Gyau v. Total Transit

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

KWASI GYAU, et al., Plaintiffs/Appellants/Cross-Appellees,

v.

TOTAL TRANSIT, et al., Defendants/Appellees/Cross-Appellants.

No. 1 CA-CV 22-0658
FILED 01-23-2025

Appeal from the Superior Court in Maricopa County
No. CV2019-015593
The Honorable Bradley Astrowsky, Judge

AFFIRMED IN PART; VACATED AND REMANDED IN PART

COUNSEL

Cohen Law Firm
By Larry J. Cohen
Counsel for Plaintiffs/Appellants/Cross-Appellees

Elardo Bragg Rossi & Palumbo PC, Phoenix
By John A. Elardo
Counsel for Defendants/Appellees/Cross-Appellants
 GYAU, et al. v. TOTAL TRANSIT, et al.
Decision of the Court

MEMORANDUM DECISION

Judge Michael J. Brown delivered the decision of the Court, in which
Presiding Judge Samuel A. Thumma and Judge Jennifer B. Campbell joined.

B R O W N, Judge:

¶1 Plaintiffs Kwasi and Yvonne Gyau challenge the superior
court’s grant of summary judgment on their breach of contract and bad
faith claims against defendants Total Transit, Total Transit Inc., Total
Transit Inc. d/b/a Discount Cab, and Auto Claim Inc. (collectively “Total
Transit”). For its cross-appeal, Total Transit challenges the court’s denial of
its request for attorneys’ fees. We conclude that summary judgment was
improper on the Gyaus’ claims for breach of contract and breach of the
implied covenant of good faith and fair dealing. We affirm, however, the
court’s rulings on the Gyaus’ claims for bad faith tort and punitive
damages. Given our partial reversal and remand on the Gyaus’ claims for
breach of contract and breach of the implied covenant of good faith and fair
dealing, Total Transit’s cross-appeal is moot, and the superior court may
consider whether either side is entitled to recover attorneys’ fees based on
the outcome of the case on remand.

BACKGROUND

¶2 In February 2015, Mr. Gyau was injured in a car accident
while working as a taxi driver for Total Transit, which leased him the car
he was driving. Mr. Gyau worked as an independent contractor for Total
Transit, but the record does not include any specific terms of their
contractual arrangement. Nonetheless, as Mr. Gyau testified in his
deposition, Total Transit provided him “with insurance coverage [as] a
condition of [him] agreeing to work for them.”

¶3 The Gyaus obtained liability policy limits ($50,000) from the
insurer of the other driver involved in the collision. Because those limits
were not enough “to address Mr. Gyau’s injuries and damages,” the Gyaus
sought to recover underinsured motorist (“UIM”) benefits from Total
Transit. In doing so, the Gyaus relied on a certificate of insurance filed with
the Arizona Department of Transportation’s insurance unit on September
3, 2014, which listed Scottsdale Indemnity Company as the insurer and
stated that Total Transit had $1 million in automobile liability coverage and

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$300,000 in “UM/UIM Bodily Injury” coverage on “any auto” at the time
of an accident. The certificate also indicated that Total Transit was
responsible for a $500,000 self-insured retention (“SIR”), “as per Policy
Terms and Conditions.” The policy provided by Scottsdale Indemnity
included an SIR endorsement, which describes the $500,000 limit as “the
amount of ‘loss’ or damage[s] [Total Transit] must pay first from claims or
‘suits’ otherwise covered under this policy,” and that the SIR is a substitute
for any applicable deductible. The endorsement states that Scottsdale
Indemnity’s “obligation under the policy applies only to the amount in
excess of the [SIR] [l]imit.”

¶4 Bill Wojtkowski, who worked as a claims examiner for Total
Transit, acknowledged that the SIR was “an amount of money that a
company agrees to have available to address claims.” According to Julie
Tyree, Total Transit’s director of risk management and Wojtkowski’s
immediate supervisor at the time, the SIR covered any claims falling below
the $500,000 threshold, and that those claims were handled “in house” by
Total Transit. As part of the claims process, Wojtkowski explained in his
deposition that he was tasked with investigating, evaluating, and settling
liability claims, but for UIM claims, he would defer the final decision about
whether there would be coverage to Tyree. Wojtkowski added that a UIM
claim is one where one of the independent contractor drivers has been
injured and the other driver did not have enough insurance coverage, but
Wojtkowski could not recall whether he discussed the Gyaus’ claim with
Tyree.

¶5 In February 2017, counsel for the Gyaus’ spoke with Tyree,
who confirmed that UIM coverage in the amount of $300,000 was “available
for Mr. Gyau’s claim” from Total Transit.1 Tyree later acknowledged in her
deposition that she was responsible for the claims that were self-
administered through the SIR and that standard operating procedures (in
electronic form) for how to handle liability claims under the SIR had been
established, but after the sale of one of Total Transit’s subsidiary companies,
“most of those documents” could not be located.

¶6 In urging Total Transit to confirm that UIM coverage was
available to pay their claim, the Gyaus also referenced Total Transit’s
handling of another taxi driver’s (“Mr. K”) claim arising from injuries he
incurred from a car accident. Mr. K had presented a claim for UIM benefits

1 The parties do not dispute, to the extent Total Transit may be found
liable for payment of UIM benefits to Gyau, the maximum available for
such payment is $300,000.

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to Total Transit, asserting in part: “[I]t is our position (1) that Total Transit,
Inc., provided underinsured motorist coverage, as it represented in the
Certificate of Liability Insurance, (2) that this underinsured motorist
coverage had limits of $300,000, and (3) that this coverage is Total Transit,
Inc.’s responsibility, as it is within the scope of its [SIR].” Writing to counsel
for the Gyaus, Wojtkowski “confirm[ed] the availability of underinsured
motorist coverage at the time of [Mr. K.’s] loss,” which “falls within the
scope of our client’s self-insured retention.” Wojtkowski then stated,
presumably referring to the Gyaus’ claim, that “[i]n . . . an underinsured
motorist claim, we will need documented confirmation that the policy
limits of the third party carrier have been exhausted as well as confirmation
of settlement.” Both Mr. K’s and Mr. Gyau’s accidents occurred within the
range of effective dates for Total Transit’s insurance policy listed in the
certificate of insurance filed with the Arizona Department of
Transportation.

¶7 After Total Transit denied the Gyaus’ claim, they sued Total
Transit, seeking to recover UIM benefits and alleging bad faith. The court
denied Total Transit’s motion to dismiss under Arizona Rule of Civil
Procedure 12(b)(6). After the parties participated in discovery, Total Transit
moved for summary judgment, arguing: (1) it had no insurance contract
with the Gyaus; (2) the certificate of insurance did not create or modify
coverage; and (3) Tyree’s post-accident statements did not create or modify
coverage. The Gyaus moved for partial summary judgment asking the
court to find as a matter of law that $300,000 in UIM coverage existed for
the accident, again relying on the certificate of insurance, Tyree’s
statements, and the letter from the other taxi driver’s claim.

¶8 The superior court granted Total Transit’s motion. The court
first noted that Total Transit was required by law to maintain liability and
uninsured (“UM”) coverage, but not UIM coverage. See A.R.S.
§§ 28-4033(A)(2)(c), -4039(A). The court then determined that while a
certificate of insurance “can be used by Arizona authorities to ensure
appropriate insurance coverage exist[s] before granting permission to
operate in this state . . . it is incorrect to say that [it] confirms the specific
details of the policy outside of the minimum coverage required by the
state.” It further concluded that “[t]he mere words of [Tyree] are not
enough to create liability where no contract exists.” The court therefore
granted summary judgment in favor of Total Transit on all the Gyaus’
claims, finding that “there is no contract between [the Gyaus] and [Total
Transit] and no duty . . . to provide the coverage claimed in [the Gyaus’]
cause of action.”

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¶9 Total Transit applied to recover attorneys’ fees under A.R.S.
§ 12-341.01(A), but the court declined to award fees, citing “the relatively
novel issue presented in this matter.” After the court entered final
judgment, the Gyaus timely appealed and Total Transit timely cross-
appealed the denial of its fee claim. We have jurisdiction under A.R.S.
§ 12-2101(A)(1).

DISCUSSION

¶10 Summary judgment is appropriate when there is “no genuine
dispute as to any material fact and the moving party is entitled to judgment
as a matter of law.” Ariz. R. Civ. P. 56(a). We review a grant of summary
judgment de novo and view the evidence and reasonable inferences from it
in a light most favorable to the Gyaus. Zambrano v. M & RC II LLC, 254 Ariz.
53, 58, ¶ 9 (2022).

I. Legal Nature of the Dispute

¶11 In defense of the superior court’s summary judgment ruling,
Total Transit focuses in part on the absence of any written insurance policy
or contract providing coverage for UIM. What Total Transit fails to
acknowledge, however, is that its dispute with the Gyaus does not turn on
any interpretation or enforcement of an insurance policy or insurance
contract. Instead, the viability of the Gyaus’ claims depends on whether
Total Transit treated the SIR as a self-administered fund to reimburse
independent contractors for claimed losses resulting from injuries suffered
while operating vehicles furnished by Total Transit.

¶12 The law recognizes the unique functions of an SIR in the
context of insurance obligations:

A “self-insured retention” (or “SIR”) is an insurance
arrangement whereby the insured takes all responsibility for
dealing with claims up to a certain amount of loss. This
includes adjusting the claim, either itself as the insurer or
through a third-party claims administrator, defending itself
against the claim, and, if necessary, paying it. Thus, as the
term would suggest, the insured effectively self-insures up to
the limit of the risk it has chosen to retain.

Vol 3, Jeffrey E. Thomas, New Appleman on Insurance Law Library Edition
§ 16.09(3)(b) (LexisNexis); see also City of Mesa v. Ryan in & for Cnty. of
Maricopa, ___ Ariz. ___, ___, ¶ 17, 557 P.3d 316, 320 (2024) (“A ‘self-insured
retention’ is the amount specified in a liability insurance policy that must

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be paid by or on behalf of the insured for a covered loss before coverage
under the policy begins to apply for the claim or claims to which the self-
insured retention applies.”) (quoting Restatement of the L. of Liab. Ins.
§ 1(12) (Am. L. Inst. 2019)); see also Transp. Indem. Co. v. Carolina Cas. Ins. Co.,
133 Ariz. 395, 398, n.3, (1982) (equating self-retention provision to self-
insurance, as a “form of deductible”); id. at 406 (“In such a situation the
excess insurance clause should not be extended to cover an amount for
which the insured [] has bargained to become a ‘self-insurer.’” (citation and
quotation omitted)).

¶13 Other jurisdictions have likewise found that “self-insurance”
arrangements are not insurance contracts. See Simmons v. Puu, 94 P.3d 667,
682 (Haw. 2004) (“[S]elf-insurers are not insurers, inasmuch as they are ‘not
in the business of making contracts of motor vehicle insurance.’” (internal
quotations and citations omitted)); Cordova v. Wolfel, 903 P.2d 1390, 1392
(N.M. 1995) (“[S]elf-insurance is a process of risk retention whereby an
entity ‘set[s] aside assets to meet foreseeable future losses.’”) (citations
omitted); Hawkins v. Ford Motor Co., 566 S.E.2d 624, 629 (W. Va. 2002) (“A
self-insured entity is not in the business of insurance.”); Wake Cnty. Hosp.
Sys. Inc. v. Nat’l Cas. Co., 804 F. Supp. 768, 774 (E.D. N.C. 1992) (collecting
cases and noting that a majority of jurisdictions have held that self-
insurance programs are not insurance).

¶14 Though Total Transit did not provide the specific procedures
it used in administering the SIR, Tyree described how Total Transit
operated the SIR “in house” before Total Transit’s other insurance provider
would cover claims. Wojtkowski also explained that his duties involved
examining claims and negotiating potential settlements. In describing the
SIR, Wojtkowski stated that Total Transit would “assume the costs of [a]
claim up . . . to [$500,000].” Under this arrangement, Total Transit did not
receive premiums in exchange for guarantees to indemnify losses; the SIR
reflects Total Transit’s decision to cover and resolve potential liability
claims on its own up to $500,000. The SIR is not an insurance contract,
rather it reflects the arrangement Total Transit established to cover
potential losses claimed by its injured taxi drivers before the Scottsdale
Indemnity excess insurance is triggered. Thus, the principles of law specific
to insurance contracts do not apply to the Gyaus’ claims.

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II. Breach of Contract Claim

A. Certificate of Insurance

¶15 The Gyaus argue that the certificate of insurance provided to
the Department of Transportation “established the existence of [UIM]
coverage.” As noted above, the certificate indicates that Total Transit had
$300,000 of “UM/UIM Bodily Injury” insurance on “any auto,” but that it
was subject to a $500,000 self-insured retention.

¶16 Citing McCandless v. United Southern Assurance Co., 191 Ariz.
167 (App. 1997) and Drucker v. Greater Phoenix Transp. Co., Inc., 197 Ariz. 41
(App. 1999), the Gyaus contend that “when certification is given to Arizona
authorities about insurance coverage in order to operate a vehicle in
Arizona the afforded coverage is then available by operation of law to the
extent described therein.” But those cases stand for the proposition that a
policy listed in a certificate of insurance provided to the Department of
Transportation can be modified by operation of law to conform to
applicable statutory requirements. Drucker, 197 Ariz. at 45, ¶ 20;
McCandless, 191 Ariz. at 171. The Gyaus have shown no statute that would
require Total Transit to carry or provide UIM insurance, and thus neither
Drucker nor McCandless apply.

¶17 Moreover, the certificate of insurance includes the following
disclaimer:

THIS CERTIFICATE IS ISSUED AS A MATTER OF
INFORMATION ONLY AND CONFERS NO RIGHTS UPON
THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES
NOT AFFIRMATIVELY OR NEGATIVELY AMEND,
EXTEND OR ALTER THE COVERAGE AFFORDED BY THE
POLICIES BELOW. THIS CERTIFICATE OF INSURANCE
DOES NOT CONSTITUTE A CONTRACT BETWEEN THE
ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE
OR PRODUCER, AND THE CERTIFICATE HOLDER.

Standing alone, this certificate does not establish UIM coverage. Cf. Cont’l
Cas. Co. v. Signal Ins. Co., 119 Ariz. 234, 238 (App. 1978) (“[A] Certificate of
Insurance cannot contradict the terms of a policy; it only provides
information as to the policy’s contents.”).

¶18 The certificate does, however, provide some indication as to
what Total Transit covered, or at least what it represented would be
covered, under the SIR, which was essentially a mechanism it used to

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compensate independent contractors for the injuries they suffered because
of auto accidents. Tyree acknowledged that it would have been her normal
practice to review a certificate of insurance to ensure the contents were
accurate, that she would have reported any errors to Total Transit’s
insurance broker, and that she did not report any such errors related to this
certificate. Thus, even though the certificate is not an “insurance contract”
between Mr. Gyau and Total Transit, at this stage of the litigation, it does
serve as some evidence of what benefits Total Transit offered to its
independent contractors, including Mr. Gyau, who were driving its
vehicles.

B. Representations About UIM Coverage

¶19 Total Transit contends summary judgment is proper because
it “never entered into an agreement to provide . . . [the Gyaus] with UIM
coverage” and that “the only coverage provided under the self-insured
retention amount is as is statutorily required, which is only UM and not
UIM.” Total Transit, however, points to no evidence that it informed the
Gyaus or anyone else that its SIR was so limited.

¶20 The Gyaus, in contrast, offered their counsel’s February 2017
letter in which he reminded Tyree that she had confirmed “there is [UIM]
coverage in the amount of $300,000 available for Mr. Gyau’s claim.” Total
Transit objected to this letter as irrelevant and “self-serving hearsay,” but
the superior court never made any ruling that the letter was inadmissible;
instead, the court analyzed why it believed the statements were not
sufficient to establish UIM coverage. By doing so, the court overruled Total
Transit’s objections as a matter of law. See Compassionate Care Dispensary,
Inc. v. Ariz. Dep’t of Health Servs., 244 Ariz. 205, 211, ¶ 16 (App. 2018). And
because Total Transit does not reassert its evidentiary objections in its
answering brief, we consider the letter in analyzing whether Total Transit
agreed, at least implicitly, to provide UIM coverage for its independent
contractors driving Total Transit’s vehicles. See id. (stating that the
appellant had “waived appellate review of evidentiary rulings not
specifically identified and argued within its opening brief”).

¶21 The Gyaus also presented evidence that, about a month after
their counsel’s conversation with Tyree, claim examiner Wojtkowski
confirmed in writing that UIM coverage was available for Mr. K’s claim
within the same policy period. Although Total Transit “denied” the
contents of that letter, it presented no controverting evidence. Instead,
similar to its argument on appeal, Total Transit contends that any evidence
about the handling of Mr. K’s claim is barred by Arizona Rule of Evidence

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(“Rule”) 408, which states in part as follows: “Evidence of the following is
not admissible—on behalf of any party—either to prove or disprove the
validity or amount of a disputed claim . . . (1) furnishing, promising, or
offering—or accepting, promising to accept, or offering to accept—a
valuable consideration in compromising or attempting to compromise the
claim.” Ariz. R. Evid. 408(a)(1).

¶22 Total Transit cites no authority suggesting that evidence of
settlement agreements in separate claims with separate parties fall under
Rule 408’s evidentiary barn. See Dahlgren v. First Nat. Bank of Holdrege, 533
F.3d 681, 699 (8th Cir. 2008) (noting that the Federal Rule of Evidence 408
“only applies to evidence of compromise offered to prove liability for or the
amount of the claim that was compromised.”); cf. Ciolli v. Iravani, 625 F.
Supp. 2d 276, 286 (E. D. Penn. 2009) (acknowledging that federal circuits are
split as to whether Federal Rule 408 applies only to the same case or claim
being settled).

¶23 It is also not clear that the Gyaus seek to introduce this
evidence to prove the validity of their claim; rather, it shows Total Transit’s
pattern of conduct in such cases. See Ariz. R. Evid. 408(b) (allowing courts
to admit evidence of settlement for other purposes not listed in Rule 408(a)).
In any event, even without this evidence, there are genuine issues of
material fact as to whether Total Transit had offered to provide UIM
coverage to Mr. Gyau as an independent contractor. Because the superior
court did not address whether evidence about the handling of Mr. K’s claim
is precluded by Rule 408, on remand the court should address the extent to
which such evidence will be admissible at trial.

¶24 The letter to Tyree and the letter from Wojtkowski constitute
evidence that Total Transit represented to its taxi drivers that it provided
them UIM benefits under the SIR. Total Transit argues nonetheless that the
Gyaus cannot “create coverage based on statements made after an
accident,” citing Farmers Ins. Co. of Arizona v. Zumstein, 138 Ariz. 469, 474
(App. 1983). There, an insured asserted that the insurer should be estopped
from denying coverage because its agent “misled [him] into believing he
had coverage.” Id. This court rejected that argument because “the policy
provision in question . . . [was] unambiguous.” Id. This court also
recognized that “oral representations made subsequent to the accident will
not create a claim of estoppel against the insurer because that doctrine
cannot provide coverage for risks the policy does not cover by its terms.”
Id. at 474–75. But as we have explained, the SIR policy is not insurance.
Further, there are no written terms for the SIR in our record and thus the
Gyaus’ UIM claim would fall entirely within the scope of the SIR. Absent

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unambiguous evidence outlining what the SIR does and does not cover,
which is absent on the record presented, Zumstein does not apply.

¶25 Total Transit also contends Tyree lacked authority to
represent that UIM benefits were available. The scope of one’s authority
typically presents questions of fact for the jury. Bud Antle, Inc. v. Gregory, 7
Ariz. App. 291, 293 (1968). It does here as well, as Tyree testified that she
did not answer to anyone above her in making claims handling and
coverage decisions. Total Transit “denied” this evidence as well but only
stated, without citation to the record, that Tyree was “limited in her
capacity as an employee” and “does not own the company and does not
have carte blanche authority to spend money any way she wants.” That
denial and those arguments, however, do not mandate the exclusion of
Tyree’s statement—when offered by the Gyaus—as an opposing party’s
statement. See Ariz. R. Evid. 801(d)(2).

¶26 Viewing the record in a light most favorable to the Gyaus, we
cannot say that Total Transit is entitled to summary judgment. The Gyaus,
based on the certificate of insurance and statements from Total Transit’s
representatives who were directly responsible for handling payments from
the SIR, have shown there are genuine factual disputes on whether Total
Transit had agreed to cover UIM claims through the SIR. We therefore
vacate summary judgment on the Gyaus’ claims for breach of contract and
breach of the implied covenant of good faith and fair dealing.

III. Bad Faith Claims

¶27 The Gyaus argue Total Transit acted in bad faith by arbitrarily
refusing to pay UIM benefits. They contend that under Arizona law, breach
of an express covenant is not a prerequisite to establishing a bad faith claim,
and that their focus here is “on the matter in which [] handling of their UIM
claim breached the implied covenant of good faith and fair dealing.”

¶28 Every contract in Arizona implies a covenant of good faith
and fair dealing, which “prohibits a party from doing anything to prevent
other parties to the contract from receiving the benefits and entitlements of
the agreement.” Wells Fargo Bank v. Ariz. Laborers, Teamsters, and Cement
Masons Local 395 Pens. Tr. Fund, 201 Ariz. 474, 490, ¶ 59 (2002). A party may
breach this covenant without necessarily breaching an express term of the
agreement because the inquiry turns on whether the parties act faithfully
“to an agreed common purpose and consisten[t] with the justified
expectations of the other party.” Id. at 492–93, ¶¶ 66, 69 (citation omitted).
The typical remedy for breach of this covenant are contract damages.

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Burkons v. Ticor Title Ins. Co. of California, 168 Ariz. 345, 355 (1991). But when
this covenant is breached in contracts implicating certain special
relationships (including between and insurer and insured), particularly
those characterized by “elements of public interest, adhesion, and fiduciary
responsibility,” Rawlings v. Apodaca, 151 Ariz. 149, 158 (1986), the plaintiff
may recover tort damages. But there is no insurer-insured relationship
between Mr. Gyau and Total Transit; nor is there any indication in the
record that Total Transit assumed any other special duties or fiduciary
responsibilities or that any contracts of adhesion exist between the parties.
See id. Without such relationships between Mr. Gyau and Total Transit, the
Gyaus cannot recover tort damages.

¶29 The parties dispute whether Total Transit agreed to provide
UIM benefits under the SIR, and the Gyaus presented evidence that Total
Transit did not deny that UIM benefits were available until after this
litigation commenced. Total Transit’s refusal to provide such benefits after
their representations that UIM coverage was available creates a genuine
dispute of material fact on whether Total Transit breached the implied
covenant of good faith and fair dealing. The Gyaus may recover contract
damages if they establish a breach of that covenant at trial.

IV. Punitive Damages

¶30 To recover punitive damages, the Gyaus must show not only
that Total Transit “engaged in tortious conduct of any kind, intentional or
negligent—that is, acted with an ‘evil hand,’” but also that “the defendant
engaged in such conduct with an ‘evil mind.’” Swift Transp. Co. of Ariz.
L.L.C. v. Carman in & for Cnty. of Yavapai, 253 Ariz. 499, 506, ¶ 22 (2022). As
discussed above, the Gyaus cannot pursue tort damages in this case. Thus,
they cannot recover punitive damages. Id.; see also Cont’l Nat’l Bank v. Evans, 107 Ariz. 378, 382 (1971) (noting that punitive damages are unavailable on
contract claims).

V. Cross-Appeal

¶31 In its cross-appeal, Total Transit challenges the denial of its
request for attorneys’ fees incurred in the superior court. Our decision
vacating summary judgment in part moots that denial. The court may
consider whether either side is entitled to recover attorneys’ fees based on
the outcome of the case.

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CONCLUSION

¶32 We affirm in part, vacate in part, and remand for further
proceedings consistent with this decision. In our discretion, we deny Total
Transit’s request for attorneys’ fees incurred in this appeal under A.R.S.
§ 12-341.01(A), and because both parties have prevailed on appeal in part,
we decline to award taxable costs.

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

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