"believe[d] . . . State Farm made an early evaluation of the UIM claim before
much claim investigation." He also stated his "belief" that State Farm had
set no reserve for Orlando's UIM and bad faith claims. He cited no record
evidence to support either of these "beliefs." See Badia v. City of Casa Grande,
195 Ariz. 349, 357, ¶ 29 (App. 1999) ("Sheer speculation is insufficient
to . . . defeat summary judgment.").

¶24             Berry also opined that, "[i]n [his] experience, insurers
purposefully locate matters . . . to be particularly harmful to the insurer or
helpful to its client/insured[] outside of the claim file because their contents
hardly ever support nonpayment of an insurance claim." He identified no
such "matters" in this case and cited no evidence to suggest State Farm
"purposefully" removed anything from its claim file. See Sobieski, 240 Ariz.
at 542, ¶ 45 (rejecting expert opinion that insurer's business policies "'could'
or 'might' result in pressure on the claims department because he had seen
that happen in other insurance companies").

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                        STATE FARM v. ORLANDO
                           Opinion of the Court

¶25             Berry also speculated that State Farm retained a "law-trained"
person who "may have been acting as State Farm's adjuster and potential
trial witness," but identified no such person. He then speculated this
unidentified person "may have been tasked to develop information that is
useful to State Farm as it looked for ways to 'deny' the claim and defend
any ensuing fist-party [sic] 'bad faith' claim litigation." But, again, Berry
cites no evidence to suggest any such thing occurred. Berry also generally
opined that insurers should not retain "independent adjusters, attorneys,
experts or consultants that are biased," but did not point to any evidence of
bias in this case. See Aida Renta Tr. v. Maricopa County, 221 Ariz. 603, 611,
¶ 19 (App. 2009) ("We will not allow an expert to base a conclusory opinion
on no facts.").

¶26            Berry opined that State Farm did not act promptly because it
did not correspond until three months after Orlando's counsel sent the
March 5, 2019 "demand letter." That letter was not, however, a demand
letter. On the contrary, the letter merely put State Farm on "notice of [the]
collision in the event that there should later arise a claim under your policy,
including . . . underinsured motorist . . . claims." (Emphasis added.)
Indeed, the letter expressly stated that Orlando was "NOT opening a
UM/UIM claim at this time" and that her counsel would "provide [State
Farm] with appropriate notice if and when we determine that either
UM/UIM may be applicable to this collision." There is nothing in the
record showing when, or even if, Orlando later gave such notice. Because
the March 5, 2019 letter sent by Orlando's counsel was not a demand letter,
the letter triggered no obligation on State Farm's part to respond, promptly
or otherwise. Notably, Berry cited this same three-month period as the only
support for his opinion that State Farm "never intended to pay [the] UIM
claim" and would litigate this case all the way to the Arizona Supreme
Court.

¶27            Berry also opined that State Farm "did not make any serious
efforts to resolve [Orlando's] claim of insurer bad faith claim handling."
Berry, however, cited no evidence to show Orlando disclosed her intent to
pursue a bad faith claim before filing her counterclaims in this litigation.
He also cited no authority to support his opinion that State Farm's duty to
"conduct a prompt, thorough and fair claim investigation and . . . evaluation
continues . . . even into claim litigation." He also cited no industry
standards governing how an insurer should investigate and evaluate a bad
faith claim already in litigation.

¶28           In summary, Berry's declaration offered conclusory
allegations, but no specific evidence, to support a finding that State Farm

                                      11
                        STATE FARM v. ORLANDO
                           Opinion of the Court

acted in bad faith. Accordingly, Berry's declaration did not defeat State
Farm's summary judgment motion. See Modular Mining Sys., Inc. v. Jigsaw
Techs., Inc., 221 Ariz. 515, 520, ¶ 19 (App. 2009) (concluding an expert
affidavit that "contain[ed] only speculation and no specific facts
demonstrating a material factual dispute" could not defeat summary
judgment).

¶29           Orlando also argues that State Farm has violated its obligation
to promptly investigate and determine her claim because State Farm has yet
"to actually accept or deny [her] claim." Orlando observes that neither of
State Farm's letters "actually denied [her] claim," and State Farm "chose not
to make a determination as to whether there was coverage" when it filed
this action seeking a judicial determination of the issue. By failing to ever
"mak[e] a coverage decision," she concludes, State Farm violated its duty
"to make a prompt determination of her claim."

¶30            But during the proceedings before the superior court,
Orlando based her bad faith claim on her contention that State Farm had
wrongfully denied her benefits, not, as she now contends, that State Farm
never made a decision. Her counterclaims for breach of contract and bad
faith were based on State Farm's alleged "de facto denial of benefits." And,
in her opposition to State Farm's motion for summary judgment, she cited
Berry's declaration to support her position that "a reasonable jury could
determine that State Farm acted in bad faith in denying [her] claim." Not
until she filed her motion for new trial did Orlando assert that State Farm
had not processed and resolved her claim. Based on her positions before
the superior court, Orlando waived the argument that State Farm
committed bad faith by failing to decide whether to deny her claim. See
Kent v. Carter-Kent, 235 Ariz. 309, 313, ¶ 20 (App. 2014) (finding argument
waived when raised for first time in new trial motion); BMO Harris Bank
N.A. v. Espiau, 251 Ariz. 588, 593-94, ¶ 25 (App. 2021) ("[L]egal theories must
be presented timely to the trial court so that the court may have an
opportunity to address all issues on their merits." (quoting Cont'l Lighting
& Contracting, Inc. v. Premier Grading & Utils., LLC, 227 Ariz. 382, 386, ¶ 12
(App. 2011))).

¶31            We therefore affirm summary judgment on Orlando's bad
faith claim.

III.   Attorney Fees.

¶32          State Farm requests reasonable attorney fees incurred in this
appeal under A.R.S. § 12-341.01(A). While this case arises out of the Policy,

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                        STATE FARM v. ORLANDO
                           Opinion of the Court

in our discretion and because neither party is completely successful on
appeal, we deny State Farm's request, without prejudice to the superior
court awarding such fees at the conclusion of this case. See Sparks v. Republic
Nat'l Life Ins. Co., 132 Ariz. 529, 544 (1982) ("[A]n action alleging insurer's
bad faith is one 'arising out of a contract' within the meaning of
[§] 12-341.01(A)."); Assyia v. State Farm Mut. Auto. Ins. Co., 229 Ariz. 216, 221,
¶¶ 13-14 (App. 2012) (holding that an UIM coverage dispute arises out of
contract for purposes of A.R.S. § 12-341.01(A)).

                                CONCLUSION

¶33           We affirm summary judgment on Orlando's bad faith claim,
vacate summary judgment on her breach of contract claim, and remand for
further proceedings. We also vacate the superior court's attorney fees and
cost awards because it is not clear at this time who will ultimately be the
successful party. The superior court may consider attorney fees and taxable
cost applications as appropriate at the conclusion of the proceedings on
remand. Orlando is the successful party on balance in this appeal and may
recover taxable costs incurred in this court upon compliance with Arizona
Rule of Civil Appellate Procedure 21.

                            AMY M. WOOD • Clerk of the Court
                            FILED: AA

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