Callies v. United Heritage Prop. & Cas. Ins. Co.
| Decision Date | 18 March 2014 |
| Docket Number | No. 1 CA-CV 13-0189,1 CA-CV 13-0189 |
| Parties | KENNETH CALLIES and DORENE CALLIES, husband and wife, Plaintiffs/Appellants, v. UNITED HERITAGE PROPERTY AND CASUALTY INSURANCE COMPANY, a foreign corporation, Defendant/Appellee. |
| Court | Arizona Court of Appeals |
NOTICE: NOT FOR PUBLICATION.
UNDER ARIZ. R. SUP. CT. 111(c), THIS DECISION DOES NOT CREATE LEGAL PRECEDENT
AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.
Appeal from the Superior Court in Maricopa County
The Honorable Mark H. Brain, Judge
REVERSED AND REMANDED
Dawson & Rosenthal PC, Sedona
By Steven C. Dawson, Anita Rosenthal
Adelman German PLC, Scottsdale
By Steven J. German
Thomas Thomas & Markson PC, Phoenix
By Neal B. Thomas
Judge Kenton D. Jones delivered the decision of the Court, in which Presiding Judge Patricia A. Orozco and Judge Lawrence F. Winthrop joined.
¶1 Kenneth and Dorene Callies, husband and wife (collectively, Callies), appeal the trial court's dismissal of their insurance bad faith cause of action against United Heritage Property and Casualty Insurance (United). For the reasons stated herein, we reverse and remand to the trial court.
¶2 The Callies maintained a homeowner's insurance policy with United. At the time they purchased the policy, the Callies were Oregon residents, while United was domiciled in Idaho and conducted business in multiple states, including Idaho, Oregon, Arizona, and Utah. The relevant policy covered the Callies' home in Eugene, Oregon, as well as their personal property "while it was anywhere in the world."
¶3 In June 2011, the Callies moved from Oregon to Arizona. To this end, the Callies rented a moving truck and drove to Surprise, Arizona. As the Callies had not yet secured permanent living arrangements in Arizona, they rented a room from The Lodge at Sun Ridge for the nights of June 10 through June 14. The Callies were allowed to park their moving truck in The Lodge's parking lot during their stay.
¶4 On the morning of June 11, the Callies discovered their truck, containing all of their personal property, had been stolen during the night. The Callies notified both the Surprise Police Department and United of the theft that same day. On June 28, the truck was discovered by the Glendale Police Department, but the Callies' personal property had been removed.
¶5 Toward the administration of the Callies' insurance claim, United directed an Arizona adjustor to contact the Callies in Arizona and take their statements. The Callies also provided complete inventory lists of the property taken, per United's request. With that, United advised the Callies that payment on their claim would be forthcoming, and that the only remaining issue was to determine the exact amount due. Acting on such assurance, the Callies proceeded to purchase a house in Arizona.
¶6 However, rather than make the promised payment, United instead decided to initiate a fraud investigation into the Callies' claim. United informed them of this decision by telephone in August. Following the phone call, Kenneth began displaying behavioral issues, suffering from emotional and mental agitation and confusion.
¶7 Later in August, the Callies received another phone call, this time from an attorney representing United, in which they were told to have no direct contact with any person at United and were asked to agree to be questioned under oath. When Dorene explained she did not believe Kenneth would be able to handle the examination, the attorney concluded the phone call. The Callies heard nothing further from United for several months. During that intervening time period, Kenneth continued to suffer emotional and psychological problems, and on October 28, he was civilly committed to a mental health facility in Oregon.
¶8 On April 13, 2012, the Callies initiated suit against United and the Lodge at Sun Ridge and its owners (collectively, The Lodge). Within their complaint, the Callies alleged two claims: 1) insurance bad faith against United, and 2) negligence (premises liability) against The Lodge.2
¶9 United responded by filing a motion to dismiss for failure to state a claim. See Ariz. R. Civ. P. 12(b)(6). In its motion, United arguedOregon law, rather than Arizona law, should be applied, and that Oregon did not recognize a cause of action for first-party insurance bad faith. It also argued the doctrine of forum non conveniens mandated dismissal. To its motion, United appended a certified copy of the Callies' insurance policy, as well as a partial transcript of Dorene's examination under oath.
¶10 Within their response, the Callies argued to the contrary, asserting Arizona law should be applied, and that Arizona was not an inconvenient forum.3 United replied, attaching, in support of its forum non conveniens argument, the Callies' Rule 26.1 disclosure statement to illustrate that a majority of the Callies anticipated witnesses lived in Oregon.
¶11 Following oral argument on United's motion to dismiss, the trial court, applying the principles delineated within the Restatement (Second) Conflict of Laws §§ 6 and 145 (1971), found Oregon law should apply, and granted United's motion to dismiss for failure to state a claim. In so finding, the trial court noted: (1) the Callies suffered the initial injury in Arizona but "the effects of [United's] conducts are continuing to be felt in Oregon, where [the Callies] reside;" (2) United's bad faith actions were centered in Oregon; (3) the Callies "were and are Oregon residents, but briefly lived in Arizona;" (4) United was an Idaho corporation that conducted business nationwide; (5) the parties' relationship was centered in Oregon; and (6) "Oregon's interests stand out - it has an interest in ensuring that its citizens are treated appropriately by insurers." While recognizing Arizona and Oregon differ in the treatment of insureds, the trial court did not find Oregon's treatment unfair.
¶12 The Callies sought reconsideration, which the trial court ultimately denied. The Callies then timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) section 12-2101(A)(1) (2014).
¶13 We review the grant of a Rule 12(b)(6) motion to dismiss de novo. Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7, 284 P.3d 863, 866 (2012). Motions to dismiss for failure to state a claim are not favored in Arizona. Acker v. CSO Chevira, 188 Ariz. 252, 255, 934 P.2d 816, 819 (App.1997). Dismissal pursuant to Rule 12(b)(6) is appropriate if as a matter of law the plaintiff would not be entitled to relief under any interpretation of the facts. Belen Loan Investors, LLC v. Bradley, 231 Ariz. 448, 453, ¶ 7, 296 P.3d 984, 989 (App. 2012) (quoting Coleman, 230 Ariz. at 352, ¶ 8, 284 P.3d at 867) (internal quotations omitted).
¶14 Choice of law issues are questions of law, which we review de novo. Garcia v. General Motors Corp., 195 Ariz. 510, 516, ¶ 19, 990 P.2d 1069, 1075 (App. 1999).
¶15 On appeal, the Callies argue the trial court erred by granting United's motion to dismiss because it found Oregon law, rather than Arizona law, applied to this action. We agree.
¶16 The parties agree the choice of law determination is dispositive of this matter. Oregon courts do not recognize a separate tort cause of action for an insurance bad faith claim that stems from an insurer's refusal to pay benefits, instead holding that such an action sounds in contract. See Emp'rs' Fire Ins. Co. v. Love It Ice Cream Co., 670 P.2d 160, 165 (Or. Ct. App. 1983). Arizona does allow such a tort action. See Zilisch v. State Farm Mut. Auto. Ins. Co., 196 Ariz. 234, 237, ¶ 20, 995 P.2d 276, 279 (2000); Rawlings v. Apodaca, 151 Ariz. 149, 160, 726 P.2d 565, 576 (1986); Noble v. Nat'l Am. Life Ins. Co., 128 Ariz. 188, 190, 624 P.2d 866, 868 (1981).4 Therefore, if Oregon law applies to this dispute, the Callies will have failed to state a claim upon which relief may be granted; the converse being true if Arizona law applies.5
¶17 As the forum state, Arizona law will govern the choice of law determination. See Cardon v. Cotton Lane Holdings, Inc., 173 Ariz. 203, 206, 841 P.2d 198, 201 (1992). Arizona courts follow the Restatement (Second) of Conflict of Laws (1971) (Restatement) in determining the controlling law for multistate torts. Pounders v. Enserch E & C, Inc., 232 Ariz. 352, 354, ¶ 8, 306 P.3d 9, 11 (2013); Bates v. Superior Court of State of Ariz., 156 Ariz. 46, 48, 749 P.2d 1367, 1369 (1988).6
¶18 Restatement § 146, entitled "Personal Injuries," has been found applicable to insurance bad faith claims when sufficient mental distress or physical harm has been alleged, as in the immediate case. See Bates, 156 Ariz. at 49, 749 P.2d at 1370 ().7 Section 146 provides:
[T]he local law of the state where the injury occurred determines the rights and liabilities of the parties, unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the occurrence and the parties, in which event the local law of the other state will be applied.
¶19 The "place of the injury," in the context of § 146, equates to the place where "the last event necessary for liability occurs." Pounders, 232 Ariz. at 356, ¶ 21, 306 P.3d at 13 (internal quotations omitted). Here, Kenneth began suffering emotional and psychological problems in Arizona immediately following United's informing the Callies their claim was being investigated. Further, the Callies allege having experiencedextreme stress during the months they remained in Arizona due to United's decision to withhold payment on the Callies' claim during its...
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