Court Opinion

ID: 6479160
Source: CourtListenerOpinion
Date Created: 2022-06-26 22:50:28.24455+00
Date Added: 2024-06-11T15:54:05.513251
License: Public Domain

NOYES, Judge,
Dissenting.
I respectfully dissent on two issues.
Statute of Limitations: The trial court held that the applicable limitations period is one year because Clark’s claim against the Fund was based “upon a liability created by statute.” See AR.S. § 12-541(3) (1992). I agree. Clark’s claim is based on the statutes which created the Fund and defined its obligations. Where the trial court and the majority err, in my opinion, is in concluding that the limitations period began running in 1993, when the Fund issued an “unequivocal denial” of Clark’s claim. As I see it, that denial merely formalized breaches of duty which the Fund had made manifest since at least 1988; in fact, the “unequivocal denial” which Clark solicited from the Fund in 1993 was based, in part, on the running of the statute of limitations.
The trial court stated that the statute of limitations began to run upon “either ... an unequivocal denial of the claim by the Guaranty Fund or a pellucid anticipatory denial (breach) by the Fund.” I agree. The Fund’s duty to investigate and defend the Chavez and Dorsey claims against Clark arose in 1987, when the Fund received statutory notice of those claims, or perhaps not until 1988, when the Fund received actual notice of those claims. By the time it filed suit in 1993, then, Clark had known for about five years that the Fund was, at a minimum, in breach of its duties to investigate and defend Clark. Clark does not dispute these facts; Clark even alleges these facts in its Complaint:
10. Integrity breached its agreement with Clark when it stopped paying Clark’s defense costs and expenses in late 1986 due to financial problems.
16. Although the Fund had notice of the Chavez and Dossey cases by at least September 21, 1987, the Fund failed to act on said claims or to perform any of its obligations to investigate, defend and indemnify Clark. The Fund also did not take a final position on the claims until July 16, 1993 when, through its attorney, it formally denied any liability to Clark.
24. The Fund has breached its contractual duties to Clark. Specifically, the Fund was required to defend and indemnify Clark. The Fund, however, failed to do so in a timely manner and is therefore liable for the defense costs and expenses paid by Clark. The Fund is also liable for amounts paid by Clark in settlement of the Chavez and Dossey cases, up to the statutory limit per claim of $99,900.00.
The Fund’s breach of the duties to investigate and defend were “pellucid” notice to Clark — beginning in 1987 or 1988 — that the Fund was not going to investigate and defend and that Clark was on its own in that regard. That was fine with Clark, who wanted to and did investigate and defend the Chavez and Dossey claims with its own attorneys and without control by or accountability to the Fund. The Chavez claim exposed Clark to damages in the $10-20 million range, which helps explain Clark’s failure to look to the Fund (and its $99,900 limit) until Clark’s privately-retained attorneys had controlled and resolved the Chavez elaim.
The trial court found that Clark, beginning in 1987, breached its duty to cooperate with the Fund by failing to provide the Fund with *448“immediate notice” of the status of the litigation and its retention of Snell & Wilmer, and related matters. The record is therefore clear that, beginning in 1987, the Fund essentially ignored Clark, Clark essentially ignored the Fund and they each accepted the breaches by the other — until 1993, when Clark made the demand which resulted in judgment against the Fund for about $.5 million. I think the Fund has the correct legal argument here and that, because the Fund’s breach of duty to Clark was “pellucid” before 1992, Clark’s 1993 lawsuit was time-barred. I agree that the Fund has not shown much prejudice from Clark’s failure to cooperate; but, from 1987 on, Clark had sufficiently clear notice of the Fund’s breaches of duty that Clark needed to file suit well before 1993 to preserve its right to complain about those breaches.
Unreimbursed Defense Costs (attorneys’ fees): The majority affirms the trial court’s award to Clark of $119,844 in unreimbursed attornéys’ fees and costs in defending the Chavez claim. This issue is moot if Clark’s lawsuit is time-barred, but I will address it.
If the Fund had been asked to employ attorneys to represent Clark, the Fund could have done so and could have paid fees to those attorneys pursuant to A.R.S. section 20-664(B)(2), which authorizes the Fund to “[ejmploy or retain such persons as are necessary to handle claims and perform other duties of the fund.” But Clark did not ask the Fund to employ attorneys in defense of Clark; instead, Clark employed and paid Snell & Wilmer (and others) on its own. Only in 1993, after Clarks’ attorneys had resolved the Chavez and Dossey claims, did Clark demand (through those same attorneys) that the Fund pay “unreimbursed defense costs.”
Clark’s claim for “unreimbursed defense costs” was not authorized by section 20-664(B)(2) because the Fund did not employ the attorneys who generated those costs. This means that Clark’s claim for “unreim-bursed defense costs” must be based on the theory that these costs are part of the Chavez “covered claim” within the meaning of A.R.S. section 20-661(3). I agree with that theory. The statute excludes “attorney’s fees or adjustment expenses incurred prior to the determination of insolvency,” which means that the statute impliedly allows a “covered claim” to include post-insolvency fees and costs incurred by privately-retained attorneys. See AR.S. § 20-661(3). The “unreimbursed defense costs” awarded to Clark for the Chavez claim were post-insolvency.
Because Clark’s “unreimbursed defense costs” are part of the Chavez “covered claim,” those fees must count against the Fund’s statutory limit of $99,900 per covered claim. See AR.S. § 20-667(B) (providing that the fund is obligated for “only that amount of each covered claim which is in excess of one hundred dollars and is less than one hundred thousand dollars”). Therefore, assuming that Clark’s Complaint was timely, Clark has been awarded $119,844 more (plus interest) on the Chavez claim than the statute allows.
I respectfully conclude that, if the judgment is not reversed on statute of limitations grounds, it should be remanded with directions to reduce the Chavez award to $99,-900 (plus interest).