Arkansas State Highway Com'n v. Union Indem. Ins. Co. of New York

Decision Date25 April 1988
Docket NumberNo. 87-348,87-348
Citation748 S.W.2d 338,295 Ark. 273
PartiesARKANSAS STATE HIGHWAY COMMISSION, et al., Appellants, v. UNION INDEMNITY INSURANCE COMPANY OF NEW YORK, a New York Company, and Robert M. Eubanks III, Insurance Commissioner, State of Arkansas, Appellees.
CourtArkansas Supreme Court

Robert L. Wilson, Maria L. Schecetzke, Ted Goodloe, Thomas B. Keys, Little Rock, for appellants.

Jack East III, Little Rock, for appellees.

HICKMAN, Justice.

The question in this case is whether the Arkansas State Highway Department, and a materialman who supplied material to a highway job, have a claim against the Arkansas Property and Casualty Insurance Guaranty Fund when the claim arose after the insurance company that issued the surety bond on the job had been declared insolvent. The trial court held that under Arkansas law the appellants did not have a claim, and we agree.

In September of 1984, the Arkansas State Highway Commission entered into three contracts with Case Construction Company for jobs at Overflow Creek, Creek Culvert and Cool Easy Creek totaling $25,000. The surety bonds for the three jobs were issued by Union Indemnity of New York. It is uncontroverted that the New York court that declared Union Indemnity insolvent and ordered its liquidation on July 16, 1985, had the authority to do so. The order provided that all obligations of Union would terminate as of August 17, 1985. The Arkansas Insurance Commissioner received notice of the liquidation on July 17, 1985, filed a local action and was appointed ancillary receiver for Union.

The highway commission did not receive personal notice by mail of the New York action, but notice was published in the Arkansas Gazette on August 9 and 16, 1985. A senior highway department employee knew of the insolvency on August 13, 1985.

The parties stipulated that "[n]either the Commission nor AHTD declared Case in default of his contractual obligations ... before August 16, 1985." It was not until early November of 1985 that the Commission declared Case to be in default of all three projects. The highway department filed a claim for $118,000. Appellant Lofland supplied material in the amount of $1,611.87 before August 17, 1985, and the trial court allowed the claim for that amount. However the court denied a claim for materials amounting to $10,224.74 which were supplied after August 17, 1985.

The only question is whether the appellants had a claim under the Guaranty Fund or the Uniform Insurers Liquidation Act, Ark.Code Ann. § 23-68-101-132 (1987). Those acts provide in part:

This chapter shall apply to covered claims existing prior to the determination that an insurer is an insolvent insurer and to covered claims arising within thirty (30) days after the determination of insolvency or before the policy expiration date if less than thirty (30) days after the determination of insolvency or before the insured replaces the policy or effects its cancellation, if he does so within thirty (30) days of the determination of insolvency.

[§ 23-90-111(a)]

'Covered claim' is an unpaid claim of an insured or third party liability claimant which arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this chapter applies, and which is issued, or assumed whereby an assumption certificate is issued to the insured, by an insurer licensed to do business in this state, in cases...

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2 cases
  • Mueller v. Killam, 87-296
    • United States
    • Arkansas Supreme Court
    • April 25, 1988
    ... ... No. 87-296 ... Supreme Court of Arkansas ... April 25, 1988 ...         P.K ... Bryan Farms, Inc. v. State, 295 Ark. 180, 747 S.W.2d 115 (1988); Sevenprop ... ...
  • Lexon Ins. Co. v. City of Cape Coral
    • United States
    • Florida District Court of Appeals
    • November 29, 2017
    ...Ct. App. Div. 2008) ("[A] claim against a surety arises upon the principal's default." (quoting Ark. State Highway Comm'n v. Union Indem. Ins. Co., 295 Ark. 273, 748 S.W.2d 338, 339 (1988) )); 72 C.J.S. Principal and Surety § 85 ("[T]he liability of a surety accrues on the breach of the con......
1 books & journal articles
  • Section 11.7 Nature and Extent of Surety’s Liability
    • United States
    • The Missouri Bar Insurance Practice 2015 Chapter 11 Surety Bonds
    • Invalid date
    ...termination date and the materialman supplied material after that date. Ark. State Highway Comm’n v. Union Indem. Ins. Co. of N.Y., 748 S.W.2d 338 (Ark. 1988). It is generally held that, when a surety bond is given in accordance with a statute and the terms of the bond are more limited than......

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