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New Court of Appeals Case on NonParty at Fault Designations, Liquidated Damages and Rule 68 Sanctions

Civil Procedure—Nonparty at Fault Requires Facts to Support

Scottsdale Ins. Co. v. Cendejas, ___Az. Adv. Rep. ___1 CA-CV 08-0001 (App. March 3, 2009) (Justice Weisberg)

DEFENDANT'S NONPARTY AT FAULT PROPERLY STRICKEN WHERE INSUFFICIENT FACTS SET FORTH IN NOTICE TO ESTABLISH VIABLE CLAIM OF LIABILITY/PREJUDGMENT INTEREST RUNS ON LIQUIDATED DAMAGES FROM THE DATE PLAINTIFF SPECIFIES HOW THEY CAN BE CALCULATED/EXPERT WITNESS FEES AWARDED FOR FAILING TO ACCEPT OFFER OF JUDGMENT INCLUDE FEES FOR NONTESTIFYING EXPERTS

Anthony Cendejas [Cendejas] caused a fire at an insured's home and Scottsdale Insurance [SIC] paid $256,500 in a property damage claim to the insured as a result then made a claim against Cendejas in subrogation to recoup this payment. Cendejas' insurer disputed the amount of the claim and this suit followed for the $259,000 payment plus prejudgment interest.

Cendejas filed nonparty at fault designations that named some specific nonparties but no specific facts as to what they did wrong. In fact, the designation was that “if” they had contributed to the fire they were nonparties. Others designations were generic such as “any subcontractor.” After the nonparty designation deadline, Cendejas' expert was deposed and during examination by Cendejas' attorney revealed a defense never before disclosed that the insulation in the house was improperly installed and caused the fire to accelerate unnecessarily. The identity of this alleged negligent installer was not revealed by Cendejas.

As a result of these deficiencies, SIC moved to strike the nonparty designations. After this motion was granted and Cendejas' motion for reconsideration was denied, SIC moved for summary judgment arguing there was no question of fact that Cendejas started the fire and caused the damage. Cendejas did not dispute that he started the fire but claimed the insulation installation was a superceding intervening cause. The trial court granted summary judgment finding the insulation could not be a superceding intervening cause because at best this would be a contributing cause and further since the nonparty designation was not proper or timely the jury couldn't apportion fault against the insulation installer and therefore evidence of this alleged improper insulation was inadmissible in any event. Prejudgment interest was also awarded along with sanctions.

In affirming the summary judgment the Court of Appeals pointed out that Rule 26(b)(5) requires a party “provide the identity, location, and the facts supporting the claimed liability” of the nonparty being designated. Cendejas' notice failed to meet this standard. Even to the extent a specific entity was identified there were no facts set forth “that would explain why [the nonparty] was liable for the fire and the resulting damage.” The court recognized that the purpose of the nonparty designation requirement is to give the plaintiff proper notice to where it can bring a nonparty into the suit before the statute of limitations runs. Here in some instances there were no facts to support bringing these nonparties in and in other cases the specific identity (“any subcontractor”) did not identify who to bring in. “From this SIC could not have deduced that Appellants intended to name an insulation installer as opposed to any other type of subcontractor.”

In so ruling the court reaffirmed its holding in Rosner v. Denim & Diamonds, Inc., 188 Ariz. 431, 937 P.2d 353 (App. 1996) which allowed a defendant to designate an unknown assailant as a nonparty where no one could reasonably ascertain the assailant's identity based upon the substantive right under ARS sec. 12-2506 to only be held liable for the amount of damages apportioned to a defendant by the jury. Here Cendejas knew or reasonably could have ascertained the identity of the insulation installer and the facts to support his liability.

Next the court ruled that even where striking the nonparty designation is in effect a striking of the defendant's answer because it eliminates his only defense, the rules do not allow the court discretion to consider any lesser sanction.

As to the question of prejudgment interest, the court recognized that “a party is entitled to prejudgment interest on a liquidated claim as a matter of right. . . .a claim is liquidated if the plaintiff provides a basis for precisely calculating the amounts owed. . . . the lack of an agreement as to a specific amount does not render a claim unliquidated if the amount is capable of calculation.” Here because the plaintiff only set forth a lump sum amount in its and did not itemize its damages until filing its complaint the date for prejudgment interest should have been calculated from the date of the filing of the suit and not the date of the demand letter.

Finally, the court held that expert witness fees sanctions for failure to accept a rule 68 offer of judgment would apply to a witness who was disclosed to have performed expert functions but who was not disclosed or intended to be called as an expert witness.

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