Leal v. Allstate Ins. Co.

• Decision Date: 21 December 2000
• Docket Number: No. 1 CA-CV 00-0041.,1 CA-CV 00-0041.
• Citation: 199 Ariz. 250,17 P.3d 95
• Parties: Estevan LEAL and Denise Leal, husband and wife, Plaintiffs-Appellants, v. ALLSTATE INSURANCE COMPANY, a foreign corporation, acting in its capacity as an insurance company, and as a law firm doing business as Sorenson & Associates; Wendi A. Sorenson and John Ishakiwa, dba Sorenson & Associates, an Arizona law firm, Defendants-Appellees.
• Court: Arizona Court of Appeals

17 P.3d 95

199 Ariz. 250

Estevan LEAL and Denise Leal, husband and wife, Plaintiffs-Appellants, v. ALLSTATE INSURANCE COMPANY, a foreign corporation, acting in its capacity as an insurance company, and as a law firm doing business as Sorenson & Associates; Wendi A. Sorenson and John Ishakiwa, dba Sorenson & Associates, an Arizona law firm, Defendants-Appellees.

No. -0041.

Court of Appeals of Arizona, Division 1, Department B.

December 21, 2000.

Thur & O'Sullivan, P.C., by Calvin C. Thur, Roger O'Sullivan, Scottsdale, Attorneys for Plaintiffs-Appellants.

Steptoe & Johnson, L.L.P., by Floyd P. Bienstock, Bennett Evan Cooper, Phoenix, Attorneys for Allstate Insurance Company.

OPINION

TOCI, Presiding Judge.

¶ 1 Estevan and Denise Leal (the "Leals"), third parties who were injured by the negligence of Allstate Insurance Company's ("Allstate") insured, appeal from the dismissal of their claims against Allstate for breach of an implied duty of good faith and fair dealing. The Leals allege that Allstate voluntarily assumed such a duty in adjusting their claims against its insured by pledging that it would consider the Leals to be customers entitled to "quality customer service." Alternatively, the Leals argue that Allstate's duty to them is implied by Arizona's mandatory vehicle liability insurance statutes. Because we find no duty under either theory, we affirm the trial court.

I. FACTUAL BACKGROUND

¶ 2 On appeal from the grant of a motion to dismiss, we accept as true the complaint's allegations and affirm dismissal only if the plaintiffs are not entitled to relief under any facts susceptible of proof. Mohave Disposal, Inc. v. City of Kingman, 186 Ariz. 343, 346, 922 P.2d 308, 311 (1996).

¶ 3 In April 1996, Estevan Leal was rear-ended by Allstate's insured. That day, an Allstate adjuster told Estevan that he would not need an attorney because Allstate would treat him fairly and would work with him to settle his claim.

¶ 4 Several days later, Allstate wrote the Leals and asked Estevan to authorize release of medical and employment records. The letter stated that Allstate considered "anyone who has been involved in an accident with one of our policyholders an Allstate `customer,' who is entitled to quality customer service." Enclosed with the letter was Allstate's "Customer Service Pledge," with the company logo and statement "You're in good hands with Allstate" at the top. The pledge states:

Because you have been involved in an accident with an Allstate policyholder, we consider you our customer and will provide you with quality customer service.... We promise you the following:

1) We will fully explain the process, take the time to answer all questions ... that you may have, and keep you informed throughout the claim process. 2) We will conduct a quick, fair investigation of the facts in your case.

3) To the extent that our policyholder was at fault in the accident:

We will assist you in providing for the repair of your vehicle...;

We will help you determine if you are eligible to receive compensation for any injuries you may have suffered; and

We will discuss fair payment for your claim when you feel you are ready.

Your claim representative is dedicated to carrying out this Pledge.

The Leals provided Allstate with various documents and signed the release authorizations.

¶ 5 About a month later, Allstate made a settlement offer that provided no compensation for future medical bills and that the Leals considered "unreasonably low." The offer was governed by the company's Claim Core Process Redesign and "Minor Impact Soft Tissue" ("MIST") programs, which were aimed at reducing payment for soft tissue injuries from accidents in which the claimant's vehicle sustained less than $1000.00 damage. Allstate intended to deny such claims or to make very low settlement offers and to fully litigate unsettled claims through arbitration and the superior and appellate courts. Allstate also attempted to discourage MIST claimants from hiring attorneys by sending letters such as the one sent the Leals and by making the claims difficult, time-consuming, and unprofitable for attorneys and claimants to litigate.

¶ 6 Dissatisfied with Allstate's offer, the Leals hired an attorney and sued Allstate's insured. In a compulsory arbitration, they were awarded $12,583.50. Allstate appealed to the superior court, and the jury awarded the Leals $23,000.00 in damages. The trial court also awarded costs and attorneys' fees and entered judgment in the amount of $50,074.65.

¶ 7 In 1999, the Leals filed this complaint against Allstate and others, alleging abuse of process, breach of an assumed or implied duty of good faith and fair dealing, and misrepresentation and non-disclosure in violation of the insurance and financial responsibility statutes. Allstate moved to dismiss all but the abuse of process claim under Arizona Rule of Civil Procedure 12(b)(6), contending that the claims were not actionable in Arizona. Allstate also asserted that the statute of limitations barred the misrepresentation and non-disclosure claim. The trial court agreed that Arizona does not recognize a cause of action for the breach of either an implied or assumed duty of good faith and that the misrepresentation claim was time-barred.

¶ 8 The court's final judgment stayed further proceedings on the abuse of process claim. The Leals timely appealed.

II. DISCUSSION

¶ 9 The Leals have abandoned their misrepresentation and non-disclosure claim and maintain only their claims that Allstate had, and breached, either an assumed or implied duty of good faith and fair dealing. They also acknowledge that no Arizona case holds that an insurer owes a direct duty of good faith and fair dealing to a third party who has a claim against one of its insureds or that the third party may sue in tort for breach of that duty. They contend, however, that Allstate sought to convince the Leals that a special relationship existed between them and that, having done so, Allstate assumed a duty to treat the Leals as its own insureds.

¶ 10 The Leals also argue that Arizona's mandatory liability insurance statutes create a duty, as a matter of law, that requires them to treat claimants fairly and to negotiate settlements in good faith. We first address whether Allstate voluntarily assumed a duty of good faith.

A. Allstate's Assumed Duty

¶ 11 The Leals ask us to recognize a third-party claimant's cause of action in tort against an insurer when, as here, the insurer actively seeks a claimant's trust, leads him to believe a special relationship exists between them, and uses that trust to reduce the size of the claim. The Leals contend that Allstate induced their reliance by promising to treat them as "customers" and then breached a resulting duty of good faith by pursuing only its interest in minimizing the Leals' claim.

¶ 12 Because no contract of insurance exists between the Leals and Allstate on which to base a duty, the Leals assert that by affirmative conduct, Allstate assumed a duty that would not otherwise exist. They cite the general rule that, "[o]ne who acts gratuitously ... is liable for the negligent performance of the act, even though there was no duty to act." Brown v. Michigan Millers Mut. Ins. Co., 665 S.W.2d 630, 634 (Mo.App.1983). See also Lloyd v. State Farm Mut. Auto. Ins. Co., 189 Ariz. 369, 377, 943 P.2d 729, 737 (App.1996)

(insurer owes duty of good faith to its insureds if it assumes their defense although the insurance contract does not actually cover the incident). When Allstate gratuitously agreed to treat the Leals as "customers," they argue, it thereby agreed to treat them as "insureds" and to deal with them in good faith.

¶ 13 The facts alleged, however, do not support this theory. Allstate's "Customer Service Pledge" did not promise a fair settlement nor did it promise to treat the Leals as insureds. It promised only to consider them as "customers" and to provide "quality customer service." That service was defined to include an explanation of the process, answers to questions, a "quick, fair investigation," assistance in the vehicle's repair and in determining eligibility for compensation, and a promise to "discuss fair payment." Nowhere did Allstate promise to make a fair settlement or to give equal consideration to the Leal's interests, as the duty of good faith would require. Thus, Allstate did not expressly assume a duty of good faith and fair dealing by adopting the Customer Service Pledge.

¶ 14 The Leals argue, however, that Allstate intentionally induced their trust and thus created a "special relationship" on which to base a duty. They cite Enyart v. Transamerica Insurance Co., 195 Ariz. 71, 985 P.2d 556 (App.1998), as a case in which this court imposed on an insurer a duty of good faith to a third-party claimant.

¶ 15 Enyart had been injured and settled with the defendants and their insurers. Id. at 73, 985 P.2d at 558. The settlement was to be paid by an annuity and, as part of the settlement agreement, Transamerica was to obtain a backup annuity policy. When it failed to do so and the annuity company became insolvent, Enyart sued Transamerica. Id.

¶ 16 This court held that a bad faith tort claim may exist "if there is a `special relationship arising from elements of public interest, adhesion, and fiduciary responsibility.'" Id. at 76, 985 P.2d at 561 (quoting Burkons v. Ticor Title Ins. Co., 168 Ariz. 345, 355, 813 P.2d 710, 720 (1991)). Burkons recognized that tort damages may be appropriate for the breach of special contractual relationships in which the object is "service, professional help, security or other intangibles." 168 Ariz. at 355, 813 P.2d at 720.

¶ 17 But, in Enyart, a contract to procure insurance existed, and Enyart had released his legal claims in exchange for Transamerica's promise. 195 Ariz. at 77, 985 P.2d at 562. Moreover, "Enyart's desire for security so informed his agreement with Transamerica that the...