Callies v. United Heritage

NOTICE: NOT FOR PUBLICATION.
UNDER ARIZ. R. SUP. CT. 111(c), THIS DECISION DOES NOT CREATE LEGAL PRECEDENT
AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

KENNETH CALLIES and DORENE CALLIES, husband and wife,
Plaintiffs/Appellants,

v.

UNITED HERITAGE PROPERTY AND CASUALTY INSURANCE
COMPANY, a foreign corporation, Defendant/Appellee.

No. 1 CA-CV 13-0189
FILED 03/18/2014

Appeal from the Superior Court in Maricopa County
No. CV2012-005517
The Honorable Mark H. Brain, Judge

REVERSED AND REMANDED

COUNSEL

Dawson & Rosenthal PC, Sedona
By Steven C. Dawson, Anita Rosenthal
Co-Counsel for Plaintiffs/Appellants

Adelman German PLC, Scottsdale
By Steven J. German
Co-Counsel for Plaintiffs/Appellants
Thomas Thomas & Markson PC, Phoenix
By Neal B. Thomas
Counsel for Defendant/Appellee

MEMORANDUM DECISION

Judge Kenton D. Jones delivered the decision of the Court, in which
Presiding Judge Patricia A. Orozco and Judge Lawrence F. Winthrop
joined.

J O N E S, Judge:

¶1 Kenneth and Dorene Callies, husband and wife (collectively,
Callies), appeal the trial court’s dismissal of their insurance bad faith
cause of action against United Heritage Property and Casualty Insurance
(United). For the reasons stated herein, we reverse and remand to the
trial court.

FACTS 1 AND PROCEDURAL HISTORY

¶2 The Callies maintained a homeowner’s insurance policy
with United. At the time they purchased the policy, the Callies were
Oregon residents, while United was domiciled in Idaho and conducted
business in multiple states, including Idaho, Oregon, Arizona, and Utah.
The relevant policy covered the Callies’ home in Eugene, Oregon, as well
as their personal property “while it was anywhere in the world.”

¶3 In June 2011, the Callies moved from Oregon to Arizona. To
this end, the Callies rented a moving truck and drove to Surprise,
Arizona. As the Callies had not yet secured permanent living
arrangements in Arizona, they rented a room from The Lodge at Sun
Ridge for the nights of June 10 through June 14. The Callies were allowed
to park their moving truck in The Lodge’s parking lot during their stay.

1When reviewing the grant of a motion to dismiss, we assume the truth of
the well-pleaded factual allegations contained within the complaint.
Logan v. Forever Living Prods. Intern., Inc., 203 Ariz. 191, 192, ¶ 2, 52 P.3d
760, 761 (2002).

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¶4 On the morning of June 11, the Callies discovered their
truck, containing all of their personal property, had been stolen during the
night. The Callies notified both the Surprise Police Department and
United of the theft that same day. On June 28, the truck was discovered
by the Glendale Police Department, but the Callies’ personal property had
been removed.

¶5 Toward the administration of the Callies’ insurance claim,
United directed an Arizona adjustor to contact the Callies in Arizona and
take their statements. The Callies also provided complete inventory lists
of the property taken, per United’s request. With that, United advised the
Callies that payment on their claim would be forthcoming, and that the
only remaining issue was to determine the exact amount due. Acting on
such assurance, the Callies proceeded to purchase a house in Arizona.

¶6 However, rather than make the promised payment, United
instead decided to initiate a fraud investigation into the Callies’ claim.
United informed them of this decision by telephone in August. Following
the phone call, Kenneth began displaying behavioral issues, suffering
from emotional and mental agitation and confusion.

¶7 Later in August, the Callies received another phone call, this
time from an attorney representing United, in which they were told to
have no direct contact with any person at United and were asked to agree
to be questioned under oath. When Dorene explained she did not believe
Kenneth would be able to handle the examination, the attorney concluded
the phone call. The Callies heard nothing further from United for several
months. During that intervening time period, Kenneth continued to suffer
emotional and psychological problems, and on October 28, he was civilly
committed to a mental health facility in Oregon.

¶8 On April 13, 2012, the Callies initiated suit against United
and the Lodge at Sun Ridge and its owners (collectively, The Lodge).
Within their complaint, the Callies alleged two claims: 1) insurance bad
faith against United, and 2) negligence (premises liability) against The
Lodge. 2

¶9 United responded by filing a motion to dismiss for failure to
state a claim. See Ariz. R. Civ. P. 12(b)(6). In its motion, United argued

2 The Lodge did not join United’s motion to dismiss, and is not a party to
this appeal.

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Oregon law, rather than Arizona law, should be applied, and that Oregon
did not recognize a cause of action for first-party insurance bad faith. It
also argued the doctrine of forum non conveniens mandated dismissal. To
its motion, United appended a certified copy of the Callies’ insurance
policy, as well as a partial transcript of Dorene’s examination under oath.

¶10 Within their response, the Callies argued to the contrary,
asserting Arizona law should be applied, and that Arizona was not an
inconvenient forum. 3 United replied, attaching, in support of its forum
non conveniens argument, the Callies’ Rule 26.1 disclosure statement to
illustrate that a majority of the Callies anticipated witnesses lived in
Oregon.

¶11 Following oral argument on United’s motion to dismiss, the
trial court, applying the principles delineated within the Restatement
(Second) Conflict of Laws §§ 6 and 145 (1971), found Oregon law should
apply, and granted United’s motion to dismiss for failure to state a claim.
In so finding, the trial court noted: (1) the Callies suffered the initial injury
in Arizona but “the effects of [United’s] conducts are continuing to be felt
in Oregon, where [the Callies] reside;” (2) United’s bad faith actions were
centered in Oregon; (3) the Callies “were and are Oregon residents, but
briefly lived in Arizona;” (4) United was an Idaho corporation that
conducted business nationwide; (5) the parties’ relationship was centered
in Oregon; and (6) “Oregon’s interests stand out – it has an interest in
ensuring that its citizens are treated appropriately by insurers.” While
recognizing Arizona and Oregon differ in the treatment of insureds, the
trial court did not find Oregon’s treatment unfair.

¶12 The Callies sought reconsideration, which the trial court
ultimately denied. The Callies then timely appealed. We have
jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) section 12-
2101(A)(1) (2014).

STANDARD OF REVIEW

¶13 We review the grant of a Rule 12(b)(6) motion to dismiss de
novo. Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7, 284 P.3d 863, 866
(2012). Motions to dismiss for failure to state a claim are not favored in
Arizona. Acker v. CSO Chevira, 188 Ariz. 252, 255, 934 P.2d 816, 819 (App.

3At no time did the Callies move to amend their pleading. See Ariz. R.
Civ. P. 15(a)(1).

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1997). Dismissal pursuant to Rule 12(b)(6) is appropriate if as a matter of
law the plaintiff would not be entitled to relief under any interpretation of
the facts. Belen Loan Investors, LLC v. Bradley, 231 Ariz. 448, 453, ¶ 7, 296
P.3d 984, 989 (App. 2012) (quoting Coleman, 230 Ariz. at 352, ¶ 8, 284 P.3d
at 867) (internal quotations omitted).

¶14 Choice of law issues are questions of law, which we review
de novo. Garcia v. General Motors Corp., 195 Ariz. 510, 516, ¶ 19, 990 P.2d
1069, 1075 (App. 1999).

DISCUSSION

¶15 On appeal, the Callies argue the trial court erred by granting
United’s motion to dismiss because it found Oregon law, rather than
Arizona law, applied to this action. We agree.

I. Choice of Law

¶16 The parties agree the choice of law determination is
dispositive of this matter. Oregon courts do not recognize a separate tort
cause of action for an insurance bad faith claim that stems from an
insurer’s refusal to pay benefits, instead holding that such an action
sounds in contract. See Emp’rs’ Fire Ins. Co. v. Love It Ice Cream Co., 670
P.2d 160, 165 (Or. Ct. App. 1983). Arizona does allow such a tort action.
See Zilisch v. State Farm Mut. Auto. Ins. Co., 196 Ariz. 234, 237, ¶ 20, 995
P.2d 276, 279 (2000); Rawlings v. Apodaca, 151 Ariz. 149, 160, 726 P.2d 565,
576 (1986); Noble v. Nat’l Am. Life Ins. Co., 128 Ariz. 188, 190, 624 P.2d 866,
868 (1981). 4 Therefore, if Oregon law applies to this dispute, the Callies
will have failed to state a claim upon which relief may be granted; the
converse being true if Arizona law applies. 5

4 Idaho, United’s place of incorporation, similarly recognizes first party
insurance bad faith as independently actionable in tort. See Weinstein v.
Prudential Prop. & Cas. Ins. Co., 233 P.3d 1221, 1240 (Id. 2010); White v.
Unigard Mut. Ins. Co., 730 P.2d 1014, 1017 (Id. 1986).
5 Neither party argues that Idaho law should be applied to this action, but

rather focuses their arguments entirely on Oregon and Arizona law. As
such, we discuss the Restatement contacts in Arizona or Oregon, and
mention Idaho’s contacts only when it would support an Arizona or
Oregon contact. See Bryant v. Silverman, 146 Ariz. 41, 44 n.2, 703 P.2d 1190,
1193 n.2 (1985).

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¶17 As the forum state, Arizona law will govern the choice of
law determination. See Cardon v. Cotton Lane Holdings, Inc., 173 Ariz. 203,
206, 841 P.2d 198, 201 (1992). Arizona courts follow the Restatement
(Second) of Conflict of Laws (1971) (Restatement) in determining the
controlling law for multistate torts. Pounders v. Enserch E & C, Inc., 232
Ariz. 352, 354, ¶ 8, 306 P.3d 9, 11 (2013); Bates v. Superior Court of State of
Ariz., 156 Ariz. 46, 48, 749 P.2d 1367, 1369 (1988). 6

A. Restatement § 146

¶18 Restatement § 146, entitled “Personal Injuries,” has been
found applicable to insurance bad faith claims when sufficient mental
distress or physical harm has been alleged, as in the immediate case. See
Bates, 156 Ariz. at 49, 749 P.2d at 1370 (“We conclude that § 146 is
pertinent because plaintiff claims that the alleged bad faith acts [of the
defendant] caused her to suffer personal injury, mental and physical
harm.”). 7 Section 146 provides:

[T]he local law of the state where the injury occurred
determines the rights and liabilities of the parties, unless,
with respect to the particular issue, some other state has a
more significant relationship under the principles stated in §
6 to the occurrence and the parties, in which event the local
law of the other state will be applied.

¶19 The “place of the injury,” in the context of § 146, equates to
the place where “the last event necessary for liability occurs.” Pounders,
232 Ariz. at 356, ¶ 21, 306 P.3d at 13 (internal quotations omitted). Here,
Kenneth began suffering emotional and psychological problems in
Arizona immediately following United’s informing the Callies their claim
was being investigated. Further, the Callies allege having experienced

6 We note that Oregon likewise applies the Restatement’s “most
significant relationship” approach to tort claims. Spirit Partners, LP v. Stoel
Rives LLP, 157 P.3d 1194, 1200 (Or. Ct. App. 2007).
7 United invites us to resolve the choice of law issue under Restatement §

193. We decline to do so, as Restatement § 193 applies to “[t]he validity of
a contract of fire, surety or casualty insurance and the rights created
thereby,” which are not at issue in this case. Further, Bates illustrates that
choice of law cases regarding multistate insurance bad faith claims are
analyzed under Restatement §§ 6, 145 and 146. Bates, 156 Ariz. at 48-51,
749 P.2d at 1369-72.

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extreme stress during the months they remained in Arizona due to
United’s decision to withhold payment on the Callies’ claim during its
investigation.

¶20 The Callies argue the place of the injury is determined at the
time of the commission of the tort, leading to the conclusion that Arizona
is the place of the injury. United argues that, in this instance, “the place of
injury is, at best, transitory,” and therefore cannot be said to be Arizona,
because bad faith is a continuing tort and the Callies have alleged they are
continuing to suffer the effects of United’s alleged bad faith in Oregon,
where they now reside. 8 We agree with the Callies that the place of injury
is Arizona, as it was the state where they were located when they allege
having initially suffered damage by virtue of United’s actions. See
Pounders, 232 Ariz. at 356, ¶ 20, 306 P.3d at 13 (“Determining that the
‘place of injury’ is the place where the last event necessary for liability
occurred (that is, the place where the injury manifested), which can only
occur in one location, preserves the Restatement goals of certainty,
predictability, and uniformity of result.”).

B. Restatement § 145

¶21 Having found that “[§] 146 initially suggests the application
of [Arizona] law, we still must consider whether [Oregon] has a more
significant relationship to the parties and the issue than does [Arizona].”
Garcia v. Gen. Motors Corp., 195 Ariz. 510, 517, ¶ 20, 990 P.2d 1069, 1076
(App. 1999); see Bates, 156 Ariz. at 49, 749 P.2d at 1370. In doing so, we
consider and analyze the factors outlined in Restatement § 145(2):

8 United cites two cases, White v. Western Title Insurance Company, 40
Cal.3d 870 (Cal. 1985) and Floyd v. Donahue, 186 Ariz. 409, 923 P.2d 875
(App. 1996), as supportive of the argument that bad faith is a continuous
tort. Both cases are easily distinguishable, and neither supports their
contention. White stands for the proposition that an insurer’s duty of good
faith does not terminate when a law suit is filed against it by an insured.
White, 710 P.2d at 885-86. Floyd addresses the implications of continuous
torts in regards to the commencement of limitations periods, and does not
enunciate insurance bad faith is such a continuous tort. Floyd, 186 Ariz. at
413, 923 P.2d at 879. Neither support United’s contention that the bad
faith claim is a continuing tort, nor that the place of injury may be said to
include a state where damages continue to accrue after they have already
been incurred in another state.

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(a) The place where the injury occurred,

(b) The place where the conduct causing the injury occurred,

(c) The domicil, residence, nationality, place of incorporation
and place of business of the parties, and

(d) The place where the relationship, if any, between the
parties is centered.

Bates, 156 Ariz. at 49, 749 P.2d at 1370; Garcia, 195 Ariz. at 517, ¶ 20, 990
P.2d at 1076.

¶22 The first factor, as previously established, weighs in favor of
applying Arizona law. United consistently argues that the weight given
this factor should be diminished because the injury occurring in Arizona
was “merely fortuitous.” See Pounders, 232 Ariz. at 357, ¶ 28, 306 P.3d at
14 (quoting Restatement § 145 cmt. e (“Situations do arise, however,
where the place of injury will not play an important role in the selection of
the state of the applicable law. . . . [W]hen the place of injury can be said
to be fortuitous. . . .”)). In support of this assertion, United notes that the
theft and events giving rise to the Callies’ insurance claim occurred on
their first night in Arizona.

¶23 First, United’s focus upon the theft occurring on the Callies’
first night in Arizona as the basis for its assertion the injury is fortuitous is
misplaced, as it is not the theft that gives rise to the allegation of tortious
conduct, but rather United’s actions, thereafter. The Callies’ bad faith
allegation is that they suffered injury as a result of United’s unreasonable
decision to launch an insurance fraud investigation. The theft of the rental
truck, itself, was no more than the triggering event that lead to the Callies’
insurance claim. It was United’s handling of the claim in August, two
months after the theft, which resulted in the Callies’ complaint of injury.

¶24 Second, we determine that Arizona was not a fortuitous
place of injury. An injury is only fortuitous when it “just happens to
occur” in a particular state. See id. (finding manifestation of mesothelioma
in Arizona was fortuitous as the injured could have moved anywhere
following his exposure to asbestos in New Mexico); Garcia, 195 Ariz. at
517, ¶¶ 21-22, 990 P.2d at 1076 (finding Idaho was a fortuitous place of
injury because the injured passengers of an automobile accident that
occurred in Idaho were Arizona residents that were taking a trip to
Washington with the intent to return to Arizona); Baroldy v. Ortho Pharm.
Corp., 157 Ariz. 574, 578-79, 760 P.2d 574, 578-79 (App. 1988).

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¶25 The Callies had not only moved to Arizona, but proceeded
with the purchase of a home by the time United determined to further
investigate their claim. Further, the Callies had filed their insurance claim
with United from Arizona. Unlike the cited cases where the injury was
deemed fortuitous because the mere happening of the event in the state
was considered random (such as a car accident or the manifestation of an
injury stemming from prior toxic exposure), in this case the Callies’
location at the time of their injury was not a random event as they had not
only decided to reside in Arizona but had relocated to this State, with
United subsequently directing its actions toward the Callies with full
knowledge they, by then, resided in Arizona. See Restatement § 146 cmt. e
(“The local law of the state where the personal injury occurred is most
likely to be applied when the injured person has a settled relationship to
that state, either because he is domiciled or resides there or because he
does business there.”).

¶26 The second factor, given this case’s procedural posture, is
unclear. The complaint merely alleges that United informed the Callies
their claim was to be investigated by an United adjustor, without
specifying which office they would be in contact with or where the
adjustor was located. Naturally, both parties argue the conduct occurred
in the locale that supports their position, with the Callies arguing the
decision was made in Idaho and United arguing the conduct occurred in
Oregon. 9 However, it is unlikely, based upon the facts alleged in the
complaint and contained within the associated papers, the complained of
conduct — United’s decision to undertake an investigation of the Callies’
claim — occurred in either Oregon or Arizona. See Bates, 156 Ariz. at 50,
749 P.2d at 1371 (noting the place where the injury-causing conduct
occurred was found where the decision to terminate plaintiff’s medical
benefits was made, at Nationwide’s headquarters); see, e.g., Baroldy, 157
Ariz. at 579, 760 P.2d at 579 (finding that in failure to warn cases “the
‘place of conduct’ is where the tortuous decision is made”). As the trial

9 This is common when conducting choice of law determinations at the
motion to dismiss stage, as the choice of law inquiry is necessarily fact
intensive, and at this stage discovery has yet to take place and the factual
record has not been developed. See Sioux Biochemical, Inc. v. Cargill, Inc.,
410 F.Supp.2d 785, 799-800 (N.D. Iowa 2005); Amiot v. Ames, 693 A.2d 675,
678-79 (Vt. 1997); see generally Coleman v. City of Mesa, 230 Ariz. 352, 363, ¶
46, 284 P.3d 863, 874 (2012) (“In adjudicating a Rule 12(b)(6) motion to
dismiss . . . a court does not resolve factual disputes between the parties
on an undeveloped record.”).

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court found, United’s place of incorporation is Idaho. Further, Idaho
appears to also be United’s principal place of business, as the address
given for United in the Callies’ policy is in Meridian, Idaho. 10

¶27 When reviewing a dismissal pursuant to Rule 12(b)(6), we
assume the truth of the well-plead allegations contained within the
complaint, as well as all reasonable inferences arising from those facts.
Cullen v. Auto-Owners Ins. Co., 218 Ariz. 417, 419, ¶ 7, 189 P.3d 344, 346
(2008). In this instance, where the facts alleged the Callies were told by a
United adjustor, rather than the insurance agent (Gambill Insurance
Agency) from whom the Callies purchased their policy in Oregon, that an
investigation of their claim was going to commence, it is reasonable to
infer that the decision to investigate their claim was made at United’s
principal place of business – Idaho – rather than in another State where it
simply conducts business. Therefore, this factor does not particularly
weigh in favor of either state’s law being applied. However, as Idaho
recognizes a tort action for insurance bad faith, we may consider this
factor as weighing in favor of the application of Arizona law. See Baroldy,
157 Ariz. at 579, 760 P.2d at 579 (noting that “when the law of two states
does not conflict, the contacts from those two states should be considered
as if they were from the state involved in the choice of law question”)
(citing Restatement § 145 cmt. i).

¶28 The third factor favors the application of Arizona law. The
Callies were domiciled in Arizona at the time of the alleged bad faith.
They had moved themselves and their belongings to Arizona and
purchased a home with the intent to remain. Arizona Bd. Of Regents v.
Harper, 108 Ariz. 223, 228, 495 P.2d 453, 458 (1972) (“Domicile is primarily
a state of mind combined with actual physical presence in the state.”).
Although they have now returned to Oregon, such bears little significance
to this factor. See Summers v. Interstate Tractor & Equip. Co., 466 F.2d 42, 48
n.3 (9th Cir. 1972) (noting that the change of domicile to another state
should carry no weight in deciding which law applies, as granting weight
to it would encourage forum shopping) (citing Reich v. Purcell, 67 Cal.2d

10The insurance policy was introduced by United in its motion to dismiss.
Although it is not a matter contained within the pleadings, see Rule 12(b),
the complaint itself referenced this specific policy and the policy is central
to the Callies’ claim against United. Strategic Dev. & Constr., Inc. v.
Roosevelt Partners, L.L.C., 224 Ariz. 60, 64, ¶ 14, 226 P.3d 1046, 1050 (App.
2010). Therefore, in reviewing the motion to dismiss, we may consider the
information contained within the certified policy.

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551, 555 (Cal. 1967)); see also Pounders, 232 Ariz. at 358, ¶ 32, 306 P.3d at
15 (stating the place of the plaintiff’s current domicile was entitled to little
weight as he could have relocated to anywhere following his asbestos
exposure); see, e.g., Restatement Intro. Note, ch. 7 (although not taking a
specific stance, noting that a party’s change in domicile following the
commission of the tort but prior to the commencement of litigation should
“[p]resumably[] . . . have no effect upon the law governing most of the
issues involving the [tort]”). United, on the other hand, is incorporated
and maintains its principal place of business in Idaho, while licensed to
conduct business in several states, including both Arizona and Oregon. In
a personal injury case, “we give greater weight to the residence of the
alleged tort victim.” Bates, 156 Ariz. at 50, 749 P.2d at 1371 (citing
Restatement § 145 cmt. e).

¶29 The fourth factor, similar to the second, is unclear based
upon the record. The Callies were Oregon residents when they purchased
their United insurance policy from an Oregon insurance agent toward
insuring their Oregon home and personal possessions. Nevertheless, at
the time of the alleged bad faith, the Callies had relocated to Arizona,
wherefrom their insurance claim to United was submitted and adjusted.
Because insureds possess greater mobility than insurers we generally
assume the relationship is centered at the insurer’s headquarters. Id. In
the immediate case, that is Idaho. Again, as Idaho and Arizona law is
harmonious, we may consider this factor to weigh in favor of applying
Arizona law. See Baroldy, 157 Ariz. at 579, 760 P.2d at 579 (citing
Restatement § 145 cmt. i).

¶30 In total, the first and third factors weigh in favor of Arizona
law, while factors two and four arguably weigh toward either Idaho or
Arizona law. However, this is a qualitative, rather than quantitative
analysis. Bates, 156 Ariz. at 51, 749 P.2d at 1372; see Restatement § 145.
Under § 146, “the law of the state ‘where the injury occurred’ is
determinative unless some other state has a more significant relationship.”
Bates, 156 Ariz. at 51, 749 P.2d at 1372 (citing Restatement § 146).

C. Restatement § 6

¶31 Having determined the factors from § 145 illustrate Arizona
has greater contacts relevant to this dispute, we still may only apply
Arizona law if doing so would be consistent with the principles stated in
Restatement § 6. Pounders, 232 Ariz. at 358, ¶ 35, 306 P.3d at 15; Bates, 156
Ariz. at 50, 749 P.2d at 1371; Restatement § 145(1)-(2). Section 6(2) sets

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forth general principles to be applied in every choice of law
determination:

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative
interests of those states in the determination of the particular
issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be
applied.

¶32 In this case, the first, fifth, and seventh factors are
insignificant. The needs of the interstate and international systems are not
implicated or affected by the application of either Oregon or Arizona law.
See Bates, 156 Ariz. at 50, 749 P.2d at 1371. Likewise, both states would be
easily able to determine and apply either state’s law. See Garcia, 195 Ariz.
at 519, ¶ 27, 990 P.2d at 1078.

¶33 United argues that the fourth factor, the protection of
justified expectations, weighs in favor of Oregon having a more significant
relationship to this dispute because the contract originated in Oregon and
none of the parties could have expected the Callies to gain greater
contractual rights by moving to Arizona. United’s assertion creates a
misnomer, as the claim alleged sounds in tort, and in no way expands the
Callies’ “contractual benefits.” Further, however, we simply disagree
with the argument as the very language of United’s insurance contract
specifically asserted the contracted-for coverage for personal property
applied anywhere in the world. United could not have believed that no
matter where the Callies moved and regardless of the circumstances
giving rise to a claim or subsequent actions following a claim being filed,
throughout the world, Oregon law would apply.

¶34 Additionally, the claim is not one arising “from breach of
some express covenant inserted by [United] as a matter unique to its
[Oregon] business. [It instead] arises, rather, from breach of a good faith

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covenant implied in law.” Bates, 156 Ariz. at 50, 749 P.2d at 1371. Bates
rejected the argument that the law of the state where the contract was
entered into (here, Oregon) necessarily is applied to a bad faith claim
arising from conduct and resulting injury occurring in another state (here,
Idaho and Arizona respectively). Id. at 51, 749 P.2d at 1372. Any
expectations that would be the case are unjustified. Id. at 50, 749 P.2d at
1371. Further, “the protection of the justified expectations of the parties . .
. is of lesser importance in the field of torts.” Restatement § 145 cmt. b.
The underlying purpose of this policy is to avoid penalizing a person for
conforming to the law of one state “when he had justifiably molded his
conduct to conform to the requirements of another state,” which is less of
a concern in the area of torts. Restatement § 6 cmt. g. Even assuming this
policy carried great relevance to the tort of bad faith, this factor does not
weigh in favor of Oregon law, as United did not justifiably mold its
conduct to conform to the law of Oregon. Oregon does not excuse liability
for insurer’s bad faith actions, but rather limits any cause of action to
contract claims. Emp’rs’ Fire Ins. Co., 670 P.2d at 165.

¶35 United also argues the application of Oregon law would best
serve the policies, provided in factors six and seven, of “certainty,
predictability, and ease of determination.” Specifically, it argues Oregon
law would provide greater ease because the tort is not recognized,
therefore the trial court would not have to go through the task of
“consider[ing] a vast array and detailed analysis of the handling of a claim
under the bad faith tort.” Succinctly stated, if this Court, on appeal, were
to decide in favor of United, any bad faith claim would be eliminated.
However, this policy bears no weight in our analysis as this principle is
concerned with “choice-of-law rules [being] simple and easy to apply,”
and both Oregon and Arizona follow the Restatement’s choice of law
approach. Moreover, the principle of certainty and predictability of result
is more significant in areas where “the parties are likely to give advance
thought to the legal consequences of their transactions,” such as the effect
and validity of a contract or will. Bryant, 146 Ariz. at 46, 703 P.2d at 1195;
Restatement §§ 6 cmt. j, 145 cmt. b. In the immediate matter, the parties
gave no such advance thought to the legal consequences of the alleged
bad faith actions.

¶36 The remaining principles require consideration of the
policies and interests of the forum state and other interested states.
Restatement § 6(2)(b)-(c). These two principles gain greater significance
due to the limited importance of the other § 6 principles in tort cases.
Pounders, 232 Ariz. at 359, ¶ 39, 306 P.3d at 16; see Restatement § 145 cmt. b
(noting that the relevant polices in tort cases usually are the policies of the

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forum and other interested states). These policies are compared with
particular weight being given to the Arizona’s policy, as it is the dominant
state. See Pounders, 232 Ariz. at 359, ¶ 40, 306 P.3d at 16 (citing
Restatement § 145 cmt. b).

¶37 Oregon and Arizona’s policies regarding insurance bad faith
are drastically different. Arizona recognizes that conduct constituting
insurance bad faith may cause a person to suffer more than mere
economic injuries, and thus recognizes it as a tort. Noble v. Nat’l Am. Life
Ins. Co., 128 Ariz. 188, 189-90, 624 P.2d 866, 867-68 (1981); Bates, 156 Ariz.
at 49, 749 P.2d at 1370. Oregon, however, limits bad faith causes of actions
to contract, thus making emotional or physical damages unrecoverable.
Emp’rs’ Fire Ins. Co., 670 P.2d at 790.

¶38 As the policies of the states are substantially different, we
turn to the interests of the respective states. Arizona has a strong interest
in ensuring its residents are made whole for injuries sustained while in
Arizona. Bryan, 146 Ariz. at 47, 703 P.2d at 1196. Toward that end, it
allows recovery for plaintiffs injured by insurance bad faith practices to
recover all damages caused by an insurer’s conduct, including economic
and emotional damages. 11 Rawlings, 151 Ariz. at 161, 726 P.2d at 577. It
also has a strong interest in deterring wrongful conduct directed against
its citizens. Pounders, 232 Ariz. at 359, ¶ 41, 306 P.3d at 16. Oregon’s
interests, on the other hand, are limited here, where the insureds were
Arizona residents at the time of the complained of conduct, the conduct
occurred outside of Oregon, and the tortfeasor is incorporated in Idaho.
Although United conducts business in Oregon, this creates no greater
interest in Oregon as United equally conducts business in Arizona.

¶39 After weighing the relevant principles of §§ 6, 145 and 146,
we find Arizona has the more substantial interest to this occurrence, and,
therefore, Arizona law is appropriately applied, even though neither party
is currently a domiciliary of the State. See, e.g., Jackson v. Chandler, 204
Ariz. 135, 139, ¶ 18, 61 P.3d 17, 21 (2003) (“[W]e believe Arizona has a
substantial interest in permitting the present action in this forum even
though no party is a domiciliary of Arizona.”).

11Punitive damages, however, are not automatically recoverable, but may
only be recovered if the plaintiff can demonstrate the insurer’s wrongful
conduct was done with an intent to injure the plaintiff or done with
knowledge that the conduct created a substantial risk of harm. Rawlings,
151 Ariz. at 162, 726 P.2d at 578.

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II. Rule 12(b)(6)

¶40 Finding that Arizona law should be applied, we turn to the
Callies’ complaint to determine whether a claim upon which relief can be
granted has been asserted. In regard to United, the complaint alleges one
cause of action for insurance bad faith. That cause of action consists of
two elements: “(1) that the insurer acted unreasonably toward its insured,
and (2) that the insurer acted knowing that it was acting unreasonably or
acted with such reckless disregard that such knowledge may be imputed
to it.” Miel v. State Farm Mut. Auto. Ins. Co., 185 Ariz. 104, 110, 912 P.2d
1333, 1339 (App. 1995). The insurer’s actions must be intentional; mere
mistake and inadvertence are insufficient to establish a bad faith claim. Id.
(citing Rawlings v. Apodaca, 151 Ariz. 149, 157, 726 P.2d 565, 573 (1986)).

¶41 Within their complaint, the Callies allege they notified police
and United of the theft the day it occurred. The stolen truck was found
completely empty and abandoned on the side of the road almost three
weeks later. A month or so following the theft, a suspect was arrested and
had in his possession a gun which had been packed in the moving truck at
the time the truck was stolen. Further, a motorcycle taken from the truck
was found abandoned and damaged on the side of the road.

¶42 The Callies met with an adjustor and provided detailed lists
of the property taken, as per United’s request. Thereafter, the Callies were
informed their payment would be forthcoming, only later to be told
payment was not being processed as their claim was being investigated
without being provided an explanation for the investigation. They
received a phone call in August 2011 from a lawyer representing United
who advised the Callies they were to no longer attempt to contact their
own insurer and requested they submit to examinations under oath.
Dorene expressed doubt during the call that Kenneth was capable of
undergoing such an examination. Thereafter, several months passed
before the Callies had any further contact from United or its
representatives.

¶43 Taking these allegations as true and drawing all reasonable
inferences there from in favor of the Callies, the Callies have alleged
sufficient facts to support a tort bad faith claim and withstand United’s
Rule 12(b)(6) motion. See Coleman, 230 Ariz. at 356, ¶ 8, 284 P.3d at 867
(dismissal pursuant to Rule 12(b)(6) is appropriate only if “as a matter of

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law plaintiffs would not be entitled to relief under any interpretation of
the facts susceptible of proof”). 12

III. Forum Non Conveniens

¶44 Within its motion to dismiss, United also argued the claim
against it should be dismissed because Arizona was an inconvenient
forum. The trial court did not rule on United’s forum non conveniens
argument when it dismissed the case against it, although both parties
addressed the argument in the course of their motion practice.
Nonetheless, United urges us to uphold the trial court’s dismissal order on
forum non conveniens grounds. See Glaze v. Marcus, 151 Ariz. 538, 540, 729
P.2d 342, 344 (App. 1986) (“We will affirm the trial court’s decision if it is
correct for any reason, even if that reason was not considered by the trial
court.”). As this issue will likely arise on remand, we address United’s
argument and find that forum non conveniens is inappropriate in this case.

¶45 “Forum non conveniens is ‘an exceptional tool to be employed
sparingly’ rather than a ‘doctrine that compels plaintiffs to choose the
optimal forum for their claim.” Parra v. Continental Tire North Am., Inc.,
222 Ariz. 212, 214, ¶8, 213 P.3d 361, 363 (App. 2009) (citing Ravelo Monegro
v. Rosa, 211 F.3d 509, 514 (9th Cir. 2000)). A plaintiff is afforded the ability
to choose a forum, and this choice should only be disturbed for weighty
reasons. Cal Fed Partners v. Heers, 156 Ariz. 245, 246, 751 P.2d 561, 562
(App. 1987)). However, a plaintiff’s forum choice is afforded less credence
if he is not a resident of the chosen forum. Id.

¶46 To prevail on a forum non conveniens argument, the
defendant must demonstrate two things: (1) that there is an available and
adequate alternative forum to hear the case, and (2) that the alternative
forum, on balance, is a more convenient place to litigate the particular
case. Parra, 222 Ariz. at 215, ¶¶ 9-10, 213 P.3d at 364. As to the first prong,
United stipulated it would agree to service and jurisdiction in Oregon,
making it an adequate alternative forum. See Restatement § 84 cmt. e
(“[A] court which finds itself to be an inappropriate forum under the rule
of this Section must dismiss the action outright, or do so conditionally (as

12As we find Arizona law should apply and the complaint states a proper
claim, we do not address the Callies’ argument on appeal that the trial
court considered matters outside the pleading in reaching its decision and
therefore should have converted the motion to dismiss into one for
summary judgment.

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by requiring that the defendant stipulate to accept service of process . . . in
some second state that is deemed a more convenient forum).”).

¶47 The second prong requires the balancing of private and
public reasons of convenience. Parra, 222 Ariz. at 215, ¶10, 213 P.3d at 364.
The private factors to be considered include: the relative ease of accessing
sources of proof, availability of a compulsory process to have unwilling
witnesses attend, the cost of obtaining the attendance of willing witnesses,
and all other practical problems that contribute to an expeditious and
inexpensive trial. Id. at ¶ 12 (citing Cal Fed Partners, 156 Ariz. at 246, 751
P.2d at 562).

¶48 With regard to sources of proof, United argues a majority of
the witnesses the Callies disclosed in their Rule 26.1 statement reside in
Oregon and are therefore unable to be summoned to Arizona for trial.
These witnesses fall into three categories: (1) the Callies’ relatives, who
would presumably avail themselves to be summoned to testify in Arizona,
(2) medical personnel that will testify as to Kenneth’s need for medical
treatment and his prognosis, and (3) people associated with United or the
Callies’ insurance policy and claim. There are also identified witnesses
who reside in Arizona, a majority being law enforcement officers, as well
as the adjustor United dispatched to the Callies’ Arizona residence.

¶49 Although there are more witnesses identified from Oregon
than Arizona, evaluation of this factor does not simply look at the
comparison of the number of witnesses from the locations, but at the
“materiality and importance of the anticipated witnesses’ testimony and
then . . . their accessibility and convenience to the forum.” Id. at 216, ¶13,
213 P.3d at 365 (citing Great Learjet Corp. v. Jensen, 743 F.2d 1325, 1335-36
(9th Cir. 1984). United has not offered any explanation as to why regular
discovery methods would be insufficient to gain information from the
identified Oregon witnesses, or why those witnesses’ testimony is so
significant it would require dismissal if they were not willing to travel to
Arizona to testify. The majority of the witnesses relate to the medical
treatment Kenneth received, and as it is the Callies’ burden to prove their
damages, it ultimately is them that would be harmed if they are unable to
procure those witnesses’ testimony. Further, with respect to the Oregon
witnesses associated directly with United, United clearly has the ability to
interview them.

¶50 Weighing in favor of Arizona being an inconvenient forum
are the undeniable increased costs, to both parties, of procuring out of
state witnesses’ testimony at trial, with these costs being unrecoverable

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from the superior court. See A.R.S. § 12-332 (2014); Ponderosa Plaza v.
Siplast, 181 Ariz. 128, 134, 888 P.2d 1315, 1321 (App. 1993). However, this
concern is countered by the added expense the Callies would have to
incur to separately litigate their two, to a certain extent, factually
overlapping claims — one against United and the other against The Lodge
— in two separate states with separate local counsel, as The Lodge is not
subject to personal jurisdiction in Oregon. See, e.g., Coonley & Coonley v.
Turck, 173 Ariz. 527, 533, 844 P.2d 1177, 1183 (App. 1993)

¶51 Also to be considered are several public factors, including:
the administrative burden the lawsuit may place on the court’s docket,
having citizens from a disinterested community to serve on a jury, and the
law that will govern the case. Parra, 222 Ariz. at 217, ¶ 20, 213 P.3d at 366.

¶52 These factors weigh heavily against Oregon being the more
appropriate forum. United argues the first factor, limiting the burden of
litigation in congestion centers, clearly favors Eugene, Oregon, over
Phoenix, Arizona. This factor is concerned “not [with] whether a
dismissal will reduce a court’s congestion but whether a trial may be
speedier in another court because of its less crowded docket.” Id. at 218,
¶24, 213 P.3d at 367. United did not support its motion with any evidence
that this litigation would be resolved any quicker in an Oregon court.

¶53 United also argues there are not enough contacts to Arizona
to justify an Arizona jury having to sit for this dispute. As we noted,
Arizona indeed does have a number of contacts to this dispute. Although
the policy was originally purchased in Oregon and the Callies are now
residing in Oregon, the bad faith conduct caused an injury to the Callies
while they were Arizona residents. Also, United is licensed and conducts
business in Arizona, selling nearly identical policies to Arizona residents.
Arizona’s significant interests in this case make it appropriate for Arizona
jurors to hear it. Furthermore, the third factor clearly weighs against
dismissal as we have found that Arizona law will govern the parties’
dispute.

¶54 Considering the private and public factors together, we
cannot say they weigh so strongly in favor of Oregon that dismissal is
appropriate. Indeed, the public factors actually weigh strongly against
dismissal in this case. We therefore conclude United has not met its
burden to dismiss the case upon grounds of forum non conveniens. See
Parra, 222 Ariz. at 215, ¶ 10, 213 P.3d at 364 (“Where factors of
convenience are closely balanced, the plaintiff is entitled to its choice of
forum.”) (citing Cal Fed Partners, 156 Ariz. at 248, 751 P.2d at 563).

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CONCLUSION

¶55 For the foregoing reasons, we find Arizona law applies.
Accordingly, we reverse the trial court’s dismissal of the Callies’ claim
against United, vacate the trial court’s minute entry dismissing the Callies’
claim against United, and remand to the trial court with instructions to
deny United’s motion to dismiss and for such further proceedings as are
consistent with this decision. 13

:gsh

13 Both sides request attorneys’ fees on appeal pursuant to A.R.S. § 12-
341.01 (2014). As neither party has yet to prevail on the merits of the case,
we deny both parties’ requests for fees. On remand, the trial court may
consider a request from the prevailing or successful party for fees incurred
in this appeal.

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