Free Objection - District Court of Arizona - Arizona

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Richard T. Treon. # 002064 TREON, AGUIRRE & NEWMAN, P.A. 2700 North Central Avenue, Suite 1400 Phoenix, Arizona 85004 Tel: 602) 285-4400 Fax: 602) 285-4483 Daniel B. Treon, # 014911 Douglas G. Shook, # 005950 Stephen E. Silverman, # 016757 TREON & SHOOK, P.L.L.C. 2700 North Central Avenue, Suite 1000 Phoenix, Arizona 85004 Tel: (602) 265-7100 Fax: (602) 265-7400 Attorneys for Robert and Joy Dunn

IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA ) ) ) ) ) ) Plaintiff/Counterclaim ) Defendant ) ) ) vs. ) ) ) ROBERT and JOY DUNN, ) ) Defendants/Counterclaimants ) AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Case No. CV2003-1277 PHX SRB

DEFENDANT DUNNS' OBJECTIONS TO PLAINTIFF AMERICAN FAMILY'S REQUESTED JURY INSTRUCTIONS

Defendant Dunns present their objections to Plaintiff American Family's
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requested jury instructions. RESPECTFULLY SUBMITTED this 23rd day of September, 2005.

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TREON, AGUIRRE & NEWMAN

By: s/ Richard T. Treon Richard T. Treon 2700 N. Central Avenue, Suite 1400 Phoenix, Arizona 85004 and

TREON & SHOOK, P.L.L.C.
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By: s/Stephen E. Silverman Daniel B. Treon Stephen E. Silverman 2700 N. Central Avenue, Suite 1000 Phoenix, Arizona 85004 Attorneys for Robert and Joy Dunn

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ORIGINAL electronically filed this 23rd of September, 2005, with the Clerk of the United States District Court COPY of the foregoing hand-delivered this 23rd day of September, 2005, to: The Honorable Susan R. Bolton Judge of the United States District Court

s/ Aly Shomar-Esparza

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No. 1 CLAIMS AND DEFENSES To help you follow the evidence, I will give you a brief summary of the positions of the parties: American Family claims that the homeowners insurance policy issued to the Dunns does not cover the alleged damage to the residence, because it was not caused by a covered water leak. The Dunns deny that claim and also contend that American Family breached the covenant of good faith and fair dealing in its investigation and evaluation of the claim. American Family denies that it breached the covenant of good faith and fair dealing. American Family also contends that the Dunns conduct

contributed to any delay in the claim investigation and that the Dunns failed to mitigate their damages. Source: Defenses) Ninth Circuit Model Civil Jury Instructions No. 1.1 (Claims and

Defendant Dunns' Objection: American Family's proposed instruction fails to include an accurate and complete statement of the Dunns' claims and defenses as allowed and required by Ninth Circuit Model Civil Jury Instruction No. 1.2 (Claims and Defenses). The Model Instruction calls for a statement about, "defendant's counterclaims and/or affirmative defenses," which contemplates a complete statement about each of a party's claims, not just the sterilized and `watered-down' version of 3

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the claim as a "breach of the covenant of good faith." A proper instruction will include a statement of the specific allegations of the breaches the Dunns allege as their claims. Moreover, the American Family Requested Instruction does not mention the Dunns' claims for breach of contract, and the specific allegations/claims related to the breach. The Dunns' Requested Instruction appropriately and accurately informs the jurors of their claims as well as American Family's.

Source: Ninth Circuit Model Civil Jury Instruction No. 1.2 (Claims and Defenses).

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No. 2 CLAIMS AND DEFENSES COURT RULINGS With respect to the appraisal award, I have ruled in this case that American Family does not owe the cost to stabilize the land or to repair the roof, garage, patio, or other structures. You are not to consider the amounts awarded for those repairs in determining damages in this case. In addition, I have ruled in this case that prior to the entry of the appraisal award in June 2002, American Family did not breach the covenant of good faith and fair dealing by not investigating or paying the Dunns' claim for mold damage. I have also ruled that American Family did not breach the covenant of good faith and fair dealing by denying the Dunns' claim for repair of the slab cracks. You are not to consider these acts or omissions in determining whether American Family breached the covenant of good faith and fair dealing and/or damages. Source: See Arizona v. California, 460 U.S. 605 at 618, 103 S.Ct. 1382 at 1391 (1983) (law of the case doctrine); Milgard Tempering, Inc. v. Selas Corp. of America, 902 F.2d 703 at 715 (9th Cir. 1990) (same); Rent-ACenter, Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597 at 601 (9th Cir. 1991) (same).

Defendant Dunns' Objection: American Family's proposed instruction regarding the Court's rulings misstates the Court's ruling on American Family's motion for summary judgment. The Court has permitted the Dunns to present evidence that 5

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American Family unreasonably investigated and evaluated their claim, and proposed instruction impermissibly creates the danger that the jury will be confused. The instruction on the "land-stabilization" issue impermissibly instructs the jury to rule in American Family's favor on an issue where American Family has the burden of proving the application of the policy exclusion (and has not presented competent evidence to show the application of the exclusion). American Family is still required to prove the application of the exclusion.

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In fact, the entire second paragraph should not be given. The Dunns are not going to argue that American Family acted in bad faith for failing to indemnify them for mold damage, and not extending Additional Living Expense

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benefits in 2000 because of the mold damage. The instruction creates the danger that the jury will be instructed that the Court has already weighed disputed evidence in this case in American Family's favor, given the jury the

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impression that the Court determines American Family's entire case to be more credible than the Dunn's case. It is enough for the jury to be instructed on what is at issue in this case, without American Family's requested instructions that

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create a danger the jury will believe the Court is siding with American Family on disputed questions of fact. The instruction also fails to properly instruct the jury about what claims

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remain as a result of the Court's rulings, not just what claims the Court ruled on. The claims are inextricably intertwined, and not clarifying with the jury that the 6

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breach of contract claims still remain will have a very strong tendency to confuse the jury on whether and to what degree breach of contract claims exist. There are two aspects of the Dunns' claims about mold and about the damage to their concrete, the breach of contract and the breach of the covenant of good faith and fair dealing. Any instruction explaining the Court ruling should be clear that the ruling on one of the aspects of the claim (the bad faith) does not affect the other aspect of the claim (the breach of contract). American Family cites to the "law of the case" doctrine for support of its

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Requested Instruction, but it is not applicable to the matter of these jury instructions, and it improperly seeks to limit this Court's power. As stated in

Rent-A-Center, Inc. v. Canyon Television and Appliance Rental, Inc., 944 F.2d
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597, C.A.9 (Ariz.),1991, a case cited by American Family, its "...reliance on the law of the case is misplaced. That doctrine concerns courts' general practice of refusing to reopen questions previously decided in the same case. It is not a

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limitation on their power". United States v. Maybusher, 735 F.2d 366, 370 (9th Cir.1984), cert. denied, 469 U.S. 1110, 105 S.Ct. 790, 83 L.Ed.2d 783 (1985). Moreover, the law of the case is an equitable doctrine that should not be

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applied if it would be unfair. Id. We will not construe the law of the case to prevent a district court from exercising its discretion to reassess evidentiary rulings in light of later developments in the proceedings."

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No. 3 CONTRACT MITIGATION OF DAMAGES American Family claims that the Dunns did not make reasonable efforts to prevent or reduce damages. The Dunns may not recover for any damages that could have been prevented or reduced through reasonable efforts. American Family must prove: 1. The Dunns did not make reasonable efforts to prevent or reduce damages; 2. If the Dunns had acted reasonably, the Dunns could have prevented or reduced damages; and 3. The amount of the Dunns' damages that could have been prevented or reduced through reasonable efforts. Source: Revised Arizona Jury Instructions (Civil) 4th, Contract 23; Coury Bros. Ranches v. Ellsworth, 103 Ariz. 515, 518, 446 P.2d 458, 461 (1968); Fairway Builders, Inc. v. Malouf Towers Rental Co., 124 Ariz. 242, 255, 603 P.2d 513, 526 (App. 1979).

Deleted: ¶ ¶ ¶

Plaintiffs' Objection: The evidence offered at trial will not justify a mitigation of damages instruction. Moreover, a mitigation instruction is not appropriate given the Dunns' claim that American Family's conduct constituted a material breach, which relieved them of other contractual obligations. The Dunns agree that the proposed instruction is an accurate statement of the law. 8

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No. 4 CONTRACT Claims and Elements The Dunns claim that American Family breached a contract--the homeowners insurance policy. On this claim, the Dunns must prove that there was a contract with American Family and that American Family breached the contract. American Family claims that the Dunns failed to mitigate their damages. American Family must prove this defense. The Dunns have the burden of proving coverage for their claim exists under the homeowners insurance policy. American Family has the burden of proving that exclusion(s) in the homeowners insurance policy preclude coverage for the Dunns' claim. Source: Revised Arizona Jury Instructions (Civil) 4th, Contract 2.

Defendant Dunns' Objection: It is not disputed that a contract of insurance existed between American Family and the Dunns, so the Dunns should not be charged with proving a matter which the parties either should stipulate exists or which the Court should take judicial notice. The Dunns suggest replacing the second sentence with, "On this claim, the parties agree that there was a contract between the parties. The Dunns must prove that American Family breached the contract."

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No. 5 CONTRACT Measure of Direct Damages If you find that American Family is liable to the Dunns for breach of contract, you must then decide the full amount of money that will reasonably and fairly compensate the Dunns for the damages proved by the evidence to have resulted naturally and directly from the breach of contract. The damage

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you award for breach of contract must be the amount of money that will place the Dunns in the position the Dunns would have been in if the contract had been performed. To determine those damages, you should consider the

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following: 1. the amount of money awarded by the appraisal panel to repair the cracks in the slab caused by the covered water leaks

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2.

the cost to pack out, clean, store the Dunns' personal property during the structure repairs.

Defendant Dunns' Objection:
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The standard RAJI instruction on measure of direct contract damages contemplates specifically instructing the jury on the elements of direct contract damages that they should consider. The Dunns' Requested Jury Instruction No.

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15 includes a description of the direct contract damages they are requesting. Source: Revised Arizona Jury Instructions (Civil) 4th, Contract 17.

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No. 6 BAD FAITH (FIRST-PARTY)

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Duty of Good Faith and Fair Dealing There is an implied duty of good faith and fair dealing in every insurance policy. The Dunns claim that American Family breached this duty. To prove that American Family breached the duty of good faith and fair dealing, the Dunns must prove any one of the following: 1. American Family intentionally denied, failed to pay, or delayed payment of the claim without a reasonable basis for such action; 2. American Family knew that it acted without a reasonable basis, or defendant failed to perform an investigation or evaluation adequate to determine whether its action was supported by a reasonable basis. Defendant Dunns' Objection: The appropriate instruction on Duty of Good Faith and Fair Dealing is contained in Defendant Dunns' Requested Instruction No. 4.

Source: Revised Arizona Jury Instructions (Civil) 4th, Bad Faith 1 (FirstParty).

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No. 7 BAD FAITH (FIRST-PARTY) Fairly Debatable Claim

American Family has the right challenge a fairly debatable claim. Whether the Dunns' claim was fairly debatable is a question of fact that you must determine. If you believe that the Dunns' claim was fairly debatable, in order to prove

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that American Family breached the implied covenant of good faith and fair dealing, the Dunns must prove that American Family failed to conduct an adequate investigation, acted unreasonably in evaluating the claim, or knowingly

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and unreasonably failed to act promptly in paying the claim. The standard is whether or not American Family acted unreasonably and either knew or was conscious of the fact that its conduct was unreasonable when

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it investigated, evaluated and paid the claim.

Mere negligence, mistake, or

inadvertence is not sufficient to establish a breach of the covenant of good faith and fair dealing.

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Source: Zilisch v. State Farm Mutual Automobile Ins. Co., 196 Ariz. 234, 995 P.2d 276 (2000); Rawlings v. Apodoca, 151 Ariz. 149, 726 P.2d 565 (1996).

Defendant Dunns' Objections:
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None

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No. 8 BAD FAITH (FIRST-PARTY) Measure of Damages ­ Bad Faith If you find that American Family is liable to the Dunns on the bad faith claim, you must then decide the full amount of money that will reasonably and fairly compensate the Dunns for each of the following elements of damage proved by the evidence to have resulted from American Family's breach of the duty of good faith and fair dealing: (1) The unpaid benefits of the policy, to the extent not already awarded as damages for breach of contract; (2) Emotional distress, humiliation, inconvenience, and anxiety

experienced, and reasonably probable to be experienced in the future. Defendant Dunns' Objection: The Dunns have proposed a slight modification to the Standard RAJI Bad Faith Instruction under Defendant Dunns' Requested Jury Instruction No. 10 to reflect the fact that their bad faith damages claim includes additional damage to their property and the loss of use of their property. Source: Revised Arizona Jury Instructions (Civil) 4th, Bad Faith 7 (FirstParty) (modified).

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No.9 FAULT Statement of Liability Issues (Comparative Fault) If you decide that American Family did not breach the covenant of good faith and fair dealing, then your verdict must be for American Family. If you find that American Family did breach the covenant of good faith and fair dealing, then American Family is liable to the Dunns and your verdict must be for the Dunns. You should then determine the full amount of the Dunns' damages and enter that amount on the verdict form. You should then consider American Family's claim that the Dunns were at fault.

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Source: Revised Arizona Jury Instructions (Civil) 4th, Bad Faith 8 (FirstParty) (modified).

Defendant Dunns' Objections: Arizona's comparative negligence statute applies to negligence claims "for

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personal injury, property damage or wrongful death" and is not applicable to "intentional" torts such as breach of the covenant of good faith and fair dealing. The verdict impermissibly allows the jury to apportion comparative fault, in

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violation of A.R.S. §12-2505 (no right to comparative fault for "intentional" tortfeasors); see also Kransco v. American Empire Surplus Lines Ins. Co., 2 P.3d 1, 9 (2000) (rejecting comparative fault instruction to insurance company

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in bad faith case, noting that "[a]n insurer's tort liability is predicated on special factors inapplicable to the insured.") American Family is free to argue that certain damages of the Dunns were not caused by American Family's breach of contract or bad faith. The causation element of the plaintiffs' bad faith claim is addressed in Stipulated Instruction No. 4. A comparative fault instruction is not appropriate in an action in which the tortfeasor's liability is premised on intentional conduct. Source: Revised Arizona Jury Instructions (Civil) 4th, Bad Faith 11 (FirstParty).

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No. 10 FAULT Defendant Dunns' Fault (Comparative Fault) On American Family's claim that the Dunns were at fault, you must decide whether American Family has proved that the Dunns were at fault and, under all the circumstances of this case, whether any such fault should reduce the Dunns' damages. These decisions are left to your sole discretion. If you decide that the Dunns' fault should reduce the Dunns' full damages, the court will later reduce those damages by the percentage of fault you have assigned to the Dunns. Source: Revised Arizona Jury Instructions (Civil) 4th, Bad Faith 9 (FirstParty).

Defendant Dunns' Objections: Arizona's comparative negligence statute applies to negligence claims "for personal injury, property damage or wrongful death" and is not applicable to "intentional" torts such as breach of the covenant of good faith and fair dealing. The verdict impermissibly allows the jury to apportion comparative fault, in violation of A.R.S. §12-2505 (no right to comparative fault for "intentional" tortfeasors); see also Kransco v. American Empire Surplus Lines Ins. Co., 2 P.3d 1, 9 (2000) (rejecting comparative fault instruction to insurance company in bad faith case, noting that "[a]n insurer's tort liability is predicated on special factors inapplicable to the insured.") 16

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American Family is free to argue that certain damages of the Dunns were not caused by American Family's breach of contract or bad faith. The causation element of the plaintiffs' bad faith claim is addressed in Stipulated Instruction No. 4. A comparative fault instruction is not appropriate in an action in which the tortfeasor's liability is premised on intentional conduct. Source: Revised Arizona Jury Instructions (Civil) 4th, Bad Faith 11 (FirstParty).

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AMERICAN FAMILY'S REQUESTED JURY INSTRUCTION No. 11 FAULT Determining Relative Degrees of Fault (Comparative Fault) If you decide that the Dunns' fault should reduce their damages, you must then determine the relative degrees of fault of all those whom you find to have been at fault. The relative degrees of fault are to be entered on the verdict form as percentages of the total fault for the Dunns' injury. The fault of one person may be greater or lesser than that of another, but the relative degrees of all fault must add up to 100%. This will be clear from the

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verdict form. Source: RAJI (Civil) 4th, Fault 11; A.R.S. 12-2506.

Defendant Dunns' Objection: Arizona's comparative negligence statute applies to negligence claims "for personal injury, property damage or wrongful death" and is not applicable to

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"intentional" torts such as breach of the covenant of good faith and fair dealing. The verdict impermissibly allows the jury to apportion comparative fault, in violation of A.R.S. §12-2505 (no right to comparative fault for "intentional"

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tortfeasors); see also Kransco v. American Empire Surplus Lines Ins. Co., 2 P.3d 1, 9 (2000) (rejecting comparative fault instruction to insurance company 18

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in bad faith case, noting that "[a]n insurer's tort liability is predicated on special factors inapplicable to the insured.") American Family is free to argue that certain damages of the Dunns were not caused by American Family's breach of contract or bad faith. The causation element of the plaintiffs' bad faith claim is addressed in Stipulated Instruction No. 4. A comparative fault instruction is not appropriate in an action in which the tortfeasor's liability is premised on intentional conduct. Source: Revised Arizona Jury Instructions (Civil) 4th, Bad Faith 11 (FirstParty).

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