Ariz Court: PTSD Claimant Missed Statute of Limitations for Bad Faith Claim

John C. France’s workers’ compensation claim cleared the way for Arizona first responders to receive workers’ compensation benefits for post-traumatic stress syndrome.

But the former Gila County Sheriff’s Office sergeant cannot pursue a bad faith claim against the Arizona Counties Insurance Pool for denying his PTSD claim because he waited too long to file suit. A state Court of Appeals panel ruled Friday that a one-year statute of limitations for claims against public entities starts running on the date the claim is denied.

The 3-0 opinion says “we reject France’s contention that before he could file a bad faith claim, he was required first to establish coverage for the industrial injury.”

France filed for workers’ compensation after he shot and killed a man who was pointing a shotgun at him in June 2017. It turned out that the gunman had never released the safety on his weapon. France, badly shaken, was diagnosed with PTSD.

The insurance pool denied the claim because under state law, mental health claims are not compensable unless the disorder is caused by “unexpected, unusual or extraordinary stress.” The Arizona Industrial Commission agreed and ruled that France’s claim was not compensable.

The state Supreme Court reversed that decision, ruling in March 2021 that the shooting did cause extraordinary stress for France, even though his ordinary job duties required him to responding to armed suspects.

France filed a bad-faith action against the insurance pool in August 2019, more than a year after the Industrial Commission ruled he was not eligible for benefits. The insurance pool argued that France had missed the one-year deadline imposed by the statute of limitations for claims against public entities.

The appellate panel, however, said the clock started running even before then. The opinion says to preserve his right to pursue a bad-faith action, France need to file suit within one year after the insurer denied his claim on Aug. 7, 2017.

The panel said Arizona Revised Statute Section 12-821 requires parties to file claims against public entities within six months after the claim “accrues.” A lawsuit must be filed within one year of accrual.

France’s attorney and the insurance pool had different opinions about when France’s bad faith claim accrued. The insurer argued that the clock started running when the Industrial Commission ruled on his workers’ compensation claim on March 27, 2018. France argued that his bad faith claim didn’t accrue until May 6, 2021, when the Industrial Commission issued a final ruling awarding benefits after the Supreme Court reversed the commission’s earlier decision denying the claim.

The appellate panel said both were wrong. Nothing in the statutes requires a claimant to exhaust all administrative remedies before filing a bad faith claim, the opinion says. If a bad faith claim hinges on whether there is coverage, the parties may stipulate to stay proceedings until the issue is resolved.

“We stated this approach is ‘arguably the most cost effective and promotes judicial economy,'” the opinion says, citing a previous ruling.

“in sum, the final coverage determination neither tolls nor affects the accrual of a bad faith claim,” the panel concluded.