Allstate v. Ecodry

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

ALLSTATE VEHICLE AND PROPERTY INSURANCE COMPANY,
Plaintiff/Appellant,

v.

ECODRY RESTORATION OF ARIZONA, LLC,
Defendant/Appellee.

No. 1 CA-CV 21-0710
FILED 11-1-2022

Appeal from the Superior Court in Maricopa County
No. CV2020-055103
The Honorable Theodore Campagnolo, Judge

AFFIRMED

COUNSEL

Goldstein Woods & Alagha, Phoenix
By Evan S. Goldstein, Hesam Alagha
Counsel for Plaintiff/Appellant

Ehmke Law, PLC, Mesa
By Joshua Thad Ehmke
Counsel for Defendant/Appellee

Jones, Skelton & Hochuli, P.L.C., Phoenix
By Patrick C. Gorman, Jonathan P. Barnes, Jr.
Counsel for Amicus Curiae Pekin Insurance Company
 ALLSTATE v. ECODRY
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Maria Elena Cruz delivered the decision of the Court, in
which Judge Angela K. Paton and Judge Peter B. Swann joined.

C R U Z, Judge:

¶1 Allstate Vehicle and Property Insurance Company
(“Allstate”) appeals the superior court’s order granting the cross-motion for
summary judgment filed by EcoDry Restoration of Arizona, LLC
(“EcoDry”) and denying Allstate’s motion for summary judgment. For the
following reasons, we affirm.

FACTUAL AND PROCEDURAL HISTORY

¶2 EcoDry performed water remediation services at the home of
Allstate insureds, Jason and Madison Serikaku (“the Homeowners”). In
exchange for EcoDry’s services, the Homeowners signed a work order
agreement with an assignment of benefits that states:

Assignment of Benefits: Customer hereby assigns any and all
post-loss insurance rights, benefits, proceeds, causes of action,
including the ability to file a lawsuit directly against
Customer’s insurance provider, under any applicable
insurance policies to Contractor and/or Contractor’s
assignees for work performed by Contractor. This post-loss
assignment is made in consideration of Contractor
performing the services and/or not requiring an upfront
down payment from Customer.

¶3 After EcoDry requested payment from Allstate for services
rendered, Allstate requested EcoDry participate in an examination under
oath (“EUO”). EcoDry refused, arguing the assignment of benefits does not
confer upon it a duty to comply with this policy requirement.

¶4 Allstate filed a declaratory judgment action in the superior
court, alleging EcoDry was obligated to undergo an EUO, and requesting a
declaration of Allstate’s and EcoDry’s rights and obligations under the
policy.

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Decision of the Court

¶5 Later, Allstate and EcoDry filed competing motions for
summary judgment. The superior court ruled EcoDry was not obligated to
undergo an EUO because the assignment of benefits it received from the
Homeowners gave “EcoDry the right to collect whatever the insured was
entitled to, subject to defenses and claims against the insured that existed
pre-assignment”; but the assignment did not create a duty upon EcoDry to
give an EUO on the claim because the assignment of benefits did not assign
the policy to EcoDry, only a discrete claim. The court denied Allstate’s
motion for summary judgment and granted EcoDry’s cross-motion,
awarding EcoDry its attorneys’ fees.

¶6 Allstate timely appealed, and we have jurisdiction pursuant
to Arizona Revised Statutes (“A.R.S.”) section 12-2101(A)(1).

DISCUSSION

¶7 We review a grant of summary judgment de novo
determining whether any genuine issue of material fact exists and whether
the superior court erred in applying the law. United Dairymen of Ariz. v.
Schugg, 212 Ariz. 133, 140, ¶ 26 (App. 2006). “Summary judgment is proper
if the evidence presented by the party opposing the motion contains so little
probative value, given the required burden of proof, that reasonable people
could not agree with that party’s conclusions.” Id. “We consider the record
in the light most favorable to the party against whom summary judgment
has been entered.” Id.

¶8 Allstate argues when EcoDry accepted the assignment of
benefits from the Homeowners it also accepted the policy obligation to
participate in an EUO. An EUO is carried out “to enable the [insurer] to
possess itself of all knowledge, and all information as to other sources and
means of knowledge, in regard to the facts, material to their rights, to enable
them to decide upon their obligations, and to protect them against false
claims.” Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 94-95 (1884). It is an
investigative tool aimed at discovering information regarding the claimed
loss itself, and an obligation for the insured under the policy, irrespective
of whether the insurer disputes the amount charged for a remediation
contractor’s charges.

¶9 As a general rule, “an assignment of a contract does not
operate to cast on the assignee liabilities imposed by the contract on the
assignor.” Norton v. First Fed. Sav., 128 Ariz. 176, 181 (1981). “[T]he
assignment is not of the policy itself, but of a claim under, or a right of action
on, the policy.” Aetna Cas. & Sur. Co. v. Valley Nat’l Bank of Ariz., 15 Ariz.

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Decision of the Court

App. 13, 15 (1971). “The legal effect of an assignment of a non-negotiable
chose in action is to merely transfer the interest of the assignor to the
assignee.” Van Waters & Rogers, Inc. v. Interchange Res., Inc., 14 Ariz. App.
414, 417 (1971). “The assignee then ‘stands in the shoes’ of the assignor,
taking his rights and remedies as described in the assignment, subject to
any [prior] defenses which the obligor or debtor has against the assignor
. . . .” Id. (citations and internal quotation marks omitted).

¶10 Allstate agrees that in receiving an assignment of benefits
EcoDry did not also receive an assignment of the Homeowners’ policy.
Allstate proposes that in Norton, 128 Ariz. at 181, the Arizona Supreme
Court has, at least implicitly, adopted the Restatement Second of Contracts
such that, absent evidence of a contrary intent, the assignment of benefits
simultaneously operates as an assignment of rights and assumption of
obligations by the assignee. The Norton court made it clear that the
circumstances of the case before it did not require deciding whether an
assignee implicitly assumes duties when it assumes benefits. Id. The
Restatement rule has not been adopted in Arizona. Even if this were the
rule, the circumstances of the assignment of benefits would not lead to the
conclusion that the parties to the assignment intended that EcoDry would
assume all the Homeowners’ duties under the policy. It would be
impractical, if not nearly impossible, for EcoDry to conduct its business of
remediation if it assumed the contractual responsibilities of each of its
clients with their respective insurers. Regardless, because the general rule
in Arizona is that “an assignment of a contract does not operate to cast on
the assignee liabilities imposed by the contract on the assignor,” and
Allstate has not shown that EcoDry affirmatively accepted any of the
Homeowners’ liabilities, EcoDry cannot be forced to comply with the
policy’s EUO requirement. Id.

¶11 Allstate also argues EcoDry is obligated to submit to an EUO
because an EUO is the mechanism by which Allstate may investigate a
claim, including ascertaining the extent of the loss and preparing for a
potential appraisal under the policy. Allstate’s right to investigate a claim
is not hampered by the inability to conduct an EUO of a contractor who
performed remediation work after the loss. The Homeowners have a
contractual obligation and are in the best position to provide Allstate with
information regarding the cause and extent of the claimed loss.

¶12 Allstate also relies on Farmers Ins. Exch. v. Udall, 245 Ariz. 19
(App. 2018), where EcoDry was an assignee under several post-loss
assignments of benefits, for the proposition that, at oral argument, EcoDry
declared its intent to abide by the insureds’ obligations after taking an

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 ALLSTATE v. ECODRY
Decision of the Court

assignment of rights. Id. at 24, ¶ 17. EcoDry’s concession is taken in the
context of its admitted obligations when pursuing a claim for services
rendered and in responding to any defenses the insurer may raise, not as
an acceptance of all obligations under the insured’s policy.

¶13 Finally, Allstate argues that EcoDry implicitly assumes all of
the Homeowners’ policy obligations if it files suit against Allstate or
demands appraisal, because the policy terms so require. Given the lack of
support for the proposition that an assignment of benefits equates to an
implied assumption of all policy obligations, see supra at ¶¶ 9-11, we also
reject this proposition. Accordingly, we find no error in the superior court’s
grant of summary judgment in favor of EcoDry.

CONCLUSION

¶14 We affirm. Both parties request attorneys’ fees and costs on
appeal pursuant to A.R.S. § 12-341.01. In the exercise of our discretion, we
award EcoDry its reasonable attorneys’ fees and costs on appeal, upon
compliance with ARCAP 21.

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

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