In 2017, the Arizona Supreme Court changed the scope and limits of discovery to “any non-privileged matter that is relevant to any party’ claim or defense and proportional to the needs of the case.”1 Starting in July 2018, Arizona Rule of Civil Procedure 26.2, will take effect. Rule 26.2 has been significantly changed, adopting a “Three-Tiered” system of civil case management to make discovery occur in a manner consistent with Rule 26.1(b)(1)—proportional discovery.
The Three-Tiered system limits discovery based in a matter based upon the assigned Tier. Tier 1 includes simple cases that can be tried in one or two days and seek damages of $50,000 or less. Tier 2 includes cases of intermediate complexity cases with more than minimal documentary evidence, more than a few witnesses and seek damages between $50,000 and $300,000. However, most first-party bad faith cases will likely fall under Tier 3. Tier 3 cases are logically or legally complex matters with a large number of witnesses, significant documentary evidence, and seek more than $300,000 in damages.
Cases will be assigned to a Tier either by stipulation or motion for good cause; or by placement by the court based upon the characteristics of the case; or, by the sum of the relief sought by the complaint and any counterclaims or crossclaims. Ultimately, the court has discretion to assign a case to any Tier based upon the totality of the circumstances.
So, what are the new discovery limitations associated with Tier 3 cases? In a Tier 3 case, each side is permitted 30 hours of fact witness depositions; 20 interrogatories; 10 requests for production; and 20 requests for admission. However, the most significant impact will be that discovery needs to be completed in 240 days, absent leave of the court. Far too often, first-party bad faith matters have extended out years based upon claims that additional discovery is needed to prepare the case for trial. The adoption of proportional discovery combined with the substantive associated changes to the limits on discovery should result in earlier case resolution, and reduced costs of litigation.
This time limitation on discovery will require policy holders, who have been treated improperly by their carriers, to rethink how they approach their case. You can no longer wait until the last minute to pursue litigation. To use the rules to the policy holder’s advantage, it is important have key aspects of your case lined up by the time your Complaint is filed. Early planning and preparation will be important. This may include identifying experts, obtaining expert opinions and assembling discoverable evidence by the time the Complaint is filed or shortly thereafter. Proper preparation should help eliminate any good faith basis for extending discovery beyond presumptive limits.
The advantages to policyholders is clear, the changes to the discovery rules should allow cases to proceed to conclusion much faster. The rules will limit the amount of discovery, consistent with the true requirements of the case. The goal should be to prevent the insurer’s counsel from extending discovery, which is typically inconsistent with a policyholder’s need to obtain just compensation to repair their home, office or commercial building, and obtain the benefit of the bargain they are entitle to under the policy.
1 Ariz.R.Civ.P., Rule 26 (effective 7/1/2018).