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Manterola v. Farmers Insurance Exchange8/28/2001
AFFIRMED
The trial court dismissed this third-party bad faith action, finding it barred by the statute of limitations. We are asked to decide whether the "final judgment accrual rule, " adopted in Taylor v. State Farm Mutual Automobile Insurance Co., 185 Ariz. 174, 179, 913 P. 2d 1092, 1097 (1996), applies in a situation, unlike Taylor, in which an insurance carrier defends an insured under a reservation of rights and then contests coverage in a separate declaratory relief action (DRA), and in which the plaintiff, meanwhile, obtains a stipulated judgment against the insured pursuant to a Morris agreement. The issue squarely presented here is when, in that scenario, does a bad faith claim against an insurer accrue, for statute of limitations purposes: when a judgment in the underlying personal injury action against the insured becomes final, or when a final determination of coverage is later made in the DRA?
The trial court concluded that the limitations period commenced on the earlier event and, therefore, granted defendant/appellee Farmers Insurance Exchange's motion to dismiss plaintiff/appellant Annette Manterola's complaint pursuant to Rule 12(b)(6), Ariz. R. Civ. P., 16 A. R.S. , Pt. 1. Because we agree with that ruling, we affirm.
BACKGROUND
Although the pertinent facts are essentially undisputed, " n reviewing a trial court's dismissal of a claim . . . , we accept the allegations in the complaint as true and resolve all inferences in favor of the plaintiff." Southwestern Paint & Varnish Co. v. Arizona Dep't of Envtl. Quality, 191 Ariz. 40, 41, 951 P. 2d 1232, 1233 (App. 1997), approved in relevant part, 194 Ariz. 22, 976 P.2d 872 (1999). This case involves three related lawsuits, the first two filed in Maricopa County Superior Court and the third, this action, filed in Pinal County Superior Court. First, in August 1995, Manterola filed a personal injury action against her treating psychologist, Dr. Dennis Charles Elias, and his wife (collectively, the Eliases), alleging in various counts that Elias had instigated inappropriate sexual relations with her when she had been his patient and that his wife had failed to take any action despite knowing or having reason to know of the impropriety (the PI action).
During the relevant time frame, the Eliases were insured under several policies issued by Farmers. Farmers defended the Eliases in the PI action, but only pursuant to a reservation of rights. In January 1996, Manterola and the Eliases entered into a Morris agreement, whereby the Eliases stipulated to a judgment against them in the amount of $2,000,000 and assigned to Manterola all their rights under the policies, including any cause of action they may have had against Farmers for bad faith. Pursuant to that agreement, Manterola agreed that she would not execute on the judgment against the Eliases personally but would only proceed against Farmers. The Maricopa County Superior Court entered the stipulated judgment in the PI action on April 9, 1996. Because neither side appealed, that judgment became final thirty days later.
Second, after Manterola had filed her PI action against the Eliases, but before those parties had executed the Morris agreement and the stipulated judgment, Farmers filed a DRA in December 1995. In that action, apparently brought against Manterola and the Eliases, Farmers sought a determination of its rights and obligations under the insurance policies. Thereafter, Farmers moved for summary judgment in that action, contending the policies provided no coverage for Manterola's claims against the Eliases. A Maricopa County Superior Court judge granted Farmers' motion, but on appeal Division O
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