Free Response to Motion - District Court of Arizona - Arizona

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Richard T. Treon (No. 002064) TREON, AGUIRRE & NEWMAN, P.A. 2700 N. Central Avenue, Suite 1400 Phoenix, Arizona 85004-1133 Telephone: (602) 285-4400 Facsimile: (602) 285-4483 Daniel B. Treon (No. 014911) Douglas G. Shook (No. 005950) Stephen E. Silverman (No. 016757) TREON & SHOOK, P.L.L.C. 2700 N. Central Avenue, Suite 1000 Phoenix, Arizona 85004-1133 Telephone: (602) 265-7100 Facsimile: (602) 265-7400 Attorneys for Defendants/Counterclaimants

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA AMERICAN FAMILY INSURANCE COMPANY, Plaintiff/Counterclaim Defendant, v. ROBERT and JOY DUNN, NO. CV2003-1277 PHX SRB

RESPONSE TO MOTION IN LIMINE RE PRINCIPALAGENT RELATIONSHIP

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Defendants/Counterclaimants.

The Dunns dispute American Family's naked assertion that there is no evidence that its "consulting engineers and contractors" acted as "independent contractors." In

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fact, there is evidence upon which a jury could find that American Family controlled their activities and acted through its engineers and contractors. American Family states there is no evidence that American Family sought to control the activities of Ninyo & Moore, Ronald Starling and Dusty Creek Builders.

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In fact, there is such evidence. For example, Exhibit 1 is a telephone message of July 26, 2000 produced by Robert Burttram of Dusty Creek builders in which Mr. Greaves directed Mr. Burttram to "fax to Steve Greave only. Not to H.O. [home owner] per Steve." Exhibit 2 is a fax cover sheet from Ninyo & Moore dated July 26, 2000 indicating that it had not faxed a copy of the report to the Dunns because it did not have the fax number. Exhibit 3 is an e-mail from Eric Dixon of American Family to Mr. Greaves directing Mr. Greaves to keep Ninyo & Moore's report from the Dunns. Apart from the evidence that American Family in fact exercised control over its contractor/engineer agents, American Family's motion is somewhat devious to the extent it attempts to avoid responsibility for conducting the claims investigation and adequately supervising and directing the work of its contractors/engineers. American

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Family cannot abandon its duty to investigate the claim. Arizona courts have repeatedly recognized that an insurer breaches its duty of good faith to an insured if it fails to conduct an adequate investigation of the insured loss. See, e.g., Zilisch v. State Farm Mut. Auto. Ins. Co., 196 Ariz. 234, 238, 995 P.2d

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276, 280 (2000) ("The carrier has an obligation to immediately conduct an adequate investigation, act reasonably in evaluating the claim, and act promptly in paying a legitimate claim."); Filasky v. Preferred Risk Mut. Ins. Co., 152 Ariz. 591, 597, 734 P.2d 76, 82 (1987) ("All of the evidence clearly suggests that reasons given by

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Preferred Risk for delaying settlement of Filasky's three claims were groundless or inadequately investigated and supports the jury's conclusion that Preferred Risk breached its duty to deal with Filasky in good faith."). American Family's inadequate, incomplete, and biased investigation is a central issue in this case. American Family asserts that certain aspects of the Dunns' claim were investigated by contractors and engineers who were hired to estimate and repair the damage, and investigate the cause of damage. On one hand, American Family argues that it was reasonable for it to rely on third-party contractors/engineers to investigate the loss. On the other hand, it argues that it is not liable for the conduct of these contractors/engineers because they were not acting as American Family's agents. American Family's position ignores the fact that its liability arises directly from its non-delegable duties ­ and not out of vicarious liability for the acts of others.

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In Walter v. Simmons, 169 Ariz. 229, 818 P.2d 214 (1991), the defendant insurance company argued that it could not be liable for the conduct of a third-party who participated in the adjustment of an insurance claim, because that third-party was not an employee or agent of the insurer. The court held, however, that the legal status

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of the third-party was irrelevant to an assessment of the insurer's liability. The court held that "although an insurer may delegate the performance of its duty of good faith to a non-servant, it remains liable for the actions taken by its delegate because the duty of good faith itself is non-delegable." Id. at 238, 818 P.2d at 223. American Family,

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therefore, is liable for any breach of its non-delegable duty to investigate the plaintiff's claim ­ even if that breach was carried out, in part, by third-parties who were not acting as American Family's agents. Accordingly, the Dunns request that American Family's motion in limine be denied. DATED this 21st day of September, 2005. TREON, AGUIRRE & NEWMAN, P.A. By: s/Richard T. Treon Richard T. Treon, Esq. 2700 North Central Avenue, Suite 1400 Phoenix, Arizona 85004 and TREON & SHOOK, P.L.L.C. By: s/Stephen E. Silverman Daniel B. Treon Douglas Shook Stephen E. Silverman 2700 North Central Avenue, Suite 1000 Phoenix, Arizona 85004 Attorneys for Defendants/Counterclaimants

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ORIGINAL of the foregoing electronically filed this 21st day of September, 2005, with: U.S. District Court Clerk

COPY hand delivered this 21st day of September, 2005, to: The Honorable Susan R. Bolton United States District Court By: s/Barbara Bopp

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