It's Not the Bark, it's the Bite
Why it's important to aggressively defend your business at any
Regulatory Board Hearing
By: Scott J. Richardson
Many Arizona businesses have a regulatory agency, board or
commission that governs their professional activity. These agencies
adopt regulatory rules and, in the case of some agencies, prescribe
minimum work standards.
Enforcement of these laws or rules primarily is from one
of two sources:
- a complaint directly by the regulatory agency/board or
- a complaint brought by a consumer.
When faced with a consumer generated complaint before your
business's Arizona regulatory agency, consider whether your general
liability insurer should or will cover your defense before the
agency. It is unlikely that a consumer will obtain monetary damages
from the regulatory agency. At first glance, an insurer may
respond that since monetary damage is not sought nor can it be
granted by the regulatory agency, they need not defend you company
under its policy. However, if the agency or board has judicial
authority to render findings of fact and conclusions of law, under
Arizona law those finding may be given preclusive effect in a
subsequent lawsuit by the consumer against your business.
JW Hancock v. Registrar of Contractors. 142 Ariz. 400, 690 P.2d 119
What this ruling clarifies is the findings of the regulatory
agency may translate to the subsequent lawsuit and no further proof
may be required. In other words, what happened at the regulatory
agency may limit the ability to defend your company in a lawsuit
against certain claims. It is important your company has a
full and complete defense in front of the regulatory agency or
Many times the regulatory agency hearings and decisions
are the start of the civil trial on your company's liability! When
presented like this, your insurance company should decide to defend
you before the regulatory agency to avoid having adverse findings
that may hurt their ability to defend your company in a subsequent
lawsuit. Additionally, the insurance carrier may provide,
under your policy, an attorney to represent and protect your
company at the regulatory hearing.
Presenting these issues to your carrier will require some
finesse. However, it is likely that it may result in a short
cut to a happy resolution of claims, an opportunity to settle the
claims without the stress of a lawsuit and allow you to get back to
what you do best - managing your business.
To determine what is the authority of the regulatory agency or
board that governs your business we would recommend visiting the
agency's website or contacting the agency telephonically. For
example, the Office of Pest Management has infomration on their
site including a complaint process summary on their website http://www.sb.state.az.us/index.php.
Another example is the Registrar of Contractors which has a
comprehensive menu of the legal process on their website. http://www.azroc.gov/Legal_menu.html.
ROC is one of the agencies that their findings will translate
to civil courts. If you cannot determine whether or not the
agency's determination or findings will have preclusive effect in a
subsequent lawsuit, then we recommend talking to your trade
association or an attorney that is knowledgeable in either
insurance coverage law or administrative law.
About the author: Scott J. Richardson is a shareholder
in the Phoenix law firm of Jaburg Wilk. He assists clients
with insurance coverage, administrative boards and agencies and
risk prevention. Scott can be reached at 602.248.1012 or email@example.com
This article is not intended to provide legal advice
and only relates to Arizona law. It does not consider the
scope of laws in states other than Arizona. Always consult an
attorney for legal advice for your particular situation.
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