Court Opinion

ID: 6478637
Source: CourtListenerOpinion
Date Created: 2022-06-26 22:48:37.949276+00
Date Added: 2024-06-11T15:54:04.537422
License: Public Domain

GERBER, Presiding Judge,
dissenting.
The majority position implies three interrelated propositions: (1) that the bad faith tort is a late judicial novelty not protected under art. 18, § 6 of the Arizona Constitution; (2) that the insurer’s bad faith is part and parcel of the worker’s compensation injury; and (3) that the worker’s right to bring an action for bad faith has been regulated, not abrogated, by A.R.S. § 23-930. I disagree with the majority on these points.
As to the first issue, art. 18, § 6 of the Arizona Constitution protects rights, not legal labels. The constitution eschews labels; instead it protects the broad “right of action to recover damages for injuries.” The right here is not the pigeonhole tort of bad faith but the broad right of a contract ing party to be dealt with in good faith. This right has its roots in the Magna Carta. Within this country it was recognized long before Arizona's constitutional convention of 1910, well before a segment of that right was labeled a tort. Insurer bad faith was recognized prior to Arizona statehood in a contract context in Germania Ins. Co. v. Rudwig, 80 Ky. 223 (1882) and in Flint & Walling Mfg. Co. v. Beckett, 167 Ind. 491, 79 N.E. 503 (1906). Even earlier, in Manhattan Fire Ins. Co. v. Weill & Ullman, 69 Va. (28 Gratt) 389, 396 (1877), the Virginia Supreme Court held that where good faith and fair dealing are of the very essence of a contract of insurance, “insurance companies will be estopped from asserting a defence [sic] which not only tends to a breach of good faith, but to actual and positive fraud.” Even the fountainhead of the modem tort of bad faith, Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973), explicitly says that the right is rooted in a breach of a contractual duty, i.e., in pre-statehood common law of contract. Id., 108 CaLRptr. at 486, 510 P.2d at 1038.
Collateral constitutional interpretation also supports this view. Art. 18, § 6 of our constitution is a direct borrowing from art. 23, § 7 of the 1907 Oklahoma constitution which prohibits abrogation of “the right of action to recover damages for injuries resulting in death.” The Oklahoma Supreme Court interpreted the phrase “right of action” in Roberts v. Merrill, 386 P.2d 780, 785 (Okla.1963), to protect the entire right of action, not merely a particular label for a theory of litigation:
The “right of action”—a term far from synonymous with “cause of action’’— means the right to effectively pursue an available remedy in a suitable forum, whether successfully or not____ The existence of a cause of action would not be meaningful without an adequate opportunity for its pursuit. That opportunity stands constitutionally protected.
(Emphasis added; citations omitted.)
As to the second issue, the majority, like the statute, implies a consequential link between the on-the-job injury and the insurer’s bad faith. This assumed link contradicts Franks v. United States Fidelity, 149 Ariz. at 293, 718 P.2d at 195:
When a workers’ compensation insurer acts in bad faith in settlement or payment of compensation benefits, a separate tort is committed that is not within the purview of the exclusivity provisions of the Workers’ Compensation Act and a separate tort of bad faith may be alleged and proved in court.
(Emphasis added.)
Apart from the law in Franks, in every imaginable factual respect the work place injury and the insurer’s subsequent bad faith lack any relationship other than caprice. Insurer bad faith is neither the natural or usual consequence of the work injury, nor does it arise “out of or in the course of employment,” nor does it occur in or near the work place, nor does it impact the employer-employee relation. This unfound*579ed link between work injury and insurer bad faith is a tenuous gossamer upon which to erect an administrative edifice for bad faith claims. That the employee’s election of workers’ compensation includes informed election of the administrative and monetary limits of § 23-930 is more tenuous to the point of fiction.
As to the third proposition—regulation versus abrogation,—the majority ignores the practical monetary ranges in the statute and the wholesale delegation of the authority to define bad faith to the whim of an administrative agency. Boswell v. Phoenix Newspapers, 152 Ariz. at 18, 730 P.2d at 195, set forth the following test:
“We differentiate between abrogation and regulation by determining whether a purported legislative regulation leaves those claiming injury a reasonable possibility of obtaining legal redress.”
(Citations omitted).
The traditional lawsuit in a traditional courtroom places no ceiling on bad faith recovery. By contrast, the statute imposes fixed limitations ($500 or 25% benefit.) It tacitly denies common law avenues of recovery such as pain and distress. It delegates to the Industrial Commission the power to redefine the tort of bad faith by administrative rule wholly as that agency wishes. In tying recovery to a percentage of benefit, the statute also implies greater-lesser proportionality between the work place injury and the bad faith injury. In fact there need be no such relationship: one can readily conceive of disproportionately major bad faith in processing a minor work place injury, as well as vice versa. This trinity of flaws—the proportionality misconception, the dollar ceiling and the delegation of the right of recovery to an administrative agency—violate the prohibitions in art. 2, § 31 and art. 18 § 6 and realistically abrogate the worker’s cause of action for bad faith.
Our constitutional founders would wince at this abrogation of the common law right to recover for insurer bad faith. They showed profound concern for the plight of injury victims. See Kenyon v. Hammer, 142 Ariz. 69, 79-81 n. 9, 688 P.2d 961, 971-73 n. 9 (1984) (detailed review of constitutional debates relating to protection of accident victims). They abolished the fellow servant doctrine, made contributory negligence a question solely for the jury, and barred the legislature from reducing damages recoverable for death or injury. They mandated the institution of a comprehensive workers’ compensation scheme and declared that the legislature would never be permitted to abrogate the right to seek judicial recovery of damages for personal injuries. See e.g. J.W. Byrkit, Forging the Copper Collar: Arizona’s Labor-Management War of 1901-1921 (1982). These goals are inconsistent with the majority opinion.
While administrative alternatives need to complement the traditional court system, burying a living segment of Anglo-American contract common law in an administrative crypt is hardly curative medicine. To redefine, cap and then eviscerate the right of recovery for insurer bad faith via the administrative efficiencies enshrined in A.R.S. § 23-930 is contrary both to our constitution and to our history. I find the statute both unconstitutional and unhistorical.