Court Opinion

ID: 4148806
Source: CourtListenerOpinion
Date Created: 2017-02-28 15:02:28.770258+00
Date Added: 2024-06-11T14:46:14.340120
License: Public Domain

NOTICE: NOT FOR OFFICIAL PUBLICATION.
 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                 AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

                                    IN THE
             ARIZONA COURT OF APPEALS
                                DIVISION ONE

                               MARIE GRADIS,
                               Plaintiff/Appellant,

                                        v.

                  BANNER HEALTH; BANNER PLAN
                ADMINISTRATION, INC.; CAROL WARD,
                        Defendants/Appellees.

                             No. 1 CA-CV 16-0056
                              FILED 2-28-2017

           Appeal from the Superior Court in Maricopa County
                          No. CV2014-006089
             The Honorable Christopher T. Whitten, Judge

                                  AFFIRMED

                                   COUNSEL

Mandel Young, PLC, Phoenix
By Taylor C. Young, Peter A. Silverman, Erin Ford Faulhaber
Co-Counsel for Plaintiff/Appellant

Doyle, LLP, Phoenix
By Michael P. Doyle, Patrick M. Dennis
Co-Counsel for Plaintiff/Appellant

Quarles & Brady, LLP, Phoenix
By Stephanie J. Quincy, Robert G. Vaught, Brian A. Howie
Counsel for Defendants/Appellees
                  GRADIS v. BANNER HEALTH, et al.
                        Decision of the Court

                     MEMORANDUM DECISION

Presiding Judge Diane M. Johnsen delivered the decision of the Court, in
which Judge Margaret H. Downie and Judge James P. Beene joined.

J O H N S E N, Judge:

¶1             Marie Gradis appeals the superior court's entry of summary
judgment dismissing her complaint against her former employer, Banner
Health; its worker's compensation administration company, Banner Plan
Administration, Inc.; and the latter company's claims worker, Carol Ward
(collectively "Banner"). For the reasons explained below, we affirm.

             FACTS AND PROCEDURAL BACKGROUND

¶2           Gradis, a certified nursing assistant, hurt her back while
working at a Banner Health facility in April 2012. She filed a claim for
worker's compensation; Banner, which is self-insured for purposes of
worker's compensation coverage, denied the claim. After Gradis appealed,
an Administrative Law Judge ("ALJ") issued a decision in May 2013 finding
Gradis had established a compensable injury and awarded her benefits.

¶3            Several months before her on-the-job injury, Gradis had filed
a charge of employment discrimination against Banner Health. On October
24, 2012, while her appeal of Banner's denial of her worker's compensation
claim was pending, Gradis and Banner Health executed a "Settlement
Agreement and General Release" ("Agreement") that resolved the
discrimination claim.

¶4            The Agreement's recitals addressed Gradis's claim for
discrimination and recounted a mutual "desire to settle and finally resolve
any and all outstanding matters and disputes between them related to any
claims GRADIS may have in relation to [her] employment or with the
ending of her employment with BANNER." The Agreement's "Payment"
section stated that the designated payment by Banner to Gradis

      is full compensation for any and all past, present, or future
      claims of emotional distress, anxiety, depression, trauma, any
      physical, psychiatric, or psychological manifestations thereof,
      any claims of temporary or permanent disability, loss of
      consortium, bodily injury, defamation, personal injury,
      impairment of his [sic] ability to compete in the open labor

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                   GRADIS v. BANNER HEALTH, et al.
                         Decision of the Court

      market, pain and suffering, lost income, damage to reputation
      or character, attorneys fees, if any exist, or any other claims,
      ASSERTED OR UNASSERTED, KNOWN OR UNKNOWN,
      rights, damages, costs, loss of services, expenses and
      compensation of any nature whatsoever, arising from or
      associated with GRADIS' employment relationship and/or
      the termination of her employment with BANNER or arising
      out of any of the events described in the Recitals above. This
      Agreement does not impact Gradis' application for worker's
      compensation or disability benefits, either positively or negatively.

(Emphasis added.) In the Agreement's "Release of Claims" section were the
following three paragraphs:

      [2]a. . . . GRADIS . . . further agrees not to institute any claims,
      charges or lawsuits in relation to any aspect of GRADIS'
      employment relationship and/or the ending of her
      employment with BANNER. GRADIS does hereby waive,
      release and forever discharge [Banner] . . . from any and all
      rights, claims, demands, causes of action . . . and liability of
      any nature whatsoever that GRADIS has had in the past or
      may hereafter have against . . . any of them, arising out of, or
      by reason of any cause, matter, or thing whatsoever existing
      as of the date of execution of this Agreement, WHETHER OR
      NOT KNOWN TO THE PARTIES AT THE TIME OF
      EXECUTION OF THIS AGREEMENT.

      [2]b. This FULL WAIVER AND RELEASE OF ALL CLAIMS
      includes, without limitation, any attorney's fees, any claims,
      demands or causes of action arising out of or relating in any manner
      whatsoever, to the employment relationship of GRADIS by
      BANNER and to the events described in the Recitals Section
      above. This FULL WAIVER AND RELEASE OF ALL
      CLAIMS INCLUDES, BUT IS NOT LIMITED TO, any and all
      complaints, claims, charges, claims for relief, demands, suits,
      actions and causes of action, whether in law or in equity,
      which GRADIS asserts or could assert, at common law or
      under any statute, rule, regulation, order or law, whether
      federal, state, or local, or on any ground whatsoever . . . .

      [2]c. In addition, in exchange for the promises contained in
      this Agreement and as a condition to receiving the above
      consideration in Paragraph 1, GRADIS agrees not to institute,

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                    GRADIS v. BANNER HEALTH, et al.
                          Decision of the Court

       nor cause to be instituted, any further legal proceeding, including
       filing any charge, claim or complaint with any state or federal
       governmental agency alleging any violation of law or public
       policy, against BANNER and/or any other RELEASEE or any
       of their current, former or future affiliates, subsidiaries,
       divisions, corporate parents, partners, joint venturers,
       associates, agents (actual, apparent, ostensible or otherwise),
       board members, officers, directors, employees, medical staff
       members, physicians, (employed or unemployed), attorneys,
       employee benefit plans, predecessors and successors in
       interest and assigns, premised upon any legal theory or claim
       whatsoever arising out of events occurring prior to the date of this
       Agreement.

(Emphases added.)

¶5           In April 2014, Gradis sued Banner, alleging Banner breached
its duty of good faith and fair dealing in handling her worker's
compensation claim. Banner moved for summary judgment, arguing the
releases Gradis gave in the Agreement applied to her bad-faith claim. The
superior court granted the motion and dismissed the complaint.

¶6            We have jurisdiction of Gradis's timely appeal pursuant to
Arizona Revised Statutes ("A.R.S.") sections 12-120.21(A)(1) (2017) and
-2101(A)(1) (2017).1

                                DISCUSSION

¶7            We review de novo the grant of a motion for summary
judgment. Espinoza v. Schulenburg, 212 Ariz. 215, 216, ¶ 6 (2006). "The court
shall grant summary judgment if the moving party shows that 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 view the evidence
and reasonable inferences in the light most favorable to the party opposing
the motion. Wells Fargo Bank v. Arizona Laborers, Teamsters & Cement Masons
Local No. 395 Pension Trust Fund, 201 Ariz. 474, 482, ¶ 13 (2002).

¶8            Settlement agreements are governed by general contract-law
principles. Emmons v. Superior Court, 192 Ariz. 509, 512, ¶ 14 (App. 1998).
Courts attempt to enforce a contract according to the parties' intent. Taylor
v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 152 (1993). To determine the

1     Absent material revision after the relevant date, we cite a statute's
current version.

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                   GRADIS v. BANNER HEALTH, et al.
                         Decision of the Court

parties' intent, we consider the meaning of the words and the "context of
the contract as a whole." Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588,
593, ¶ 9 (App. 2009).

¶9            The Agreement contains two broad releases, one described in
paragraph 2(b) and the other described in 2(c). In paragraph 2(c), Gradis
waived claims "premised upon any legal theory or claim whatsoever
arising out of events occurring prior" to October 24, 2012, the date of the
Agreement. The superior court reasoned the complaint was barred by this
provision, but, as Gradis argues, some of the events that underlie her bad-
faith claim against Banner (e.g., its allegedly bad-faith choice of a physician
to perform an independent medical examination) occurred after execution
of the Agreement.

¶10           In paragraph 2(b), the Agreement described a "FULL
WAIVER AND RELEASE OF ALL CLAIMS" that encompassed any claim
"arising out of or relating in any manner whatsoever, to the employment
relationship of GRADIS" with Banner.2 Banner argues that its handling of
Gradis's worker's compensation claim arose out of or related "in any
manner whatsoever" to the employment relationship, and therefore is
encompassed by the waiver. Gradis contends that, to the contrary, an
employer's handling of a worker's compensation claim is distinct from the
employment relationship.

¶11            Arizona law requires all employers to secure worker's
compensation insurance for their employees, but allows employers to self-
insure if they can show "satisfactory proof of financial ability to pay." A.R.S.
§ 23-961(A)(1), (2) (2017). A self-insured employer may be liable for breach
of the duty of good faith and fair dealing in its handling of an employee's
worker's compensation claim. Mendoza v. McDonald's Corp., 222 Ariz. 139
(App. 2009).

¶12           Gradis argues that Franks v. United States Fidelity & Guaranty
Co., 149 Ariz. 291 (App. 1985), supports her contention that acts by a self-
insured employer in handling a worker's compensation claim do not arise
out of the employment relationship. In Franks, we held for the first time
that an employee's bad-faith claim against a worker's compensation insurer
is not subject to the exclusivity provision of the Worker's Compensation
Act. 149 Ariz. at 296; see A.R.S. § 23-1022(A) (2017). We contrasted the

2     Banner does not argue that the language of the first sentence in
paragraph 2(b) was meant as a waiver of any claims, whether or not related
in some way to Gradis's employment relationship.

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                   GRADIS v. BANNER HEALTH, et al.
                         Decision of the Court

injury an employee suffers from an insurer's breach of the duty of good
faith with the original injury suffered from a workplace injury, and, using
the words of the compensation statute, concluded that the former injury
"does not arise out of and in the course of employment." 149 Ariz. at 296;
see A.R.S. § 23-1021 (2017).

¶13            Franks does not dictate the meaning of the language the
parties here chose to use in the Agreement. The statutory language we
recited and applied in Franks was "arising out of and in the course of
employment," which is the language by which Arizona law distinguishes
injuries that are compensable under Title 23 from those that are not. Each
element of that phrase has a separate meaning and serves a separate
purpose. See Keovorabouth v. Indus. Comm'n, 222 Ariz. 378, 381, ¶ 8 (App.
2009) ("'Arising out of' refers to origin or cause of the injury, while 'in the
course of' refers to time, place, and circumstances of the injury in relation
to the employment."); Lane v. Indus. Comm'n, 218 Ariz. 44, 47, ¶ 9 (App.
2008) ("Although we must analyze the elements separately, 'in determining
whether the necessary degree or quantum of "work-connection" is
established to bring the claimant under the coverage of the Act, it is also
necessary to consider them together.'"). To be compensable under Title 23,
an injury must both "arise out of" and "in the course of" employment. Noble
v. Indus. Comm'n, 188 Ariz. 48, 50 (App. 1996). See, e.g., Circle K Store No.
1131 v. Indus. Comm'n, 165 Ariz. 91, 93-94 (1990) (separate analysis for
"arising out of" and "in the course of" elements); Nowlin v. Indus. Comm'n,
167 Ariz. 291, 293 (App. 1990).

¶14            By contrast, paragraph 2(b) of the Agreement provided that
Gradis waived any claim "arising out of or relating in any manner whatsoever"
to her employment with Banner. That language is far broader than the
words of § 23-1022 that we applied in Franks ("arising out of and in the
course of employment"). Injury caused by a self-insured employer's bad
faith does not occur in the course of employment; it arises in the course of the
employer's handling of the claim. But the employer's claims-handling
certainly "aris[es] out of" and/or "relat[es] in any manner whatsoever" to
the employment relationship. To be sure, an employer owes different
duties to an employee when it acts as an employer and when it acts as its
own worker's compensation carrier. But such an employer's claims-
handling duties exist only because of the employment relationship. To state
the obvious, in this context, Banner administered Gradis's worker's
compensation claim only because that claim was for an injury Gradis
alleged she suffered while working for Banner. But for the employment
relationship, the bad-faith claim would not arise.

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                   GRADIS v. BANNER HEALTH, et al.
                         Decision of the Court

¶15            Gradis points out that the Agreement specifically excludes
her worker's compensation claim. Contrary to her contention, however, the
Agreement did not carve out from the otherwise broad waiver and release
any claim that might relate to worker's compensation. The language the
parties chose to describe the exception to the waiver is very precise: "This
Agreement does not impact Gradis' application for worker's compensation
or disability benefits, either positively or negatively." Consistent with that
language, Gradis's worker's compensation claim proceeded through
regular Industrial Commission channels to its ultimate resolution by the
ALJ after a hearing, and there is no indication Banner used or attempted to
use the Agreement as a defense in that proceeding.

¶16            As stated, a claim for worker's compensation benefits is
distinct from a claim for breach of a worker's compensation insurer's duty
of good faith and fair dealing. Mendoza, 222 Ariz. at 149, ¶ 31 ("bad faith is
a separate tort, and not a direct or natural consequence of a compensable
workers' compensation injury"). The narrow exception to the waiver in the
Agreement was for Gradis's "application for worker's compensation"
benefits, not for damages caused by Banner's alleged bad-faith handling of
her worker's compensation claim. Although Gradis argues that the carve-
out for her worker's compensation claim means the parties must have
intended also to carve out any bad-faith claim arising from worker's
compensation, the narrow language the parties used weighs against that
construction. This is particularly so, given that they signed the Agreement
five months after Banner denied Gradis's worker's compensation claim and
three months after Gradis commenced her appeal of that denial.

¶17           Considering the Agreement's language and context, we
construe its release and waiver provisions to include any claim for breach
of the duty of good faith and fair dealing that might arise from Banner's
handling of Gradis's worker's compensation claim.3

3      Because Gradis has no surviving substantive claim against Banner,
we need not address her claim for punitive damages. Quiroga v. Allstate Ins.
Co., 151 Ariz. 127, 129 (App. 1986) ("The right to an award of punitive
damages must be grounded upon a cause of action for actual damages.").

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                 GRADIS v. BANNER HEALTH, et al.
                       Decision of the Court

                            CONCLUSION

¶18          We affirm the superior court's entry of summary judgment
against Gradis and in favor of Banner. We award Banner its costs and an
amount of reasonable attorney's fees on appeal pursuant to A.R.S. § 12-
341.01 (2017), contingent on compliance with Arizona Rule of Civil
Appellate Procedure 21.

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

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