State Farm v. Frank

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
Plaintiff/Appellee,

v.

KAREN EGAN FRANK, Defendant/Appellant.

No. 1 CA-CV 23-0282
FILED 3-21-2024

Appeal from the Superior Court in Maricopa County
No. CV2021-019129
The Honorable Joan M. Sinclair, Judge

AFFIRMED IN PART; VACATED AND REMANDED IN PART

COUNSEL

Hill Hall & DeCiancio PLC, Phoenix
By Joel DeCiancio, Christopher Robbins
Counsel for Plaintiff/Appellee

Mick Levin PLC, Phoenix
By Mick Levin
Co-Counsel for Defendant/Appellant

Erlichman Law Firm, Phoenix
By Joseph Erlichman
Co-Counsel for Defendant/Appellant

STATE FARM v. FRANK
Opinion of the Court

OPINION

Judge Michael S. Catlett delivered the opinion of the Court, in which
Presiding Judge David D. Weinzweig and Judge Maria Elena Cruz joined.

C A T L E T T, Judge:

¶1 This case involves two insurance policies. Karen Frank and
State Farm Mutual Automobile Insurance Company (“State Farm”) are
party to both. One is an automobile policy (“Auto Policy”), the other is a
personal liability umbrella policy (“Umbrella Policy”); both policies include
underinsured motorist (“UIM”) coverage. Another driver rear-ended and
injured Frank but failed to cover her purported damages. Frank made a
UIM claim under both policies. State Farm paid under neither.

¶2 Two lawsuits ensued. In the first, brought in 2019 (which,
naturally, we call the “2019 Lawsuit”), Frank sued State Farm under both
policies. That lawsuit remains pending in superior court. In the second, on
appeal here, State Farm turned the tables and sought a declaration that UIM
coverage under both policies is time barred under the applicable statute of
limitations.

¶3 In this case, State Farm moved for summary judgment. The
court balked, concluding Frank complied with the statute of limitations.
But after State Farm moved for reconsideration, the court reversed course
and entered judgment for State Farm.

¶4 We conclude the superior court was partially correct and
partially incorrect. The Auto Policy required Frank to request arbitration
within three years of first making a claim. Frank fell short. So State Farm
was entitled to a judgment declaring UIM coverage under the Auto Policy
time barred. But all is not lost for Frank. Unlike the Auto Policy, the
Umbrella Policy required Frank to initiate a lawsuit in state or federal court
within three years of making a claim. Frank did so with the 2019 Lawsuit.
So State Farm was not entitled to a judgment declaring UIM coverage under
the Umbrella Policy time barred. We partially affirm and partially vacate
the judgment and remand for further proceedings (if any).

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STATE FARM v. FRANK
Opinion of the Court

FACTUAL AND PROCEDURAL BACKGROUND

¶5 Frank was involved in an automobile accident in August
2015. On April 20, 2016, she notified State Farm of her “potential
underinsured motorist claim.” Shortly thereafter, she received a policy
limits settlement of $15,000 from the other driver’s insurer, but Frank
claimed damages exceeding $15,000.

¶6 The Auto Policy provides $100,000 of UIM coverage, and the
Umbrella Policy provides $2,000,000 of UIM coverage. Both policies spell
out how a UIM dispute is resolved. Starting with the Auto Policy, it
requires Frank or State Farm to make a written request for arbitration of
disputed UIM claims:

1. The insured and we must agree to the answers to the
following two questions:

a. Is the insured legally entitled to recover
compensatory damages from the owner or driver of
the underinsured motor vehicle; and

b. If the insured and we agree that the answer to 1.a.
above is yes, then what is the amount of the
compensatory damages that the insured is legally
entitled to recover from the owner or driver of the
underinsured motor vehicle?

2. If there is disagreement on the answers to either or both
questions, then the disagreement will be resolved by
arbitration upon written request of the insured or us.

...

7. Any arbitration or suit against us will be barred unless
commenced within three years after the date you notified us
in writing of the underinsured motor vehicle claim.

¶7 The Umbrella Policy is different. It requires Frank to press a
UIM claim by filing a lawsuit in state or federal court:

1. a. The insured and we must agree to the answers to the
following two questions:

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STATE FARM v. FRANK
Opinion of the Court

(1) Is the insured legally entitled to collect damages
from the owner or driver of the . . . underinsured motor
vehicle?

(2) If the insured and we agree that the answer to 1.a.(1)
above is yes, then what is the amount of the damages
that the insured is legally entitled to collect from the
owner or driver of the . . . underinsured motor vehicle?

b. If there is no agreement on the answer to either question in
1.a. above, then the insured shall:

(1) within three years after providing us written notice
of the claim, file against us a lawsuit, in a state or federal
court that has jurisdiction;

...

(3) agree that we may contest the issues of liability and
the amount of damages[.]

¶8 On May 18, 2018, slightly more than two years after Frank
gave notice of her UIM claim, State Farm wrote to confirm her “intent to
present an Underinsured Motor Vehicle claim.” State Farm stated,
consistent with the Auto Policy, that any disagreement would be “resolved
by arbitration upon written request of the insured or us” and that
arbitration must be “commenced within three years after the date you
notified us in writing of your Underinsured Motor Vehicle claim.” State
Farm also said it would “use the date of this letter as the date you notified
us of your . . . claim.”

¶9 In February 2019, Frank made a policy limits demand for $2.1
million. She gave State Farm an open extension to respond. In April 2019,
State Farm wrote Frank regarding “UM/UIM Arbitration,” stating that it
was preparing disclosures for an arbitration proceeding. State Farm later
sent a letter proposing arbitrators. State Farm also proposed “exchang[ing]
Disclosure Statements within 60 days” and stated its intent to examine
Frank under oath on August 2, 2019.

¶10 Neither arbitration nor the examination under oath went
forward. Instead, Frank commenced the 2019 Lawsuit on August 14, 2019.
In her complaint, Frank alleged that she purchased UIM coverage “in the
amount of $2,100,000 from State Farm as part of her policy of coverage.”
Frank alleged that State Farm effectively denied her UIM claim by doing

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STATE FARM v. FRANK
Opinion of the Court

nothing to investigate or resolve it. Frank alleged that “State Farm . . . never
indicated that it disagreed . . . as to whether [she] is legally entitled to
recover compensatory damages . . . or . . . the amount of the compensatory
damages that [she] is legally entitled to recover,” and therefore she did not
have to arbitrate her UIM claim. She alleged she had been deprived “the
unpaid benefits of the policy” and sought compensatory damages.

¶11 State Farm filed this lawsuit in December 2021, seeking
declaratory relief. State Farm alleged that any claim for UIM coverage was
time-barred under A.R.S. § 12-555(C)(2) because Frank had “failed to
request arbitration or respond to State Farm’s request for arbitration.” State
Farm moved for summary judgment, which the superior court initially
denied. The court concluded State Farm extended Frank’s deadline to
request arbitration or file suit to May 18, 2021. The court determined that
the 2019 Lawsuit satisfied the statute of limitations for both policies.

¶12 State Farm moved for reconsideration. Citing only the Auto
Policy, it argued “the statute required [Frank] to request arbitration because
that is the proper forum according to the terms of the policy.” State Farm
cited a minute entry from the 2019 Lawsuit to contend Frank argued that
her claim in that lawsuit “was separate and different from a[] UIM claim”
and that she “was not seeking to resolve her UIM claim” in the 2019
Lawsuit.

¶13 The court granted reconsideration. The court concluded
Frank was estopped from arguing the 2019 Lawsuit satisfied the statute of
limitations because she argued the 2019 Lawsuit “was separate from the
UIM claim and that the lawsuit did not constitute the arbitration request.”
The court decided that UIM coverage under both policies was time-barred
because Frank never requested arbitration. The court entered judgment in
State Farm’s favor.

¶14 Frank timely appealed. We have jurisdiction under A.R.S.
§ 12-2101(A)(1).

DISCUSSION

¶15 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 in favor
of Frank, the non-moving party. Zambrano v. M & RC II LLC, 254 Ariz. 53,
58 ¶ 9 (2022). A defendant asserting a statute of limitations defense has the

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burden to prove the statute bars a claim. Kiley v. Jennings, Strouss & Salmon,
187 Ariz. 136, 139 (App. 1996).

I. The Statutory Framework

¶16 The parties agree A.R.S. § 12-555 contains the relevant
limitations period. Section 12-555 sets forth a three-step process for UIM
claims “if settlement is not reached.”

¶17 First, A.R.S. § 12-555(B) provides that an insurer is not liable
for UIM benefits unless the claimant provides written notice that she has a
UIM claim under an insurance policy “within three years after the date of
the accident that caused the bodily injury.” In addition to the three-year
notice requirement, the claimant must make a claim against the underlying
tortfeasor’s insurer or file a claim against the tortfeasor within the time
required under A.R.S. § 12-542 (or the applicable limitations period under
the law where the accident occurs, if outside Arizona). A.R.S. § 12-555(B).

¶18 Second, the UIM insurer must give written notice that it will
not be liable unless the claimant “request[s] arbitration or file[s] suit
pursuant to the terms of the insurance contract within three years” of
providing the insurer notice of the UIM claim. A.R.S. § 12-555(C)(1). The
insurer has two years from receiving notice of the UIM claim to provide this
written notice. Id.

¶19 Third, the statute ends with a limitations period for
requesting arbitration or filing a lawsuit relating to UIM benefits. The
statute provides that “[a] person shall request arbitration or file suit
pursuant to the terms of the insurance contract within three years after
providing” written notice of the UIM claim. A.R.S. § 12-555(C)(2). If “the
person” does not request arbitration or file a lawsuit within three years of
providing written notice of a UIM claim, “the insurer is not liable for” UIM
benefits. Id.

II. Settlement

¶20 The introductory clause in A.R.S. § 12-555(C) states that its
limitations period applies only “[i]f settlement is not reached.” Frank seizes
on that language and argues that summary judgment was inappropriate
because there were material fact questions about whether the parties settled
Frank’s claims. Frank more specifically contends State Farm accepted her
policy limits demand by not responding to it for more than a year.

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Opinion of the Court

¶21 Settlement agreements, which Arizona law favors, are
governed by common-law contract principles. Emmons v. Super. Ct., 192
Ariz. 509, 512 ¶¶ 11, 14 (App. 1998). An enforceable contract requires an
offer, acceptance, consideration, and sufficient specification of terms.
Armiros v. Rohr, 243 Ariz. 600, 605 ¶ 17 (App. 2018). Acceptance occurs
when one manifests agreement to the terms of an offer in a way the offer
requests or requires. K-Line Builders, Inc. v. First Fed. Sav. & Loan Ass’n, 139
Ariz. 209, 212 (App. 1983). One accepts an offer through silence only in
limited circumstances. Those circumstances are described in Restatement
(Second) of Contracts § 69 (1981). See Cook v. Cook, 142 Ariz. 573, 576 (1984)
(relying on the Restatement (Second) of Contracts for principles of contract
formation). For example, one accepts an offer through silence by taking the
benefit of offered services with reason to know the offeror expects
compensation. See Restatement (Second) of Contracts § 69(1)(a). One also
accepts an offer through silence by acting inconsistent with the offeror’s
ownership of offered property. Id. § 69(2). And one accepts an offer
through silence if the offeror gives the offeree reason to understand that
acceptance through silence is sufficient. Id. § 69(1)(b).

¶22 State Farm’s silence here did not resemble any of the
situations where silence equals acceptance. In the superior court, Frank
cited Arizona’s Unfair Claims Settlement Practices Act (“Settlement Act”)
to contend State Farm had to “respond . . . in a timely, prompt matter as
required by Arizona law[.]” No provision of the Settlement Act purports
to alter the common-law requirements for contract formation, including for
assent through silence. As this court explained, the Settlement Act is not “a
standard of conduct against which an insurer’s conduct in handling an
individual claim is to be measured for creating a claim for relief.” Melancon
v. USAA Cas. Ins. Co., 174 Ariz. 344, 347 (App. 1992).

¶23 The two opinions Frank cites to us do not further her cause.
In Farm and Auto Supply v. Phoenix Fuel Co., our supreme court explained
that “the question of whether silence would amount to assent to the
provisions contained on an invoice” is fact and case specific. 103 Ariz. 344,
347 (1968). The court held that receiving but not signing invoices containing
attorney fees provisions did not constitute a binding contract. Id. at 349.
The court noted that silence can operate as acceptance when it “has the
effect to mislead.” Id. at 348. But Frank has not established that State Farm
misled her regarding its silence. For example, Frank did not produce
evidence that State Farm said she should equate its silence with acceptance.
See Restatement (Second) of Contracts § 69(1)(b).

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Opinion of the Court

¶24 The second case, Swingle v. Myerson, concluded that the
defendant owed the plaintiff a finder’s fee for services because the
defendant did not reject the plaintiff’s “terms and expectation of
compensation.” 19 Ariz. App. 607, 609 (1973). Swingle is consistent with
Restatement (Second) of Contracts § 69(1)(a), stating that one can accept an
offer through silence by taking the benefit of offered services. Frank does
not claim she offered services to State Farm, which State Farm then took
advantage of knowing Frank expected payment. Swingle is inapposite.

¶25 State Farm did not accept, through silence or otherwise,
Frank’s policy limits demand, and there is no evidence in the record even
creating a genuine issue of material fact on that issue. Thus, we must
address State Farm’s assertion that Frank is time barred from seeking UIM
coverage.

III. Frank’s Deadline Under A.R.S. § 12-555

¶26 In relevant part, A.R.S. § 12-555(C)(2) requires that “[a] person
. . . request arbitration or file suit pursuant to the terms of the insurance
contract within three years after providing the written notice prescribed in
subsection A or B of this section.” A.R.S. § 12-555(C)(2). We first determine
when the three-year deadline expired, before addressing whether Frank
complied with that deadline.

¶27 Frank provided State Farm with notice of her UIM claim on
April 20, 2016. Thus, the deadline for initiating arbitration or filing a
lawsuit would ordinarily be April 20, 2019 (three years after April 20, 2016).
Frank argues the deadline should have been extended further. We agree
with her in part and conclude her deadline was May 18, 2021.

A. State Farm’s Noncompliance with A.R.S. § 12-555(C)(1)

¶28 Frank first contends she did not have to comply with
subsection (C)(2) because State Farm violated subsection (C)(1), having
failed to provide the required written notice within two years of receiving
her notice. We interpret statutes “according to the plain meaning of the
words in their broader statutory context, unless the legislature directs us to
do otherwise.” S. Ariz. Home Builders Ass’n v. Town of Marana, 254 Ariz. 281,
286 ¶ 31 (2023). “When the statute’s language is clear and unambiguous,
we must give effect to that language without employing other rules of
statutory construction.” Parsons v. Ariz. Dep’t of Health Servs., 242 Ariz. 320,
323 ¶ 11 (App. 2017).

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Opinion of the Court

¶29 We disagree that State Farm’s failure to provide notice within
two years extended Frank’s deadline. Commencement of the three-year
period in (C)(2) is not tied to the insurer’s compliance with (C)(1). Instead,
subsection (C)(1) unambiguously ties the three-year statute of limitations to
the date notice is provided under subsections (A) or (B). Subsection (C)(2)
says arbitration or a lawsuit “shall” commence “within three years after
providing the written notice prescribed in subsection A or B of this section.”
The legislature could have tied the period in (C)(2) to the notice required
under (C)(1); it did not do so. It instead tied the period to the notice
required in (A) or (B). And that makes sense because tying the statute of
limitations to the notice required under (C)(1) could result in a never-
ending limitations period if the insurer fails entirely to provide notice.
Thus, we agree with the federal district court in Arizona that an insurer’s
non-compliance with (C)(1) does not extend the claimant’s limitations
period in (C)(2). See Creasman v. Farmers Cas. Ins. Co., ___ F. Supp. 3d ___,
2023 WL 4533964, at *6 (D. Ariz. July 13, 2023). State Farm’s noncompliance
with subsection (C)(1) did not change Frank’s deadline under subsection
(C)(2).

B. Equitable Estoppel

¶30 Frank also argues the superior court should have extended
her deadline to commence arbitration or a lawsuit against State Farm under
the doctrine of equitable estoppel. Frank argues State Farm first disputed
her UIM claims in December 2020, and thus the three-year period did not
start to run until that time (making her deadline December 2023). Though
we agree that Frank’s deadline was extended from April 20, 2019, to May
18, 2021, we reject her argument that the deadline should have been
extended further.

¶31 Arizona courts have recognized equitable exceptions,
including equitable estoppel, to statutes of limitations “when necessary to
prevent injustice.” Nolde v. Frankie, 192 Ariz. 276, 279 ¶ 13 (1998). “One
such exception applies when [one party] induces [another] to forbear filing
suit.” Id. ¶ 14. Four factors must be established for equitable estoppel to
apply: (1) one party must engage in affirmative conduct causing
forbearance; (2) the conduct must cause forbearance; (3) the conduct must
be reasonably expected to cause forbearance; and (4) the claimant must
bring an action within a reasonable time after the conduct stops. Id. ¶ 20.

¶32 Here, State Farm did not comply with the two-year notice
requirement in § 12-555(C)(1). Instead, State Farm provided its notice
slightly more than two years after Frank notified State Farm of her UIM

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Opinion of the Court

claim. But State Farm voluntarily told Frank it would consider the date of
its late notice (May 18, 2018) as the date of Frank’s notice of claim under §
12-555(B), giving Frank three years from that date to request arbitration or
file a lawsuit (until May 18, 2021 rather than April 20, 2019). State Farm’s
letter was affirmative conduct that could be reasonably expected to, and
did, cause Frank to forebear from commencing an action against State Farm.
In fact, State Farm concedes Frank did not have to act until May 18, 2021.

¶33 Frank claims she should have had even more time. She
argues the three-year period for commencing an action did not start until
State Farm first disputed her UIM claim, which Frank says occurred in
December 2020. We disagree. State Farm’s delay in disputing her claim is
not affirmative conduct satisfying any of the four factors for equitable
estoppel. See Nolde, 192 Ariz. at 279 ¶ 20. More to the point, the legislature
pegged the three-year period in § 12-555(C)(2) for commencing an action to
the date when a UIM claim is first made. Frank’s estoppel argument, if
adopted, would re-calibrate that accrual date to when an insurer formally
disputes a UIM claim. If we do so for Frank, we will have to do so for most
UIM claimants—insurance companies rarely dispute claims
instantaneously. Had the legislature wanted to use the date the insurer first
disputes a claim, it would have said so in the statute. But the legislature
chose the notice of claim date instead. We will not use equitable principles
to override the legislature’s choice of accrual date. Frank, as a matter of
law, was required to request arbitration or file a lawsuit on or before May
18, 2021.1 See id. (“[A] court appropriately may conclude as a matter of law
that no reasonable jury could find for the plaintiff on one or more of the”
four estoppel factors.).

IV. Application of the Statute of Limitations

¶34 Having determined that the applicable statute of limitations
expired on May 18, 2021, we must decide who was required to act by that
date and whether they did so. We conclude Frank was required to request
arbitration or file a lawsuit, not State Farm. Frank did not meet the statute
of limitations under the Auto Policy, but she did do so under the Umbrella
Policy.

1 In her opening brief, Frank also mentions equitable tolling. But she
does not argue equitable tolling would extend the limitations period if
equitable estoppel does not.

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A. The Statutory Requirement

¶35 Under § 12-555(C)(2), as applied here, “a person” (Frank) was
required to “request arbitration or file suit pursuant to the terms of the
insurance contract” by May 18, 2021. Frank contends “person,” which is
broadly defined in A.R.S. § 1-215, includes State Farm. Frank, thus,
interprets “a person” as referring to State Farm or Frank, and contends State
Farm’s arbitration demand in April 2019 relieved Frank from doing
anything further. State Farm interprets “a person” to refer only to Frank,
so she was required to request arbitration or file a lawsuit. The statutory
text supports State Farm’s interpretation.

¶36 Subsection (C)(2) treats “the insurer” and “a person”
differently. The second sentence of that subsection states that “[i]f the
person does not comply with this paragraph, the insurer is not liable for
uninsured motorist coverage benefits or underinsured motorist coverage
benefits.” A.R.S. § 12-555(C)(2). Given that plain language, “the person”
referred to in the first clause of that sentence is the person who asserts
liability against the insurer, not the insurer itself.

¶37 Realizing the second sentence cuts against her interpretation,
Frank puts great weight on the first sentence. Frank points out that the first
sentence in subsection (C)(2) refers to “a person” while the second sentence
refers to “the person.” Though acknowledging that “the person” in the
second sentence may refer to the person making the claim (her), Frank
argues the phrase “a person” in the first sentence refers more broadly to
both the insurer and the person making the claim. But the first sentence of
subsection (C)(2) also makes clear that the person referred to therein is the
same person who must provide written notice of the UIM claim to the
insurer under subsection (B). Subsection (B), in turn, places that notice
requirement on the “person making the claim,” not the insurer. Subsection
(B) says that “[a]n insurer is not liable for underinsured motorist coverage
benefits unless the person making the claim gives written notice to the
insurer of the person’s intent to pursue the claim.” A.R.S. § 12-555(B).

¶38 Thus, throughout A.R.S. § 12-555, the legislature
differentiated between, on the one hand, the person who provides notice of
a claim and pursues liability against an insurer, and on the other, the
insurer. Frank’s interpretation blurs that distinction and gives the word
“person” different meanings within a single statutory subsection. We
“presume a word or phrase bears the same meaning throughout a text.”
Fann v. State, 251 Ariz. 425, 442 ¶ 60 (2021). Frank has not overcome that
presumption.

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Opinion of the Court

¶39 Frank is “the person making a claim,” and “the person”
pursuing liability for UIM benefits, so Frank is “a person” required to
“request arbitration or file suit pursuant to the terms of the insurance
contract” within three years. See A.R.S. § 12-555. State Farm’s
correspondence regarding arbitration did not excuse Frank from timely
requesting arbitration or filing a lawsuit before May 18, 2021.

B. Arbitration Under the Auto Policy

¶40 Recall that § 12-555(C)(2) requires a person to request
arbitration or file a lawsuit “pursuant to the terms of the insurance
contract.” We, therefore, look to the language of the Auto Policy to
determine how Frank was required to pursue her claim against State Farm
under that policy. We interpret contracts according to their plain language
and in view of all the circumstances. In re Est. of Lamparella, 210 Ariz. 246,
250 ¶ 21 (App. 2005).

¶41 The Auto Policy provides that Frank and State Farm must
agree on two questions—whether Frank is entitled to recover compensatory
damages from the underinsured motorist and, if so, the amount of such
damages. If they disagree on either of those questions, “the disagreement
will be resolved by arbitration upon written request” of State Farm or
Frank. But the Auto Policy then makes clear, parroting § 12-555(C)(2), that
Frank was required to request arbitration within three years of notifying
State Farm of her UIM claim: “Any arbitration or suit against {State Farm]
will be barred unless commenced within three years after the date [Frank]
notified [State Farm] in writing of the underinsured motor vehicle claim.”

¶42 The Auto Policy, therefore, makes clear that if Frank wanted
to press a UIM claim thereunder, she was required to request arbitration
within three years of her notice of claim to State Farm. State Farm extended
that three-year deadline to May 18, 2021. See supra ¶ 32. Yet Frank did not
request arbitration prior to that date—only State Farm requested arbitration
and Frank did not participate. We, therefore, affirm summary judgment as
to the Auto Policy.

C. A Lawsuit Under the Umbrella Policy

¶43 Though the Umbrella Policy has the same parties as the Auto
Policy, it has different requirements for pressing a UIM claim. The
Umbrella Policy requires Frank and State Farm to agree on the same two
topics as the Auto Policy—legal entitlement to, and the amount of,
damages. If there is no agreement on either question, Frank shall “within
three years after providing [State Farm] notice of the claim, file against

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[State Farm] a lawsuit, in a state or federal court that has jurisdiction.” If
Frank does so, she must “agree that [State Farm] may contest the issues of
liability and the amount of damages.”

¶44 Frank argues she complied with the Umbrella Policy when
she filed the 2019 Lawsuit. State Farm responds that the 2019 Lawsuit was
insufficient because that was a bad faith action that did not involve a claim
for UIM benefits. State Farm takes an overly-cramped view of Frank’s
allegations in the 2019 Lawsuit.

¶45 In the complaint from the 2019 Lawsuit2, Frank asserted that
State Farm refused to offer any compensation for the 2015 automobile
collision and that was a de facto denial of coverage. Frank alleged State Farm
“refused to provide Plaintiff with fair compensation for her claim.” Later
in the complaint, Frank alleged “State Farm intentionally denied Plaintiff’s
claim and/or failed to pay Plaintiff’s claim and/or delayed payment of
Plaintiff’s claim without a reasonable basis when State Farm refused to offer
Plaintiff fair compensation for her claim.” And Frank concluded by
asserting that “[a]s a result of State Farm’s breach of the duty of good faith
and fair dealing, Plaintiff lost the unpaid benefits of the policy[.]” Frank
requested “general and compensatory damages.”

¶46 The 2019 Lawsuit satisfied the Umbrella Policy’s requirement
that Frank file “a lawsuit” against State Farm within three years. Subsection
(C)(2) specifies only that a lawsuit be filed “pursuant to the terms of the
insurance contract[.]” See A.R.S. § 12-555(C)(2). While it appears the 2019
Lawsuit asserts a bad faith claim against State Farm, the complaint accuses
State Farm of denying Frank fair compensation for her UIM claim in
multiple instances. To resolve those allegations, the court will have to
determine State Farm’s liability and Frank’s damages under the Umbrella
Policy. See Rawlings v. Apodaca, 151 Ariz. 149, 158 (1986) (“We have
previously noted that the remedy for breach of the implied covenant of
good faith is ordinarily on the contract itself.”).

2 We may take judicial notice of the content of the complaint in
the 2019 Lawsuit. See In re Sabino R., 198 Ariz. 424, 425 ¶ 4 (App. 2000)
(“[Arizona Rule of Evidence 201] allows this court to take judicial notice of
anything of which the trial court could take notice, even if the trial court
was never asked to take notice. It is proper for a court to take judicial notice
of its own records or those of another action tried in the same court.”
(internal citations omitted)). We take no position on the merits of the
allegations contained therein.

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¶47 The Umbrella Policy also states that, if Frank brings a lawsuit
within three years, Frank must agree State Farm “may contest the issues of
liability and the amount of damages” in the lawsuit. So if State Farm is
unsatisfied with the clarity of Frank’s complaint in the 2019 Lawsuit, State
Farm can raise that policy provision to dispute its liability and Frank’s
damages in the 2019 Lawsuit. But that option does not mean Frank did not
“file against [State Farm] a lawsuit, in a state or federal court that has
jurisdiction,” which is all the Umbrella Policy required of Frank.

D. Judicial Estoppel

¶48 One last issue remains. In granting summary judgment, the
superior court concluded Frank was estopped from arguing that the 2019
Lawsuit satisfied A.R.S. § 12-555(C)(2). State Farm did not specify what
type of estoppel it relied on, and the superior court did not specify what
type of estoppel it applied. It appears, however, the court applied judicial
estoppel and, at oral argument in this court, State Farm agreed the superior
court most likely applied that doctrine.

¶49 Judicial estoppel prevents a party from taking and prevailing
on inconsistent positions in successive or separate actions. See, e.g., Martin
v. Wood, 71 Ariz. 457, 459 (1951). Judicial estoppel has three requirements:
(1) the parties must be the same, (2) the question involved must be the same,
and (3) the party asserting the inconsistent position must have been
successful in the prior proceeding. Flood Control Dist. of Maricopa Cnty. v.
Paloma Inv. Ltd. P’ship, 230 Ariz. 29, 41 ¶ 35 (App. 2012). The doctrine
focuses on factual assertions, not opinions or legal positions. Id. at 41 ¶ 36;
accord Miles v. Franz Lumber Co., 14 Ariz. 455, 457 (1913) (noting that a party
“should not be permitted to ‘blow hot and cold’ with reference to the same
transaction” or facts). We apply judicial estoppel cautiously; if a court has
not conclusively accepted a party’s position, there is no risk of inconsistent
results and “the judicial process is unimpaired.” Bank of Am. Nat. Trust &
Sav. Ass’n v. Maricopa County, 196 Ariz. 173, 176 ¶ 8 (App. 1999); see also State
Farm Auto. Ins. Co. v. Civil Serv. Emp. Ins. Co., 19 Ariz. App. 594, 600 (1973)
(stating that judicial estoppel “is not merely that a party has taken
inconsistent positions in judicial proceedings”).

¶50 In the 2019 Lawsuit, State Farm sought dismissal of Frank’s
complaint, arguing Frank had to arbitrate her UIM claim. Frank defeated
that motion by arguing that her claim did not fall within the scope of any
arbitration provision. The superior court in this case found Frank “argued
[in the 2019 Lawsuit] that [it] was separate from the UIM claim and that the
lawsuit did not constitute the arbitration request.” The superior court

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STATE FARM v. FRANK
Opinion of the Court

relied on a minute entry in which the court handling the 2019 Lawsuit
denied State Farm’s motion to dismiss. According to the court in the 2019
Lawsuit, Frank asserted (1) she “was not requesting a determination of the
amount of [UIM] compensation she is entitled to receive” and (2) her bad
faith claim “focuses not on how much was owed to [her] but on how [State
Farm] handled her claim.”

¶51 Frank explained these positions to the superior court,
contending the 2019 Lawsuit’s purpose was “not to determine the amount
of the claim, but to be paid the amount State Farm agreed to pay her by [its]
failure to dispute the amount she claimed.” At the very least, this is
consistent with her contention in this case, discussed above, that State Farm
agreed to settle the UIM claim by not promptly responding to her policy
limits demand. It is also consistent with Frank’s allegations in the 2019
Lawsuit alleging she had “lost the unpaid benefits of the policy” and
demanding “general and compensatory damages” that presumably would
include those unpaid benefits. See Miel v. State Farm Mut. Auto. Ins. Co., 185
Ariz. 104, 111 (App. 1995) (“If the [insurance] company breaches its duty
[of good faith and fair dealing], its insured . . . may recover compensatory
damages for breach of contract, or damages in tort if the insurer’s actions
rise to the level of bad faith.”).

¶52 As such, the minute entry underlying State Farm’s motion for
reconsideration does not show Frank changed a factual position. See
Standage Ventures, Inc. v. State, 114 Ariz. 480, 484 (1977) (“[T]he law will not
allow a party ‘to have his cake and eat it too.’‘‘). Nor is there evidence of
inconsistent results between the two cases—the record indicates only that
the court handling the 2019 Lawsuit denied State Farm’s motion to dismiss.
See Bank of Am., 196 Ariz. at 175 ¶ 8; State v. Towery, 186 Ariz. 168, 183 (1996)
(“[J]udicial estoppel is generally not applied when the first inconsistent
position was not a significant factor in the initial proceeding.”). And, in any
event, State Farm was never entitled to compel arbitration under the
Umbrella Policy—that policy required Frank to file a lawsuit, not request
arbitration. We vacate summary judgment as to the Umbrella Policy.3

3 State Farm suggested at oral argument in this court that a
decision in its favor under the Auto Policy would cut off UIM coverage
under the Umbrella Policy. Frank disagreed. That issue is not before us,
and we do not address it.

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STATE FARM v. FRANK
Opinion of the Court

CONCLUSION

¶53 We affirm summary judgment as to the statute of limitations
for UIM coverage under the Auto Policy, vacate summary judgment as to
the statute of limitations for UIM coverage under the Umbrella Policy, and
remand for further proceedings (if any).4

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

4 We grant Frank’s post-argument motion for supplemental
briefing and deny State Farm’s motion to strike as moot.

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