Webb v. Gittlen

• Decision Date: 10 January 2008
• Docket Number: No. CV-07-0127-PR.,CV-07-0127-PR.
• Citation: Webb v. Gittlen, 174 P.3d 275, 217 Ariz. 363 (Ariz. 2008)
• Parties: D. Jere' WEBB, through assignment granted by Gail Susan Berliant and Neal Berliant (dba The Liquor Vault, Inc. and Berliant, LLC), Plaintiff-Appellant, v. Victoria GITTLEN; G & G Insurance Service, Inc., an Arizona corporation; CDS Insurance Agency LLC, a limited liability company doing business in Arizona, Defendants-Appellees.
• Court: Arizona Supreme Court

174 P.3d 275

217 Ariz. 363

D. Jere' WEBB, through assignment granted by Gail Susan Berliant and Neal Berliant (dba The Liquor Vault, Inc. and Berliant, LLC), Plaintiff-Appellant, v.Victoria GITTLEN; G & G Insurance Service, Inc., an Arizona corporation; CDS Insurance Agency LLC, a limited liability companydoing business in Arizona, Defendants-Appellees.

No. CV-07-0127-PR.

Supreme Court of Arizona, En Banc.

January 10, 2008.

Matthew L. Riggs, P.C. by Matthew L. Riggs, Mesa, Attorney for D. Jere' Webb.

Lewis, Brisbois, Bisgaard & Smith, L.L.P. by Greg S. Como, Rob A. Justman, Phoenix, Attorneys for Victoria Gittlen, G & G Insurance Service Inc., and CDS Insurance Agency, L.L.C.

The Hassett Law Firm, P.L.C. by Myles P. Hassett, Lucas N. Frank, Phoenix, Attorneys for Amicus Curiae Independent Insurance Agents and Brokers of Arizona.

OPINION

BALES, Justice.

¶ 1 Under Arizona law, an insurance agent's clients may assert claims for professional negligence against the agent.We hold that clients may assign such claims to third parties.

I.

¶ 2 In 2000, Neal and Gail Berliant bought a liquor store called The Liquor Vault.To insure themselves, they purchased a business and umbrella liability policy from Victoria Gittlen, a licensed insurance agent.Gittlen then worked for G & G Insurance Service; she later moved to CDS Insurance Agency.The Berliants allege that Gittlen did not advise them that they could also purchase liquor liability coverage.

¶ 3 In 2001, The Liquor Vault sold beer to a minor who gave it to another.The second youth drove his car into a cement barrier, killing his passenger.The passenger's father, D. Jere' Webb, filed a wrongful death claim against the Berliants and The Liquor Vault.The Berliants tendered the claim to their insurance company, which refused to defend because the Berliants lacked liquor liability coverage.

¶ 4 To settle the wrongful death claim, the Berliants stipulated to the entry of a $3 million judgment; Webb agreed not to execute on the judgment and, in exchange, the Berliants assigned to Webb their rights to sue both their insurer and their insurance agent and her employers.Webb then sued Gittlen, G & G, and CDS, alleging negligence and breach of fiduciary duty.The trial court dismissed these claims, citing Premium Cigars International Ltd. v. Farmer-Butler-Leavitt Insurance Agency, which held that claims against an insurance agent for professional negligence are not assignable.208 Ariz. 557, 96 P.3d 555(App.2004).¹

¶ 5The court of appeals affirmed in a memorandum decision that also relied upon Premium Cigars.We granted review to consider whether insureds may assign claims against their insurance agent.This Court has jurisdiction pursuant to Article 6, Section 5(3) of the Arizona Constitution,Arizona Revised Statutes("A.R.S.")§ 12-120.24(2003), andArizona Rule of Civil Appellate Procedure23(c)(3).

II.

¶ 6 Arizona case law generally allows the assignment of unliquidated legal claims except those involving personal injury.This distinction reflects the evolution of the common law, which once held that "choses in action" could not be assigned, except to the crown.Welch v. Mandeville,14 U.S. (1 Wheat.) 233, 237, 4 L.Ed. 79 n.a (1816).A legal claim is one type of "chose in action," but the concept also encompasses "debts of all kinds" and "rights to recover ownership or possession of real or personal property."Restatement (Second) of Contracts§ 316 cmt. a (1981);see alsoW.S. Holdsworth, The History of the Treatment of Choses in Action by the Common Law, 33 Harv. L.Rev. 997(1920)(tracing the term's evolution).

¶ 7 The broad prohibition on assignment exemplified the common law view that litigation was vexatious or otherwise socially undesirable.Max Radin, Maintenance by Champerty,24 Cal. L.Rev. 48, 57-58(1935).Illustrative is Lord Coke's statement:

And first was observed the great wisdom and policy of the sages and founders of our law, who have provided that no possibility, right, title, nor thing in action, shall be granted or assigned to strangers, for that would be the occasion of multiplying of contentions and suits, of great oppression of the people.

Lampet's Case,(1613)77 Eng. Rep. 994, 997(K.B.).

¶ 8 As courts became more accessible and litigation a more accepted means for resolving disputes, the prohibition on assignment gradually became the exception rather than the rule.By the end of the 17th century, the English equity courts permitted assignees to recover debts.The common law courts later followed suit, although they sometimes required the action to be filed in the name of the assignor for the benefit of the assignee.Welch,14 U.S. at 237 n.a;Walter Wheeler Cook, The Alienability of Choses in Action, 29 Harv. L.Rev. 816, 821-22(1916).American courts have long allowed the assignment of various choses in action, including many unliquidated legal claims.SeeWelch,14 U.S. at 236-37(upholding assignment and denying preclusive effect to a collusive judgment reached by assignor and debtor);Deatsch v. Fairfield,27 Ariz. 387, 397-98, 233 P. 887, 891(1925)(allowing assignment of breach of contract claim);Rice v. Stone,83 Mass. (1 Allen) 566, 568(1861)(noting that property claims and property tort claims could be assigned).

¶ 9 One class of unliquidated claims was excluded from the emerging rule of assignability: personal injury claims.Restatement (First) of Contracts§ 547(1932).Since Roman times, such claims were considered "personal" to the claimant and could not be asserted by others.Holdsworth, supra¶ 6, at 1002-03, 1022-24.Consistent with this perspective, absent a statute allowing for survival, a deceased claimant's personal injury claim could not be asserted by heirs or an estate.SeeMcClure v. Johnson,50 Ariz. 76, 81, 69 P.2d 573, 575(1937).Many courts concluded that whether a claim would survive the claimant's death should also determine whether it could be assigned during the claimant's life and applied this test to both personal injury and other claims.See, e.g., Comegys v. Vasse,26 U.S. (1 Pet.) 193, 213, 7 L.Ed. 108(1828)(dicta noting that "mere personal torts, which die with the party, and do not survive to his personal representatives, are not capable of passing by assignment.");United Verde Extension Mining Co. v. Ralston,37 Ariz. 554, 559-60, 296 P. 262, 264(1931)(holding that claims for property damage would survive and thus were assignable).

¶ 10 This "survivability" test did not itself survive in Arizona after 1955, when the legislature enacted a statute providing for the survival of most causes of action, including personal injury claims.SeeHarleysville Mut. Ins. Co. v. Lea,2 Ariz.App. 538, 540-41, 410 P.2d 495, 497-98(1966)(quotingA.R.S. § 14-477(1955)).²Although this statute undermined one rationale for refusing to allow the assignment of personal injury claims, courts did not abolish the rule.Instead, they resurrected the common law public policy rationale — fear of vexatious litigation.In Harleysville, the first decision to embrace this approach, the court of appeals concluded that allowing assignment of personal injury claims would be "fraught with possibilities" and noted that many early writers "objected to . . . assignability because they felt that unscrupulous people would purchase causes of action and thereby traffic in law suits for pain and suffering."Harleysville,2 Ariz. App. at 541-42, 410 P.2d at 498-99.

¶ 11This Court subsequently endorsed Harleysville and expressly relied on public policy considerations in reaffirming the rule against assignment of personal injury claims.State Farm Fire & Cas. Co. v. Knapp,107 Ariz. 184, 185, 484 P.2d 180, 181(1971).Both Harleysville and Knapp, however, noted that the legislature could specify whether certain claims are assignable.Id.;Harleysville,2 Ariz.App. at 542, 410 P.2d at 499;see alsoK.W. Dart Truck Co. v. Noble,116 Ariz. 9, 11, 567 P.2d 325, 327(1977)(holding that the legislature could statutorily assign an injured worker's claim to his employer's insurer in certain circumstances).

¶ 12 Public policy considerations have also guided courts in determining the assignability of claims not involving personal injury.For example, the court of appeals has held that legal malpractice claims cannot be assigned, although the principal policy consideration offered has been deference to the attorney-client relationship, not fears about trafficking in lawsuits.SeeBotma v. Huser,202 Ariz. 14, 17 ¶ 11, 39 P.3d 538, 541(App.2002)(citingSchroeder v. Hudgins,142 Ariz 395, 399, 690 P.2d 114, 118(App.1984), abrogation on other grounds recognized by Franko v. Mitchell,158 Ariz. 391, 399 n. 1, 762 P.2d 1345, 1353 n. 1(App.1988)).

¶ 13 The current principles under Arizona law for determining if an unliquidated claim may be assigned can be summarized as follows: (1) claims generally are assignable except those involving personal injury; (2)the legislature may specify whether particular claims are assignable; and (3) absent legislative direction, public policy considerations should guide courts in determining whether to depart from the general rule.Cf.Restatement (Second) of Contracts§ 178(1981)(stating that contracts are unenforceable where legislation so provides or where public policy clearly outweighs contractual terms).³

III.

¶ 14 Against this background, Gittlen argues that claims against insurance agents for professional negligence cannot be assigned because (1) claims against lawyers for legal malpractice are not assignable; (2)the court of appeals in Premium Cigars correctly extended this rule to insurance agents, as their relationship with clients is analogous to the attorney-client relationship; and (3) although the legislature has not addressed the assignment of claims against insurance agents, allowing such assignment would violate public policy.

A.

¶ 15 In contending that legal...