Arizona Court of Appeals Division Two Rules on Insurance Contract Construction, Propriety of Protective Order and on Award of Attorney's Fees.

Tritschler appealed from the Superior Court’s grant of summary judgment and award of attorney’s fees against him in his action against Allstate, his homeowner’s insurer, and Better Way Services, Inc., a contractor recommended by Allstate and hired by him to repair rain damage to his home. Tritschler’s action was for breach of contract and bad faith against Allstate and for breach of implied contract against Better Way.

After Tritschler’s home was damaged, he made a claim with Allstate, which referred him to Better Way, one of its “Quality Vendors.” Better Way made emergency repairs and gave an estimate for other repairs for $44,417. After work was partially completed, Tritschler complained about shoddy workmanship to Allstate, which offered to “cash-out” Tritschler by paying him the difference between the total cost of repairs and the cost of work already performed by Better Way. Tritschler accepted and was paid over 11,000 dollars. Months later, Tritschler submitted another claim, based on an independent adjuster he hired, for an additional $36,377, including several thousand dollars for “contractor’s overhead and profit fees.” Allstate paid a portion of the additional claim; Tritschler then sued.

As to Allstate, the Court of Appeals first addressed the grant of summary judgment in its favor on its obligation to pay overhead and profit fees as part of Tritschler’s claim for the “actual cash value” of his loss. Reversing, as a matter of first impression in Arizona, the Court surveyed decisions by other state and federal courts. Based on these precedents and as a matter of public policy, the Court held that under the Policy “actual cash value” includes any cost that would be reasonably likely incurred in repair or replacement of a covered loss. p.20. Rather than rule on the inclusion of overhead and profit in Tritschler’s case, however, the Court remanded for additional discovery and a ruling by the superior court.

The Court then resolved several other claims against and pertaining to Allstate. First, it reversed the superior court’s summary judgment on Tritschler’s bad faith claims on the theory that the Court of Appeals could not determine the basis for the superior court’s grant of summary judgment to Allstate. Next, the Court affirmed summary judgment on Tritschler’s claim for punitive damages because Tritschler had presented no evidence of Allstate’s evil mind or intent to injure him such as would sustain a bad faith claim.

Ruling next on the superior court’s protective order entered against various topics Tritschler noticed in his 30(b)(6) notice for Allstate’s deposition, the Court affirmed. Tritschler’s requests called for information from all litigation nationwide in which Allstate had confronted issues of actual cash value and overhead and profits. The Court of Appeals agreed with the trial court that such requests were unduly burdensome and unlikely to lead to the discovery of admissible evidence.

Finally, as to Allstate, the Court reversed the Superior Court’s award of attorneys fees in its favor. Because the Court of Appeals reversed the Superior Court’s summary judgments, Allstate was no longer the successful party and thus was not entitled to an award of fees under Rule 68.

As to Better Way, the Court affirmed summary judgment in its favor on Tritschler’s implied contract claims and confirmed that ARS 12-341.01 allows for an award of fees on any contract case, whether express or implied.

The Court concluded by awarding attorney’s fees on appeal to Tritschler under ARS 12-341.01

Judge Howard authored the decision, in which Chief Judge Pelander and Judge Vasquez concurred.