Koppy's sought restitution as a crime victim, and the MCAO requested a restitution hearing. Through private counsel, Koppy's submitted a “Crime Victim's Statement,” requesting restitution in the amount of $59,381.50 – an amount not reduced by the $24,000 Koppy's already had received from its insurer, North America Risk Services, Inc. (“NARS”), for insured property damage.

Koppy's argued that Hayes should not receive a credit against the restitution award for money it had received from NARS.

Hayes agreed to stipulate that he owed $35,381.50 — the amount of restitution sought minus the $24,000 Koppy's had received from NARS.

At the conclusion of the restitution hearing, the trial court ordered Hayes to pay the stipulated restitution amount of $35,381.50, and took the matter of the disputed $24,000 under advisement. The trial court later denied Koppy's request for the additional $24,000.

At Koppy's request, the MCAO filed a timely notice of appeal. Koppy's argued that the trial court had erred by reducing the amount of restitution due Koppy's based on the insurance payment Koppy's had received from a collateral source (that is, its insurance company, NARS).

Arizona Law

Arizona law provides that a person convicted of a criminal offense must pay restitution to a victim of the crime:

in the full amount of the economic loss as determined by the court.

A.R.S. § 13-603(C).

A.R.S. § 13-804(A) provides that the trial court has discretion to:

order that all or any portion of the fine imposed be allocated as restitution to be paid by the defendant to any person who suffered an economic loss caused by the defendant's conduct.

In ordering restitution for economic loss:

the court shall consider all losses caused by the criminal offense or offenses for which the defendant has been convicted.

A.R.S. § 13-804(B).

Arizona law also provides:

If a victim has received reimbursement for the victim's economic loss from an insurance company, a crime victim compensation program funded pursuant to section 41-2407 or any other entity, the court shall order the defendant to pay the restitution to that entity.

The Plea Agreement

The plea agreement provided that:

The defendant [Hayes] shall pay restitution for all economic loss to all victims . . . and/or their insurance companies. . . .

A.R.S. § 13-804(E).

The Appellate Court's Decision

The appellate court affirmed.

In its decision, it explained that a loss was recoverable as restitution if it met three requirements:

(1) The loss must be economic,

(2) The loss must be one that the victim would not have incurred but for the criminal conduct, and

(3) The criminal conduct directly caused the economic loss.

The appellate court added that a “loss,” for purposes of restitution, was “the something out of pocket actually suffered by the victim,” and if a victim received compensation from a collateral source to recover economic loss caused by criminal conduct, “the court must reduce the victim's recovery by that amount.”

In this case, the appellate court observed, Koppy's had requested $59,381.50 based on a calculation of the gross cost to repair its tow truck ($30,219.41), plus its estimate of the gross lost profits from inability to use the tow truck ($46,900), minus a payment it had received from Hayes' insurance company ($5,000), unpaid sales tax ($1,012.91), and recouped profits from a replacement tow truck ($11,725). The appellate court noted that Koppy's had not included within its calculation the $24,000 it had received from its own insurance claim.

The appellate court ruled, however, that Koppy's could “no longer be considered 'out' that amount given its receipt of the insurance proceeds,” and, as a result, the total amount of restitution it sought had to be “reduced by that sum.” Hayes had agreed to pay the amount of Koppy's actual out-of-pocket loss and was entitled to consideration of the money Koppy's had received from NARS as reducing Koppy's actual amount of loss, the appellate court said.

Thus, according to the appellate court, Hayes should be credited the $24,000 and only required to pay the balance of Koppy's out-of-pocket loss, or $35,381.50.

The appellate court added that awarding Koppy's an additional $24,000 would “create a windfall” for Koppy's because its overall financial circumstance “would have been improved solely by virtue of the accident beyond where it was immediately before the accident.” Further, it concluded, doing so would leave NARS without restitution, which would mean that under A.R.S. § 13-804(E), Hayes still would be responsible for paying NARS $24,000. The statutory restitution scheme required a defendant to pay the “full economic loss, not double the full economic loss,” the appellate court concluded.

The case is State v. Hayes, No. 1 CA-CR 16-0463 (Ariz. Ct.App. July 18, 2017). Attorneys involved include: Maricopa County Attorney's Office, Phoenix, By Diane M. Meloche, Counsel for Appellant. Maricopa County Public Defender's Office, Phoenix, By Tennie B. Martin, Counsel for Appellee. Law Office of Richard D. Coffinger, Glendale, By Richard D. Coffinger, Counsel for Victim Koppy's Towing.