Arizona’s Notice of Claim Statute and Private Employers

Posted on June 8, 2020 in Personal Injury

Since 1994, Arizona’s Notice of Claim Statute, codified as A.R.S. § 12-821.01, has protected the State of Arizona from persons attempting to use it.  The Notice of Claim Statute applies to every conceivable claim a person may bring against the State of Arizona.  The protections found in the Notice of Claim Statute also extend to state agencies and political subdivisions such as counties, cities, boards, and commissions.

Among other mandates, the Notice of Claim Statute requires anyone who has a claim against a protected public entity or employee to first provide the entity/employee with notice of the claim within 180 days (i.e., about six months) after the claim has accrued.  This notice period is much shorter than the time allowed by statutes of limitations applied to claims against non-state entities, which is generally two years.  In effect, the Notice of Claim Statute limits a person to only 180 days to present his or her claim to the entity; otherwise, the claim may be lost altogether.

The Notice of Claim Statute also requires that notice of the claim be served upon a person authorized to accept service of process.  The notice must state facts sufficient to support the claim and a “specific amount for which the claim can be settled and the facts supporting that amount.”  The statute provides that a notice of claim is deemed denied if not accepted within sixty days of its submission and, regardless of whether the notice is accepted or denied, a person must sue within one year after the claim accrued.  This limitation period may, in some cases, expire before or soon after a claim has been denied.  These requirements are complicated and require lawyers to be extremely cautious—many lawyers have been tripped up by this confusing matrix of deadlines on their way to the courthouse.

Recently, a private hospital tried to extend the Notice of Claim Statute to protect it from medical malpractice.  In Banner Univ. Med. Ctr. v. Gordon, 2 CA-SA 2019-0051 (Ariz. Ct. App. May 29, 2020), the plaintiffs brought a medical malpractice claim against both Banner University Medical Center (“Banner”) and some of its resident doctors for the death of their fourteen-month-old son.  The claims against Banner were based upon its alleged vicarious liability for the conduct of its doctors.  However, the doctors were granted summary judgment based upon a finding that they were employees of both Banner and the University of Arizona, a public entity of the State of Arizona, and they were not timely served under the Notice of Claim Statute.  The trial judge went on to deny Banner’s motion for summary judgment seeking dismissal of the vicarious liability claims.  Banner then asked the Arizona Court of Appeals, by way of a Special Action, to decide whether a vicarious liability claim against a private employer must be dismissed when the claims against its employees were dismissed with prejudice due to the plaintiff’s failure to timely serve those employees as required by the Notice of Claim Statute due to their joint employment by a public entity.

Banner first argued the doctrine of claim preclusion necessitated the dismissal of the vicarious liability claim.  Banner asserted the three elements of claim preclusion were satisfied because of the employees’ dismissal from the case: (1) an identity of claims in the suit in which a judgment was entered and the current litigation; (2) a final judgment on the merits in the previous litigation; and (3) identity or privity between the parties in the two suits.  The Court of Appeals held that because of the unique employment situation of the doctors who worked for both the University of Arizona and a private, for-profit hospital, Banner failed to prove privity between the parties.  The Court of Appeals went on to hold that Banner could not show that claim preclusion, if applied, would further “finality, the prevention of harassment, efficiency, and enhancement of the prestige of the courts.”

Finally, the Court of Appeals said that claim preclusion is inappropriate because applying the doctrine would contravene public policy and “result in manifest injustice.”  Banner is a private, for-profit hospital, and the Notice of Claim Statute is a codified recognition of sovereign immunity.  In short, Banner is not the State of Arizona.  “The policies underlying the notice-of-claim requirement are not served by applying claim preclusion here.  The chief purpose of § 12-821.01 is to give the government notice of potential liability, an opportunity to investigate claims, the chance to avoid costly litigation through settlement, and assistance in budgeting.”  The Court of Appeals noted the decision to not extend the protections of the Notice of Claim Statute to Banner would not cause the State of Arizona to suffer financially from an adverse judgment.  Accordingly, the Notice of Claim Statute does not protect private employers from vicarious liability claims in instances when the relevant employees are protected by the statute because of their joint employment by a public entity.