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Bills v. Arizona Property and Casualty Insurance Guaranty Fund2/2/1999
d by statute and has assumed [the insolvent insurer's] obligations because of its statutory duty, the essential nature of this action remains one sounding in contract.").
In light of the language in A.H., the Fund's argument that it "cannot be held liable for breach of contract or bad faith" solely because "there is no contract" between it and PBC is misplaced.(3) Rather, the Fund has both a statutory and contractual relationship with the insured, obligating both parties to comply with the terms and conditions of the policy that the insolvent insurer had issued, to the extent those terms are not inconsistent with or superseded by the statutes. In Arizona, insurance contracts give rise to an implied covenant of good faith and fair dealing, which obligates the insurer "to give equal consideration to both the interests of itself and of its insured" in matters relating to settlement. City of Glendale v. Farmers Ins. Exch., 126 Ariz. 118, 120, 613 P.2d 278, 280 (1980). The statutes do not eliminate or modify that obligation. Therefore, the Fund essentially inherited the duty of good faith and fair dealing when it "step into the shoes" of the insolvent insurer, A.H., 190 Ariz. at 529, 950 P.2d at 1150, at least "to the extent of its obligation on the covered claims." § 20-667(C). See Arizona Property & Cas. Ins. Guar. Fund v. Helme, 153 Ariz. 129, 138, 735 P.2d 451, 460 (1987) (suggesting that the Fund has both a "duty to indemnify and to fairly consider settlement proposals").
As it did in the trial court, however, the Fund claims immunity from plaintiff's tort claims under § 20-675(A), which provides:
"There shall be no liability on the part of, and no cause of action shall rise against, any member insurer, the board or its agents or employees, the director or representatives of the director for any action taken in the performance of their powers and duties pursuant to this article."
In Wells Fargo, the court concluded that "the legislative intent and the relevant statutory provisions indicate that the Fund itself is immune from tort liability pursuant to § 20-675, notwithstanding the lack of a specific reference to the Fund in that provision." 165 Ariz. at 573, 799 P.2d at 914. See also Clark Equip., 189 Ariz. at 445, 943 P.2d at 805 (" he Fund is not liable for the bad faith denial of a claim.").
Plaintiff challenges that Conclusion, noting that, unlike the Model Act upon which Arizona's statutes were based, § 20-675(A) "does not purport to grant immunity to the Fund." The Model Act's immunity provision (§ 17) expressly includes "the association." Although the parties do not mention it, Arizona's original immunity statute, which the legislature enacted in 1970 and repealed in 1977, also expressly included "the association." 1970 Ariz. Sess. Laws, ch. 78, § 2 (enacting former A.R.S. § 20-673).
The court in Wells Fargo did not address either the Model Act or Arizona's predecessor immunity statute. Considering the Model Act and the 1970 version of the immunity statute, it could be argued that the legislature's omission of "the fund" from § 20-675(A) in 1977 resulted either from an inadvertent oversight or a deliberate deletion. We have neither found nor been furnished with any helpful legislative history, however, to indicate why the legislature would have deliberately omitted "the fund" from the immunity provision when reenacting it in 1977. In the absence of any such history, we agree with the analysis and Conclusion in Wells Fargo that § 20-675(A) was intended to include the Fund, particularly when the 1970 predecessor statute expressly included "the association." In addition, like Wells Fargo in that case, plaintiff here offers no
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