Arizona Court of Appeals, Division One, holds that the Arizona Municipal Risk Retention Pool is a public entity subject to the notice of claim statute.

A City of Maricopa police officer was injured on the job.  The officer filed a workers’ compensation claim with the Arizona Municipal Risk Retention Pool (“Risk Pool”). Berkley Risk Administrators Company (“Berkley”) served as the third-party administrator for the claim. After a dispute regarding the officer’s coverage and benefits, the officer sued both the Risk Pool and Berkley for bad faith.

The superior court granted summary judgment in favor of both defendants. The officer appealed, and the Risk Pool cross-appealed the superior court’s determination that it was not a public entity for purposes of A.R.S. § 12-821.01.

On appeal, the Arizona Court of Appeals reversed the superior court’s determination that the Risk Pool was not a public entity subject to the notice-of-claim statute. The Court noted that while the Risk Pool is neither the state nor a political subdivision, the statutory definition of public entity uses the word “includes”—a term of enlargement that encompasses items not specifically enumerated. Drawing on its prior decision in Pivotal Colorado II, L.L.C. v. Arizona Public Safety Personnel Retirement System, the Court considered several factors: whether the entity is a creature of statute, whether its governing board is appointed by a political subdivision, and whether it is subject to state regulation. The Court found the Risk Pool satisfied each factor—it was formed by member municipalities pursuant to A.R.S. § 11-952.01, its board of trustees consists of elected officials or employees of public entities, and it is subject to oversight and investment limitations applicable only to political subdivisions. The Court concluded that the Risk Pool is a public entity subject to the 180-day notice-of-claim requirement. Because the officer conceded he did not serve a compliant notice of claim, his claims against the Risk Pool were barred.

Turning to the officer’s claims against Berkley, the Court affirmed the superior court’s determination that Berkley was not liable to the officer on either a direct-liability or joint-venture theory. On direct liability, the Court explained that bad faith claims arise from the implied covenant of good faith and fair dealing in contractual relationships. Because Berkley’s contract was solely with the Risk Pool, not with the officer, no contractual nexus existed to support a direct bad-faith claim against Berkley. On joint-venture liability, the Court found insufficient evidence of profit-and-loss sharing. The Court also found no evidence that Berkley had any right to control the venture, as opposed to merely administering claims as the Risk Pool’s agent.

Judge Furuya authored the Court’s opinion, joined by Judge Paton and Judge Kiley. Judge Furuya also filed a special concurrence, noting additional grounds supporting the Risk Pool’s public-entity status—specifically, its apparent subjection to Arizona’s Open Meeting Law and Public Records Law, statutes that apply only to public bodies.

Posted by: Sarah Lawson