Satamian v. Great Divide

IN THE

SUPREME COURT OF THE STATE OF ARIZONA
GARBIS SATAMIAN,
Plaintiff/Appellant,

v.

GREAT DIVIDE INSURANCE CO., ET AL.,
Defendants/Appellees.

No. CV-23-0085-PR
Filed April 9, 2024

Appeal from the Superior Court in Maricopa County
The Honorable Katherine Cooper, Judge
No. CV2021-010306
AFFIRMED

Memorandum Decision of the Court of Appeals, Division One
No. 1 CA-CV 22-0375
Filed February 28, 2023
VACATED

COUNSEL:

Brian Blankenship, Charles L. Finlayson (argued), Claggett & Sykes Law
Firm, Las Vegas, NV; and Lawrence Moon, Poli, Moon, and Zane, PLLC,
Phoenix, Attorneys for Garbis Satamian

Bennett Evan Cooper, Timothy M. Strong, James T. Lawson, Dickinson
Wright PLLC, Phoenix, Attorneys for Great Divide Insurance Company

Ryan Sandstrom (argued), Taylor Barlow, Copper Canyon Law LLC,
Mesa, Attorneys for Risk Placement Services

Gregory B. Iannelli, Matthew J. Stanford, Bryan Cave Leighton Paisner
LLP, Phoenix, Attorneys for Farm Bureau Property and Casualty
Insurance Company
 SATAMIAN V. GREAT DIVIDE
Opinion of the Court

JUSTICE LOPEZ authored the Opinion of the Court, in which CHIEF
JUSTICE BRUTINEL, VICE CHIEF JUSTICE TIMMER, JUSTICES BOLICK,
BEENE, MONTGOMERY and KING joined.

JUSTICE LOPEZ, Opinion of the Court:

¶1 We consider when the statute of limitations commences for
claims of negligent procurement of insurance and promissory estoppel. We
hold that these claims accrue when an insured incurs its own litigation costs
for defense against a claim due to an insurer’s negligent failure to obtain
insurance coverage.

BACKGROUND

¶2 In March 2015, Sayed Mohammed (“Mohammed”)—owner
of A.C. Watercraft Rental, LLC (“A.C. Watercraft”)—contacted Farm
Bureau Property and Casualty Insurance Company (“Farm Bureau”) to
purchase liability insurance. Mohammed sought liability insurance for all
business-owned watercraft. Farm Bureau connected Mohammed with
Great Divide Insurance Company (“Great Divide”) for the issuance of such
a policy.

¶3 On March 26, 2015, Great Divide issued the policy, listed Risk
Placement Services (“RPS”) as the agent of record, and provided
Mohammed with the policy schedule (“Policy Schedule”) listing the
specific vehicle-identification numbers (“VINs”) for the watercraft covered
by the policy. Based on his negotiations with Farm Bureau, Mohammed
believed the Policy Schedule covered all the watercraft in A.C. Watercraft’s
inventory. However, notably absent from the Policy Schedule was a
Yamaha watercraft—VIN YAMA2958J506—which later was involved in a
tragic accident resulting in Stephanie Satamian’s death on June 13, 2015.

¶4 On January 7, 2016, anticipating a lawsuit by the Satamian
family, Mohammed filed a claim with Great Divide on behalf of A.C.
Watercraft for defense and indemnification. On January 25, 2016, Great
Divide denied coverage by letter because, “[t]he jet ski that was involved in

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 SATAMIAN V. GREAT DIVIDE
Opinion of the Court

the accident . . . is not listed on the [Policy] Schedule.” Great Divide’s
denial letter further provided:

We reserve the right to review any lawsuits or amendments
to this claim to make a separate determination as to whether
either a defense, or indemnity, might be provided by Great
Divide. It is possible that we might provide a defense and/or
indemnity for an amended claim or a lawsuit. Our decision
on coverage is based only on the facts as presented to us to
date and should not be construed as applicable to a lawsuit or
an amendment to this claim. Our right to have notice of either
situation is reserved, as are the notice conditions of the policy.

On May 3, 2017, Stephanie Satamian’s father—Garbis Satamian
(“Satamian”)—filed suit against A.C. Watercraft. A.C. Watercraft hired
counsel and incurred litigation costs to defend against Satamian’s suit.

¶5 Later, A.C. Watercraft re-tendered its claim, and Great Divide
once again denied coverage. 1 A.C. Watercraft continued to provide and
bear the cost of its own defense in the Satamian lawsuit, serving document
requests on Great Divide during the litigation. In February 2020, pursuant
to subpoena, Great Divide provided A.C. Watercraft with a portion of its
claim file, which apparently confirmed that Farm Bureau and RPS were
aware of the subject jet ski but failed to include it in the Policy Schedule of
covered watercraft. Ultimately, in December 2020, A.C. Watercraft and
Satamian reached a settlement agreement which stipulated to a judgment
in Satamian’s favor and assigned A.C. Watercraft’s insurance coverage
claims against Great Divide, RPS, Farm Bureau, and any other pertinent
parties to Satamian.

¶6 On June 28, 2021, Satamian exercised this assignment against
A.C. Watercraft’s insurers and sued Great Divide, Farm Bureau, and RPS
(collectively “Defendants”) for various claims in both Nevada and Arizona.

1 Although the record is unclear, Satamian alleges that Great Divide denied

A.C. Watercraft’s re-tendered claim on May 22, 2020; however, the specific
timeline is irrelevant because Great Divide’s first denial was unequivocal
and, even if it was not, it provided sufficient notice to A.C. Watercraft to
commence the limitations periods applicable to its claims. See Part II,
¶¶ 34–35.
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 SATAMIAN V. GREAT DIVIDE
Opinion of the Court

As relevant here, Satamian alleged claims for negligent procurement of
insurance, predicated on RPS and Farm Bureau’s failure to include the jet
ski at issue in the Policy Schedule, and promissory estoppel, based on
Defendants’ assertions that A.C. Watercraft’s entire inventory of jet skis
would be covered by the policy.

¶7 RPS moved to dismiss Satamian’s claims under Arizona Rule
of Civil Procedure 12(b)(6) on statute of limitations grounds. The trial court
granted RPS’s motion, finding that A.C. Watercraft learned of the negligent
procurement of insurance on January 25, 2016, when Great Divide denied
coverage, and that it “sustained injury in May 2017, when [A.C. Watercraft]
incurred attorneys’ fees and costs defending itself.” Applying the two-year
statute of limitations for the negligent procurement claim (A.R.S. § 12-542)
and the three-year limitations period for the promissory estoppel claim
(A.R.S. § 12-543), the trial court ruled that both claims were time-barred
because each accrued no later than May 2017. Specifically, the negligent
procurement of insurance claim was time-barred by May 2019, and the
promissory estoppel claim by May 2020.

¶8 Satamian appealed the trial court’s dismissal on two grounds:
(1) the discovery rule tolled the statute of limitations; and (2) the claims
could not have accrued until his underlying action against A.C. Watercraft
was final and non-appealable. Satamian v. Great Divide Ins., No. 1 CA-CV
22-0375, 2023 WL 2250419, at *2 ¶¶ 13, 17 (Ariz. App. Feb. 28, 2023) (mem.
decision). The court of appeals rejected Satamian’s arguments, holding that
A.C. Watercraft knew or should have known of its injury by May 2017 when
it incurred legal costs and had sufficient notice to investigate whether RPS
had caused the injury. Id. ¶ 16. The court also analogized Satamian’s claims
to a bad faith denial-of-coverage claim, reasoning that Satamian’s claims
began to accrue when Great Divide denied coverage. Id. at *3 ¶ 21. The
court affirmed, holding that both claims were time-barred. Id. ¶ 22.

¶9 Satamian sought review in this Court. We granted review to
clarify the proper accrual standard for negligent procurement of insurance
and promissory estoppel, and the applicability of the discovery
rule—issues of statewide importance. We have jurisdiction under article 6,
section 5(3) of the Arizona Constitution.

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Opinion of the Court

DISCUSSION

¶10 We review the dismissal of a complaint under Rule 12(b)(6)
de novo. Coleman v. City of Mesa, 230 Ariz. 352, 355 ¶ 7 (2012). In evaluating
a motion to dismiss, “courts must assume the truth of all well-pleaded
factual allegations and indulge all reasonable inferences from those facts.”
Id. at 356 ¶ 9. “[M]ere conclusory statements,” however, “are insufficient.”
Id.

¶11 We also review de novo questions of law regarding a statute
of limitations, including “when a particular cause of action accrues.” Cook
v. Town of Pinetop-Lakeside, 232 Ariz. 173, 175 ¶ 10 (App. 2013) (quoting
Montano v. Browning, 202 Ariz. 544, 546 ¶ 4 (App. 2002)). Generally, “a
cause of action accrues, and the statute of limitations commences, when one
party is able to sue another.” Gust, Rosenfeld & Henderson v. Prudential Ins.
Co. of Am., 182 Ariz. 586, 588 (1995). The ability to sue arises when the act
underlying the legal action occurs, “even though the plaintiff may be
unaware of the facts underlying his or her claim.” Id. If “it appears on the
face of the complaint that an action may be barred by limitations, the
burden is on the plaintiff to establish that the statute has been tolled.” Bailey
v. Superior Court, 143 Ariz. 494, 498 (App. 1985).

I.

A.

¶12 We begin with Satamian’s argument that the discovery rule
tolled the statute of limitations on the negligent procurement and
promissory estoppel claims until February 2020, when A.C. Watercraft
obtained Great Divide’s claim file and confirmed RPS’s failure to include
the jet ski at issue on the Policy Schedule. Satamian concedes that the Policy
Schedule lists RPS as the “agent,” but contends that this mere reference to
RPS was insufficient to determine RPS’s role in the coverage omission. We
are unpersuaded.

¶13 The discovery rule provides that a statute of limitations is
tolled until “the plaintiff knows or with reasonable diligence should know
the facts underlying the cause.” Doe v. Roe, 191 Ariz. 313, 322 ¶ 29 (1998).
A plaintiff, however, “need not know all the facts underlying a cause of
action to trigger accrual.” Walk v. Ring, 202 Ariz. 310, 316 ¶ 22 (2002)

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Opinion of the Court

(quoting Doe, 191 Ariz. at 323 ¶ 32). The ability “to identify that a wrong
occurred and caused injury” is sufficient. Doe, 191 Ariz. at 323 ¶ 32. To be
sure, “it is not enough that a plaintiff comprehends a ‘what’; there must also
be reason to connect the ‘what’ to a particular ‘who’ in such a way that a
reasonable person would be on notice to investigate whether the injury
might result from fault.” Walk, 202 Ariz. at 316 ¶ 22; accord Lawhon v. L.B.J.
Institutional Supply, Inc., 159 Ariz. 179, 183 (App. 1988) (“The cause of action
does not accrue until the plaintiff knows or should have known of both the
what and who elements of causation.”).

¶14 “[D]eterminations of the time when discovery occurs and a
cause of action accrues ‘are usually and necessarily questions of fact for the
jury.’” Kopacz v. Banner Health, 245 Ariz. 97, 100 ¶ 10 (App. 2018) (alteration
in original) (quoting Walk, 202 Ariz. at 316 ¶ 23). However, in some cases,
“an unexpected poor result immediately puts a plaintiff on notice that
[fault] might have occurred.” Id. ¶ 11. In such circumstances, “the court
may determine the date of accrual as a matter of law.” Id. Thus, “[t]he
affirmative defense of statute of limitations may be raised by motion in
Arizona if it appears from the face of the complaint that the claim is barred.”
Dicenso v. Bryant Air Conditioning Co., 131 Ariz. 605, 606 (1982).

¶15 Satamian’s claim that RPS was not identifiable as a potential
“who”—a party responsible for A.C. Watercraft’s deficient coverage—until
February 2020 ignores the fact that the policy is replete with explicit
references to RPS as Great Divide’s agent. Given RPS’s prominence in the
policy, Satamian’s assertion that A.C. Watercraft had no reason to view RPS
as a potential defendant before discovering a single critical document in
Great Divide’s file—a photograph taken by RPS of all watercraft to be
covered by the policy, including the jet ski negligently omitted—is
unavailing. In any event, as Farm Bureau aptly notes, it is irrelevant when
A.C. Watercraft and Satamian learned all the facts underlying each claim;
rather, the critical inquiry is when a reasonable person would readily
identify RPS as a potential defendant. See Doe, 191 Ariz. at 323 ¶ 32. Indeed,
the very first page of the Policy Schedule resolves this question: RPS is
specifically listed as Great Divide’s agent, placing a reasonable person on
notice that RPS was a potential “who” responsible for any negligence or
promissory estoppel in A.C. Watercraft’s deficient coverage.
Consequently, by March 2015, when A.C. Watercraft obtained its insurance
policy, the “who” prong of the discovery rule was indisputably satisfied.

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 SATAMIAN V. GREAT DIVIDE
Opinion of the Court

¶16 Identifying when A.C. Watercraft knew or should have
known the “what”—the wrong and the resulting injury—requires an
understanding of the relevant claims’ elements. Glaze v. Larsen, 207 Ariz.
26, 29 ¶ 10 (2004). Thus, before we can resolve whether A.C. Watercraft’s
claims were tolled under the discovery rule, we must first determine the
accrual standards for negligent procurement of insurance and promissory
estoppel claims. We address each claim in turn.

B.

¶17 “An insurance agent owes a duty to the insured to exercise
reasonable care, skill and diligence in carrying out the agent’s duties in
procuring insurance.” Darner Motor Sales, Inc. v. Universal Underwriters Ins., 140 Ariz. 383, 397 (1984) (quoting Quality Furniture, Inc. v. Hay, 595 P.2d
1066, 1068 (Haw. 1979)). Negligent procurement of insurance arises when
an insurance agent negligently fails to obtain the insured’s requested
coverage. To establish this claim, the plaintiff must prove: (1) duty; (2)
breach; (3) causation; and (4) damages. See Cal-Am Props. Inc. v. Edais Eng’g
Inc., 253 Ariz. 78, 81 ¶ 5 (2022). The two-year statute of limitations period
“does not commence until actionable negligence exists.” CDT, Inc. v.
Addison, Roberts & Ludwig, C.P.A., 198 Ariz. 173, 176 ¶ 7 (App. 2000)
(quoting Com. Union Ins. v. Lewis & Roca, 183 Ariz. 250, 254 (App. 1995)); see
also § 12-542. For accrual, negligence alone is insufficient—there must be
actual damages. DeBoer v. Brown, 138 Ariz. 168, 170–71 (1983); Amfac
Distrib. Corp. v. Miller, 138 Ariz. 152, 153 (1983); Myers v. Wood, 174 Ariz.
434, 435 (App. 1992).

¶18 The requisite legal injury to sustain a negligence action entails
“appreciable, non-speculative harm.” Com. Union Ins., 183 Ariz. at 254.
“Nominal damages, to vindicate a technical right, cannot be recovered in a
negligence action, where no actual loss has occurred. The threat of future
harm, not yet realized, is not enough.” William L. Prosser, Handbook of the
Law of Torts § 30 (4th ed. 1971). Thus, a cause of action for a negligent act
does not accrue unless it results in immediate harm. Tullar v. Walter L.
Henderson, P.C., 168 Ariz. 577, 579 (App. 1991); Int’l Mobiles Corp. v. Corroon
& Black, 560 N.E.2d 122, 124–25 (Mass. App. Ct. 1990) (holding that until a
plaintiff suffers damages, any negligent procurement claim is merely
negligence in the abstract).

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 SATAMIAN V. GREAT DIVIDE
Opinion of the Court

¶19 The simple anatomy of a negligent procurement claim
illustrates the application of these accrual principles. In a typical negligent
procurement scenario, an insured anticipates full coverage, including
defense and indemnification of a claim within the scope of coverage. But
because the policy coverage is deficient—allegedly due to the insurer’s
fault—uncovered claims against the insured result in undefended liability,
causing actual harm by requiring the insured to incur costs to defend
against the uncovered claim. Cf. Gibbons v. Badger Mut. Ins., 11 Ariz. App.
485, 489–90 (1970) (holding that a negligent procurement claim accrues for
an insurance agency’s failure to transfer coverage “when the insurance
company officially notified plaintiff that it would acknowledge no coverage
for the fire loss”). At this point, the cause of action accrues and the statute
of limitations period commences.

C.

¶20 A promissory estoppel claim allows a plaintiff to recover for
detrimental reliance on a promise. Higginbottom v. State, 203 Ariz. 139, 144
¶ 18 (App. 2002). This claim requires “a promise, which the promissor
should reasonably foresee would cause the promisee to rely, upon which
the promisee actually relies to his detriment.” Contempo Constr. Co. v.
Mountain States Tel. & Tel. Co., 153 Ariz. 279, 282 (App. 1987). Thus,
“[p]romissory estoppel provides an equitable remedy that renders a
promise enforceable.” Sholes v. Fernando, 228 Ariz. 455, 460 ¶ 14 (App.
2011). Promissory estoppel claims have a three-year statute of limitations.
§ 12-543. 2

¶21 Ascertaining the accrual date for a promissory estoppel claim
involves a fact-dependent inquiry. For a promissory estoppel claim
predicated on a promise by an insurance company to procure insurance,
the promise and the foreseeability of reliance are reasonably identifiable.
See Restatement (Second) of Contracts § 90 cmt. e (Am. L. Inst. 1981) (noting
that the common difficulties in establishing the promise and foreseeable
reliance prongs of a promissory estoppel claim are abated in the context of
commercial insurance procurement). An insured relies on an insurance

2 Whether § 12-543 applies to a promissory estoppel claim is not before us.
The parties did not dispute the application of § 12-543, or whether a
three-year limitations period applies, to Satamian’s promissory estoppel
claim in the trial court, the court of appeals, or in this Court.
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 SATAMIAN V. GREAT DIVIDE
Opinion of the Court

policy at the time of purchase, and that reliance continues throughout the
life of the policy, but the critical point for accrual is when the insured
detrimentally relied on the insurer’s promise to obtain coverage. Cf. Double
AA Builders, Ltd. v. Grand State Constr. L.L.C., 210 Ariz. 503, 507 ¶ 19 (App.
2005). Thus, the detriment is not merely when the deficient policy issues,
but rather, when a claim is made against the policy, coverage is denied due
to the policy’s deficiency, and the insured is forced to fund its own defense
against the uncovered claim.

D.

¶22 Satamian argues that, under the accrual standards for both
negligent procurement and promissory estoppel, these claims are tolled
under the discovery rule because A.C. Watercraft was unable to determine
the “what” of the injuries until May 22, 2020, when Great Divide issued a
supplemental coverage disclaimer and, again, denied coverage.
Defendants contend that A.C. Watercraft should have identified its injury
in May 2017, at the latest, when it was required to fund its own defense
against the Satamian lawsuit. We agree with Defendants’ analysis because
a plaintiff need not know all facts underlying the claims at issue, merely the
presence of a wrong and resulting injury. See Walk, 202 Ariz. at 316 ¶ 22;
Doe, 191 Ariz. at 323 ¶ 32. Here, Great Divide’s January 25, 2016 denial of
coverage, which prompted A.C. Watercraft to procure its own defense in
May 2017, placed A.C. Watercraft on notice of the wrong and its resulting
injury.

¶23 Satamian next contends that A.C. Watercraft could not have
suffered actual damages for negligent procurement until May 22, 2020,
when Great Divide rejected A.C. Watercraft’s re-tendered claim, thus
terminating all coverage negotiations. But, as Farm Bureau notes, Satamian
ignores the attorney fees and costs A.C. Watercraft incurred from 2017 to
2020 defending against Satamian’s lawsuit. Moreover, even if A.C.
Watercraft’s re-tender had been successful and Great Divide assumed A.C.
Watercraft’s defense in the midst of the litigation, Great Divide’s delayed
coverage would have merely mitigated A.C. Watercraft’s damages rather
than eliminating them. Great Divide’s second denial of coverage simply
confirmed that A.C. Watercraft would continue to incur damages; it did not
commence accrual of the claim. See Com. Union Ins., 183 Ariz. at 255 (noting
that a statute of limitations commences even if a plaintiff has not discovered
“the full extent of his damages” (quoting Wettanen v. Cowper, 749 P.2d 362,

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 SATAMIAN V. GREAT DIVIDE
Opinion of the Court

365 (Alaska 1988))). Indeed, a cause of action may arise even before a
plaintiff “sustains all, or even the greater part, of the damages” resulting
from the negligence. Id. (quoting Ariz. Mgmt. Corp. v. Kallof, 142 Ariz. 64, 68
(App. 1984)). Finally, if we accepted Satamian’s re-tender argument, it
would effectively toll the statute of limitations even when, as here, the
subsequent tender is based on the same facts. Therefore, as to the negligent
procurement claim, A.C. Watercraft suffered actual, non-speculative
damages in May 2017 when it began funding its own litigation defense.

¶24 We find no evidence in the record to support the notion that
A.C. Watercraft was reasonably unaware of Defendants’ purported
negligence when, in May 2017, it was required to fund its own defense in
the Satamian suit. Thus, by May 2017, A.C. Watercraft knew or should have
known both the “who” and the “what” of the negligent procurement cause
of action, establishing the moment A.C. Watercraft was able to sue Great
Divide for the deficient policy. See Sato v. Van Denburgh, 123 Ariz. 225, 227
(1979) (explaining that “the cause of action accrues when the plaintiff
knows, or in the exercise of reasonable diligence should have known, of the
defendant’s negligent conduct, or when the plaintiff is first able to sue”
(internal citations omitted)). Thus, under the two-year statute of limitations
for negligence, A.C. Watercraft’s cause of action for negligent procurement
accrued, as a matter of law, by May 2017, and expired by May 2019. See
§ 12-542. Because Satamian filed this lawsuit in June 2021, this claim is
time-barred.

¶25 Satamian further contends that, as to the promissory estoppel
claim, A.C. Watercraft did not rely on the deficient policy to its detriment
until February 2020, when A.C. Watercraft reviewed Great Divide’s files
and discovered that Defendants knew of the jet ski at issue, but inexplicably
failed to include it on the Policy Schedule. In other words, before A.C.
Watercraft’s 2020 review of the file, it did not know that Great Divide’s
assurances of full insurance coverage were inaccurate. However, as Farm
Bureau counters, Great Divide’s omission of the jet ski was readily
discoverable when the policy issued in March 2015 because the face of the
Policy Schedule listed the covered watercraft, including the watercrafts’
VINs.

¶26 Even if we were to disregard A.C. Watercraft’s constructive
notice of Great Divide’s omission of the jet ski when the policy issued in
early 2015, it would not salvage Satamian’s claims. In its January 25, 2016

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Opinion of the Court

denial of coverage, Great Divide expressly informed A.C. Watercraft that
the jet ski at issue was not included in the Policy Schedule. Consequently,
when A.C. Watercraft was required to fund its own defense in the Satamian
litigation in May 2017, A.C. Watercraft’s detrimental reliance on Great
Divide’s promise of insurance coverage was obvious. Thus, by May 2017,
the “what” of the harm was identified, allowing A.C. Watercraft to sue
Great Divide on a promissory estoppel claim. Under the three-year statute
of limitations for promissory estoppel, A.C. Watercraft’s claim began to
accrue, as a matter of law, by May 2017, and expired by May 2020. Because
Satamian filed this lawsuit in June 2021, this claim, too, is time-barred.

II.

¶27 Satamian argues that, if the discovery rule does not toll the
statute of limitations for his negligence and promissory estoppel claims, we
should apply one of two rules from bad faith jurisprudence: (1) the “final
judgment accrual rule,” applicable to third-party bad faith claims and
adopted by this Court in Taylor v. State Farm Mutual Automobile Insurance
Company, 185 Ariz. 174, 178 (1996), wherein neither claim accrued until his
underlying claims against A.C. Watercraft became final and
non-appealable; or (2) a first-party bad faith denial of claim rule set forth in
Ness v. Western Security Life Insurance, 174 Ariz. 497, 500 (App. 1992),
wherein neither claim accrued until Great Divide issued a final denial of
coverage.

¶28 Insurance bad faith denial-of-coverage claims arise when an
insurer intentionally denies, fails to process, or fails to pay a claim without
a reasonable basis for such action. Ness, 174 Ariz. at 500. Third-party bad
faith involves an “action alleging that the insurer acted in bad faith in its
duty to indemnify or protect the insured from third-party claims.” Taylor,
185 Ariz. at 175–76. “In contrast, first-party [bad faith] actions arise out of
a direct obligation by which the carrier contracts to pay benefits directly to
the insured . . . for losses incurred.” Id. at 176.

¶29 We first address Satamian’s argument that we should apply
the final judgment accrual rule. Satamian contends that because “bad faith
claims do not begin to accrue until the underlying judgment against the
insured becomes final or non-appealable and the insured’s rights are
assigned over to the injured party,” his claims against Great Divide, RPS,
and Farm Bureau did not accrue until he settled his underlying lawsuit

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Opinion of the Court

against A.C. Watercraft. Satamian fails, however, to account for the
difference between the elements of a third-party bad faith claim and those
of an action for negligent procurement and promissory estoppel. We
decline Satamian’s invitation to apply the final judgment accrual rule here
because the rule arises from third-party bad faith jurisprudence, which is
wholly irrelevant to accrual of the claims in this case. 3

¶30 The final judgment accrual rule provides that a final judgment
is an essential element for accrual of a third-party bad faith
denial-of-coverage claim because “it is impossible to determine if the
insurer acted in bad faith, or the extent of the insured’s damages, until the
underlying liability is finally determined.” Taylor, 185 Ariz. at 178. Our
courts have limited the rule’s application to cases in which the alleged
injury was exclusively an adverse litigation outcome. See, e.g., Amfac
Distrib. Corp., 138 Ariz. at 154 (applying final judgment accrual rule in
context of attorney malpractice in litigation); Manterola v. Farmers Ins. Exch., 200 Ariz. 572, 580 ¶ 24 (App. 2001) (applying final judgment accrual rule to
bad faith denial of coverage leading to Morris agreement). Thus, because
third-party bad faith denial claims arise from adverse litigation and hinge
on a final determination of liability, they involve considerations wholly
divorced from, and temporally well past the accrual point for, Satamian’s
negligent procurement and promissory estoppel claims. See Part I(B)
¶¶ 17–19; Part I(C) ¶¶ 20–21.

¶31 Similarly, first-party bad faith claims do not begin to accrue
until an insurer intentionally and unreasonably issues a final denial of
coverage because, as an essential element, a final denial is necessary to
establish the existence of bad faith. See Ness, 174 Ariz. at 500 (“The cause of
action [for bad faith] arises only when all three elements are present.”).
Simply put, because the limitations period for bad faith does not start until
all of the elements are satisfied, the cause of action does not accrue without
a final denial of coverage. Id.

¶32 The claims in this case, however, accrue upon discoverable
breach and damages arising from the negligent failure, or detrimental
reliance on a promise, to provide insurance coverage. See Sato, 123 Ariz.
at 227. In other words, a third-party bad faith claim requires judgment

3We note that Satamian alleged bad faith against Great Divide in Nevada,
but not in Arizona.
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finality, and a first-party bad faith claim necessitates a final denial of
coverage, but negligent procurement and promissory estoppel claims
require neither. France v. Ariz. Cntys. Ins. Pool, 254 Ariz. 151, 155–56
¶¶ 19–20 (App. 2022) (clarifying that Taylor “expressly limited application
of the [final judgmental accrual] rule to ‘third-party bad faith refusal to
settle claim[s]’” and a first-party “bad faith claim accrues when the insurer
denies coverage” (citation omitted) (second bracket in original)).

¶33 This case illustrates why the bad faith final judgment and final
denial accrual rules offer poor analytical tools for determining accrual for
negligent procurement and promissory estoppel claims. Satamian’s
argument that the claims at issue could not accrue until A.C. Watercraft and
Satamian settled the underlying litigation in 2020 is logically flawed. Before
A.C. Watercraft could independently settle Satamian’s suit, it had to know
that Great Divide had denied coverage and forced it to furnish its own
defense—such events satisfying the “what” and “who” inquiries
commencing accrual for negligent procurement and promissory estoppel.
In this circumstance, judgment finality is inapplicable because it is not an
element of the negligent procurement and promissory estoppel claims and
it is irrelevant in ascertaining when A.C. Watercraft suffered “appreciable,
non-speculative harm.” Com. Union Ins., 183 Ariz. at 254.

¶34 Satamian’s invocation of the final coverage denial rule fares
no better. Here, a final denial does not inform the accrual inquiry because,
even if Great Divide had reversed its initial denial of coverage—arguably
rendering its denial “non-final”—A.C. Watercraft had already suffered
actual damages when it incurred litigation expenses between 2017 and
2020. See id. at 255 (“[T]he cause of action arises . . . before the [plaintiff]
sustains all, or even the greater part, of the damages occasioned by [the]
negligence.” (ellipses in original) (quoting Ariz. Mgmt. Corp., 142 Ariz.
at 68)); see also Part I(C) ¶¶ 23–24. Thus, a final coverage denial is
unnecessary to determine when A.C. Watercraft knew or should have
known the “what” and “who” of its negligent procurement and promissory
estoppel claims because Great Divide’s January 25, 2016
denial—preliminary or final—caused A.C. Watercraft to incur litigation
expenses in May 2017.

¶35 In addition to holding that Satamian’s negligent procurement
and promissory estoppel claims accrued, as a matter of law, without a final
judgment or the necessity of a final coverage denial, we reject Satamian’s

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Opinion of the Court

assertion that Great Divide’s initial denial of coverage was not a final denial
of the claim or otherwise failed to place A.C. Watercraft on notice of the
“what” causation element of the claims. Great Divide’s January 25, 2016
letter is unequivocal and, thus, a final coverage denial “based only on the
facts as presented to [Great Divide] to date.” Great Divide clearly and
unequivocally denied coverage for a specific reason because, “[t]he jet ski
that was involved in the accident . . . is not listed on the [Policy] Schedule.”
Although in denying A.C. Watercraft’s claim, Great Divide reserved the
right to revisit its denial based on review of “any lawsuits or amendments
to [the] claim,” A.C. Watercraft never presented additional facts in lawsuits
or amendments to the claim sufficient to cause Great Divide to revisit or
reverse its initial denial. Moreover, unlike the insurer in Ness, Great Divide
never “treated its failure to pay benefits as non-final.” See 174 Ariz. at 500.
Thus, Great Divide’s initial denial was final and, more importantly, it
placed A.C. Watercraft on notice of a wrong that culminated in appreciable,
non-speculative harm. A.C. Watercraft’s re-tendered claim does not alter
our conclusion.

¶36 Satamian settled with A.C. Watercraft, in part, for time-barred
claims against Defendants for negligent procurement and promissory
estoppel for denial of A.C. Watercraft’s insurance coverage claim.
Assuming “the truth of all well-pleaded factual allegations and indulg[ing]
all reasonable inferences from those facts” in Satamian’s complaint,
Coleman, 230 Ariz. at 356 ¶ 9, we conclude that Satamian has not met his
burden to establish that the relevant limitations periods have been tolled.
Bailey, 143 Ariz. at 498. As the assignee of these claims, Satamian stands in
A.C. Watercraft’s shoes because an assignee “can stand in no better position
than the assignor.” See Stephens v. Textron, Inc., 127 Ariz. 227, 230 (1980).
Consequently, because A.C. Watercraft’s claims are time-barred,
Satamian’s identical claims are also barred because assignment does not
alter the operation of the statute of limitations. See id. Although
unfortunate, the perceived equities do not, and cannot, justify
non-adherence to the proper accrual standards for negligent procurement
of insurance and promissory estoppel.

III.

¶37 RPS requests attorney fees under A.R.S. § 12-349(A), which
allows this Court to award fees, in part, if a party “[u]nreasonably expands
or delays the proceeding” or “[b]rings or defends a claim without

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Opinion of the Court

substantial justification.” RPS alleges that Satamian unreasonably
expanded proceedings as both claims were time-barred, and
“mischaracterizes the nature of the suit as one involving a third-party bad
faith failure to settle and cites cases out of context.” We decline to award
attorney fees for two reasons: first, Satamian’s petition did not
unreasonably expand the proceedings because, in this unique context
involving negligent procurement claims, Arizona’s accrual jurisprudence
has not been a paragon of clarity; and second, relatedly, RPS and the lower
courts erroneously adopted inapposite bad faith jurisprudence to resolve
the accrual issues in this case.

CONCLUSION

¶38 For the reasons set forth, we vacate the court of appeals’
memorandum decision, but concur in the result, and affirm the trial court’s
dismissal of the complaint.

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