NOT FOR OFFICIAL PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

MEMORANDUM DECISION

WINTHROP, Judge.

¶1 This appeal arises from the trial court's denial of a plaintiff's motion to amend her complaint. For the reasons that follow, we vacate the judgment dismissing the plaintiff's case, and remand with instructions to grant the plaintiff's motion to amend and for further proceedings consistent with this decision.

FACTS AND PROCEDURAL BACKGROUND

¶2 In May 2007, Sharon Hutchison was involved in a work-related automobile accident. At the time of the accident, Hutchinson was personally insured by American Family Mutual Insurance Company ("American Family") and had underinsured motorist ("UIM") insurance coverage with a policy limit of $50,000.

¶3 The other driver's insurance company paid its bodily injury liability coverage limit of $15,000. Hutchison claimed her damages from the accident exceeded $15,000, however, and on December 15, 2008, she submitted through counsel a demand letter to American Family for $50,000, the full amount of coverage available under her UIM policy. In the letter, Hutchison stated that since the accident, she had been treated by a chiropractor, visited an emergency care facility, received physical therapy, and had been evaluated by a medical doctor, a neurologist, and three orthopedic surgeons — the first and third at the request of SCF of Arizona, the workers' compensation carrier. On March 31, 2008, the third orthopedic surgeon, Irwin Shapiro, M.D., concluded Hutchison had no neurological deficits, but had suffered a thoracolumbar strain, for which she did not need surgical intervention, but needed pain management. Hutchison claimed she had incurred $12,518.65 in medical bills, and further claimed $75,000 in general damages for physical and emotional pain and suffering.

¶4 Although the record is not entirely clear on this point, American Family apparently responded by offering to settle Hutchison's UIM claim for $2,500. Hutchison advised American Family that she was seeking further treatment in California for her alleged accident-related injuries, and further negotiations would be deferred until she finished her treatment.

¶5 In a subsequent demand letter dated February 1, 2010, Hutchison again sought the $50,000 policy limit of her UIM coverage. In the letter, she claimed her medical bills associated with the accident "presently total $37,706.10," and she claimed additional damages both "to date and continuing into the future" for physical therapy and lost wages. In total, Hutchison claimed her current and future damages were $117,922.10. Hutchison supplemented her demand with supportive documentation, and noted she had since been evaluated by Michael Keller, M.D., at the San Diego Arthritis Medical Clinic and at the Scripps Clinic, Department of Rheumatology, in La Jolla, California. In a letter dated May 6, 2010, American Family responded, offering Hutchison $3,500.

¶6 On August 20, 2010, Hutchison filed a complaint against American Family, requesting UIM benefits and asserting a breach of contract claim for failure to pay those benefits.

¶7 On August 16, 2012, Hutchison made a final settlement demand to American Family, again requesting payment of the UIM coverage limit. This demand letter described additional damages allegedly realized since the February 2010 demand letter, stated (apparently for the first time) that a physician from the Scripps Clinic had concluded Hutchison "had probably developed fibromyalgia," and included a claim that a hearing officer from the Social Security Administration had determined Hutchison totally disabled as of April 26, 2012, ostensibly as a result of the accident.

¶8 Hutchison and American Family agreed to submit the value of Hutchison's underlying personal injury claim to binding arbitration and did so in December 2012. The major issue presented at the arbitration hearing was whether Hutchison's recently diagnosed fibromyalgia was related to or caused by the accident. After the presentation of evidence and expert witness testimony — including the testimony of Dr. Keller, a rheumatologist, who opined that Hutchison's fibromyalgia was related to the accident1 — the arbitrator found Hutchison's accident-related damages, including the fibromyalgia, were $200,000. American Family paid Hutchison the $50,000 available under her UIM policy.

¶9 On March 11, 2013, Hutchison filed a request to set a Rule 16, Ariz. R. Civ. P., scheduling conference. The joint Rule 16 memorandum filed with the trial court reflected Hutchison's plan to pursue a claim of bad faith, and American Family's response, requesting that the court determine whether Hutchison had any claims remaining to litigate. At the conference, the trial court ordered Hutchison to file a motion to amend the complaint and American Family to file a response.

¶10 On August 14, 2013, Hutchison moved to amend her complaint to add a claim for bad faith. American Family responded, objecting to the amendment as untimely and arguing the statute of limitations barred the bad faith claim. Hutchison replied that her proposed amendment related back to the date of the original complaint pursuant to Rule 15(c), Ariz. R. Civ. P., because it arose out of the same conduct, transaction, or occurrence.

¶11 On October 1, 2013, the trial court heard argument on the motion to amend the complaint. At the conclusion of oral argument, the court found the amendment related back to the complaint; however, the court also found that because the amendment was not promptly requested, "the delay was prejudicial to all concerned, to the whole proceedings, it was dilatory to the extreme and it was almost a tactic and would require much — many new witnesses and exhibits and completely new discovery." Accordingly, the court denied Hutchison's motion to amend the complaint. With no issues remaining for litigation, the court issued a final judgment dismissing the case with prejudice.

¶12 This court has jurisdiction over Hutchison's timely appeal. See Ariz. Rev. Stat. ("A.R.S.") § 12-2101(A)(1) (Supp. 2015).

ANALYSIS

¶13 On appeal, Hutchison argues the trial court erred in denying her motion to amend her complaint. The parties raise numerous arguments related to the court's decision.

¶14 We review for an abuse of discretion a trial court's denial of a motion to amend a complaint. Tumacacori Mission Land Dev., Ltd. v. Union Pac. R.R. Co., 231 Ariz. 517, 519, ¶ 4, 297 P.3d 923, 925 (App. 2013). Although a court has discretion in deciding whether to grant a motion to amend the pleadings, amendments should be liberally allowed, absent a finding of undue delay, dilatory motive, undue prejudice, or futility of the amendment. See Owen v. Superior Court, 133 Ariz. 75, 79, 649 P.2d 278, 282 (1982); Bishop v. State Dep't of Corr., 172 Ariz. 472, 474-75, 837 P.2d 1207, 1209-10 (App. 1992); Ariz. R. Civ. P. 15(a)(1)(b) ("Leave to amend shall be freely given when justice requires."). If a motion to amend seeks only to add a new legal theory supported by factual issues already in the case, a denial of such request is generally considered an abuse of discretion. Walls v. Ariz. Dep't of Pub. Safety, 170 Ariz. 591, 597, 826 P.2d 1217, 1223 (App. 1991); see also Spitz v. Bache & Co., 122 Ariz. 530, 531, 596 P.2d 365, 366 (1979) (recognizing that when "the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief," a trial on the merits is preferred (quoting Foman v. Davis, 371 U.S. 178, 182 (1962))). "Notice and substantial prejudice to the opposing party are critical factors in determining whether an amendment should be granted." Owen, 133 Ariz. at 79, 649 P.2d at 282 (quoting Hageman v. Signal L. P. Gas, Inc., 486 F.2d 479, 484 (6th Cir. 1973)).

¶15 An amendment relates back to the date of the original pleading if the claim asserted in the amendment "arose out of the [same] conduct, transaction, or occurrence." Ariz. R. Civ. P. 15(c). In evaluating whether an amendment adding a new legal claim should be permitted, we look at whether the facts, as pled, would put the party on notice of the potential of such a claim. Marshall v. Superior Court, 131 Ariz. 379, 382-83, 641 P.2d 867, 870-71 (1982). It is reasonable to assume that, as long as the parties remain the same, a defendant is on notice of any claim that could arise out of the conduct, transaction, or occurrence described in the complaint. See Watts v. State, 115 Ariz. 545, 549, 566 P.2d 693, 697 (App. 1977) (citation omitted). "It is only when the amendment seeks relief with respect to a transaction or event which was not the `basis of the original complaint' that the doctrine of relation back is considered inapplicable." Marshall, 131 Ariz. at 383, 641 P.2d at 871 (citing Barnes v. Vozack, 113 Ariz. 269, 272, 550 P.2d 1070, 1073 (1976)).

¶16 Implied in every contract is a covenant of good faith and fair dealing. Rawlings v. Apodaca, 151 Ariz. 149, 153, 726 P.2d 565, 569 (1986). Hutchison's complaint alleged breach of contract against American Family. By Hutchison's claim of a breach of contract, American Family knew or should have known a bad faith claim could arise. See, e.g., Owen, 133 Ariz. at 79-80, 649 P.2d at 282-83 (concluding the trial court abused its discretion in denying a plaintiff's motion to amend his complaint approximately three weeks before the close of discovery when the amendment added a claim of gross negligence against a defendant who was already on notice of a negligence claim).

¶17 Additionally, American Family concedes it was on notice of such a claim, arguing "[t]he original complaint [] provides evidence that Hutchison was aware of a bad faith claim" because the complaint alleged American Family breached its contract "by refusing to offer a reasonable sum." Hutchison's initial disclosure statement, alleging American Family had "refused to perform under the contract by refusing to pay a reasonable sum," provided further notice a bad faith claim could arise from the contract claim. The trial court did not err in concluding Hutchison's requested amendment related back for purposes of Rule 15(c).

¶18 In finding the amendment related back, we need not determine when Hutchison's bad faith claim actually accrued or address the parties' arguments related to the statute of limitations.2 Cf. Tyman v. Hintz Concrete, Inc., 214 Ariz. 73, 76-78, ¶¶ 21-28, 148 P.3d 1146, 1149-51 (2006) (addressing circumstances in which an amended complaint relates back to the date of the original pleading for purposes of the statute of limitations, and holding that the naming of fictitious defendants was not a mistake of identity permitting relation back).

¶19 Despite finding the proposed amendment related back, the trial court denied the motion, finding the amendment was "dilatory to the extreme" and prejudicial to American Family. Based on the record provided on appeal, however, no substantial evidence supports the trial court's denial. No evidence suggests Hutchison's filing of the motion to amend was deliberately delayed by any improper motive, or that she was negligent in conducting discovery related to a bad faith claim. See Owen, 133 Ariz. at 80, 649 P.2d at 283. Moreover, as Hutchison notes, her claim for bad faith may not have accrued until as late as December 2012, explaining why the motion to amend was not made earlier.

¶20 Additionally, both parties jointly agreed to any "delays" in litigating Hutchison's claims. Hutchison filed her complaint in August 2010, and American Family filed its answer in October 2010. In June 2011, Hutchison requested the case be continued on the inactive calendar due to a change in her counsel; American Family filed a notice of non-objection. Hutchison's new counsel entered a notice of appearance in early November 2011, and the trial court scheduled a pretrial conference for January 2012. In January 2012, the parties jointly stipulated to vacate the pretrial conference, in part because they were discussing the possibility of submitting the case to arbitration. In December 2012, the parties arbitrated the value of the underlying personal injury claim. Hutchison retained new counsel in March 2013 and promptly filed a request for a Rule 16 scheduling conference.

¶21 An amendment prejudices a party when it adds a new party or an issue late in the litigation that results in inconvenience and delay. Id. at 79, 649 P.2d at 282 (citing Spitz, 122 Ariz. at 531, 596 P.2d at 366). The timing of the amendment alone — or "mere delay" in requesting the amendment — is insufficient justification for denial. Id. Denial of a motion to amend is appropriate when the proposed amendment "comes late and raises new issues requiring preparation for factual discovery which would not otherwise have been necessitated []or expected, thus requiring delay in the decision of the case." Haynes v. Syntek Fin. Corp., 184 Ariz. 332, 336, 909 P.2d 399, 403 (App. 1995) (quoting Owen, 133 Ariz. at 81, 649 P.2d at 284).

¶22 As discussed previously, American Family was on notice of a potential bad faith claim.3 American Family has alleged it would be prejudiced because it would have to "start from square one" in discovery; however, it provides no evidence or explanation as to how this claimed burden affects its case. At the time of Hutchison's motion, discovery was still in its infancy. No pretrial conference had been conducted and no discovery deadlines or trial date had been set. According to the parties' joint Rule 16 memorandum, Hutchison expected to take the deposition of American Family's "claims handler and any supervisor involved in the decision-making process," the same deponents necessary to litigate the contract claim. Presumably, any other witnesses or evidence needed to defend against a claim of bad faith would be at American Family's disposal and derived from the underlying contract at issue in the original complaint. On this record, no evidence supports a conclusion that Hutchison's proposed amendment would prejudice American Family. Consequently, the trial court abused its discretion in denying Hutchison's motion to amend her complaint.

¶23 Both sides request an award of attorneys' fees on appeal pursuant to A.R.S. § 12-341.01 (Supp. 2015). American Family is not the prevailing party on appeal, and we deny its request. Additionally, in our discretion, we deny Hutchison's request for attorneys' fees. As the prevailing party, however, Hutchison is awarded her taxable costs on appeal, contingent upon her compliance with Rule 21, ARCAP.

CONCLUSION

¶24 Hutchison's proposed amendment related back to the complaint, and the record is devoid of evidence supporting a finding that the amendment was a result of undue delay or dilatory motive, resulted in undue prejudice to American Family, or was futile. Accordingly, the trial court abused its discretion in denying Hutchison's motion to amend to assert her bad faith claim against American Family. The judgment dismissing the case is vacated, and the matter is remanded to the trial court with instructions to grant the motion to amend and for further proceedings consistent with this decision.