Knightbrook Insurance Co v. Payless Car Rental System, Inc., 100 F. Supp. 3d 817

KnightBrook issued an SLI (supplemental liability) policy to PCR Venture covering renters who elected SLI; Payless rented a car to Bovre on Feb 17, 2010, and Bovre did not pay for SLI but left a contraction in the rental paperwork (no initial) and later testified the desk agent said liability was included.
Bovre collided with the McGills on March 1, 2010; McGills sued Bovre and later accepted a Damron settlement for $530,000 plus assignment of Bovre’s claims and a stipulated $8M judgment.
McGills then sued Knight and Payless (second lawsuit) asserting Bovre’s assigned claims; they made a time-limited $1M (later $970,000) demand.
Knight asked Payless to contribute 50% to a $970,000 settlement; Payless refused; Knight paid $970,000, took assignment of claims, then sued Payless for indemnification and other claims.
After bench trial, court: negligence/negligent misrepresentation and breach of fiduciary duty claims dismissed as time‑barred; Knight entitled to equitable indemnification of $970,000 plus defense fees from Payless; Payless’ bad‑faith counterclaim dismissed.

Issue	Plaintiff's Argument (Knight)	Defendant's Argument (Payless)	Held
Whether negligence & negligent misrepresentation claims are timely	Claims arose from desk agent’s failure to document/representations; accrual when discovered later	Claims accrued earlier and are barred by two‑year statute	Dismissed: claims time‑barred (accrued by June 2010)
Whether breach of fiduciary duty is timely	Payless acted as agent and breached duties; claim belongs to Knight and accrued later	Knight knew in 2010 and suffered harm (attorney retention) before limitations cut‑off	Dismissed: claim time‑barred (accrued by summer 2010)
Entitlement to equitable indemnification for the $970,000 settlement	Knight paid to eliminate liability caused primarily by Payless’s contract/form/agent; payment made in justifiable belief of liability; seeks full recovery plus defense fees	Payless invokes anti‑subrogation and unclean‑hands to bar recovery	Granted: Knight entitled to $970,000 indemnity and defense fees for defending the second lawsuit; anti‑subrogation and unclean‑hands do not bar recovery
Payless’ counterclaim for insurance bad faith against Knight	N/A (Payless asserts Knight acted in bad faith by settling, obtaining assignment, seeking indemnity)	Knight says it reasonably protected itself from Payless’s fault and was not insurer for the settled claims	Dismissed: Payless failed to prove bad faith by Knight

K.B. v. State Farm Fire & Cas. Co., 189 Ariz. 268, 941 P.2d 1288 (Ariz. Ct. App.) (assignee stands in assignor's shoes for defenses)
Walk v. Ring, 202 Ariz. 310, 44 P.3d 990 (Ariz. 2002) (accrual requires knowledge of wrong and causation)
Ritchie v. Krasner, 221 Ariz. 288, 211 P.3d 1272 (Ariz. Ct. App.) (statute‑of‑limitations accrual principles)
Commercial Union Ins. Co. v. Lewis & Roca, 183 Ariz. 250, 902 P.2d 1354 (Ariz. Ct. App.) (when plaintiff knows cause of harm is key to accrual; discussion of attorney‑fee injury)
Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565 (Ariz.) (tort damages include inconvenience, time, effort)
Damron v. Sledge, 105 Ariz. 151, 460 P.2d 997 (Ariz.) (Damron settlement mechanics)
MT Builders L.L.C. v. Fisher Roofing, Inc., 219 Ariz. 297, 197 P.3d 758 (Ariz. Ct. App.) (equitable indemnification discussion)
Zilisch v. State Farm Mut. Auto. Ins. Co., 196 Ariz. 234, 995 P.2d 276 (Ariz.) (insurer's covenant of good faith and fair dealing)
Deese v. State Farm Mut. Auto. Ins. Co., 172 Ariz. 504, 838 P.2d 1265 (Ariz.) (implied covenant of good faith in insurance contracts)