Farmers Insurance Co. v. Vagnozzi
In Farmers Insurance Co. v. Vagnozzi, 138 Ariz. 443, 675 P.2d 703 (1983), the Arizona Supreme Court applied Restatement 58 and held that "where there is a conflict of interest between an insured and his insurer, the parties will not be estopped from litigating in a subsequent proceeding those issues as to which there was a conflict of interest, whether or not the insurer defended in the original tort claim." 138 Ariz. at 448, 675 P.2d at 708.
Because collateral estoppel principles should be suspended "where there is an adversity of interests" between the insured and insurer, the court ruled, the insurer "was not collaterally estopped in the DRA from asserting the policy exclusion for intentional acts." Id.
And that was so even though "the facts which established coverage under the policy for the claimant's injury were identical to and inseparable from those alleged in the tort action," and even though the claimant had obtained an unopposed, partial summary judgment against the insured finding him negligent in the underlying tort case. Id. at 447, 675 P.2d at 707.