Beatty v. USAA Cas. Ins. Co.

• Decision Date: 31 October 1997
• Docket Number: No. 97-349,97-349
• Parties: Barbara J. BEATTY, Individually and as Natural Guardian of Kristi Beatty, and Kristi Beatty, Appellants, v. USAA CASUALTY INSURANCE CO., Appellee.
• Court: Arkansas Supreme Court

Page 250

954 S.W.2d 250

330 Ark. 354

Barbara J. BEATTY, Individually and as Natural Guardian of

Kristi Beatty, and Kristi Beatty, Appellants, v. USAA CASUALTY INSURANCE CO., Appellee.

No. 97-349.

Supreme Court of Arkansas.

Oct. 31, 1997.

George E. Pike, Jr., Deborah Pike Bliss, Clifton H. Hoofman, North Little Rock, for Appellant.

Patrick J. Goss, Little Rock, for Appellee.

ARNOLD, Chief Justice.

This case involves an interpretation of the term insurable interest found in Ark.Code Ann. § 23-79-104(b)(Repl.1992). Appellants claim that they have an insurable interest in an automobile and are entitled to the policy proceeds of an insurance contract covering property damage to the automobile. The trial court granted summary judgment for the insurer based upon the finding that appellants did not have an insurable interest. Appellants claim error in this ruling; we agree and reverse and remand.

On June 24, 1993, Douglas Beatty had a Toyota Celica delivered to his daughter Kristi for her sixteenth birthday. Mr. Beatty lived outside of the State of Arkansas, visited Arkansas, selected a car to purchase for his daughter, and made arrangements for its delivery on her birthday. Barbara Beatty, as natural guardian of Kristi, added the car to her existing insurance policy with USAA Casualty Insurance Company (hereinafter, "USAA"). The policy included coverage for liability as well as property damage. The policy's loss clause read as follows: "Loss or damage under this policy shall be paid, as interest may appear, to you and the loss payee shown in the Declarations." No loss payee was listed in the declarations.

On November 20, 1994, Kristi was involved in an automobile accident that resulted in the total loss of the car. USAA determined that the net loss was $13,924.75. Before acting on the claim, USAA discovered that Douglas Beatty held certificate of title for the automobile and additionally found a lien on the car securing a promissory note executed by Douglas Beatty on behalf of the Arkansas Federal Credit Union (hereinafter, "Credit Union"). USAA paid $11,772.50 to the Credit Union in satisfaction of the lien and accepted title of the car to sell for salvage value. The lien by the Credit Union was unbeknownst to Barbara and Kristi Beatty, and the Credit Union was not noted as a loss payee on the policy. USAA tendered payment to Barbara Beatty for the remaining $2,152.25 as payment in full for the claim. Ms. Beatty refused payment based upon the contention that she was entitled to the entire $13,924.75.

Barbara Beatty brought suit against USAA, individually and in her capacity as natural guardian of Kristi Beatty. Ms. Beatty claimed that full payment should have been made to her by USAA because she was the policy holder and there was no loss payee named in the policy. Ms. Beatty contends that USAA was not authorized to pay the proceeds of the insurance contract to a third party with whom she had no contractual obligation. USAA contends that neither Barbara Beatty nor Kristi Beatty had an insurable interest in the automobile and that its payment to the Credit Union was proper. The trial court granted USAA's motion for summary judgment ruling that neither Barbara Beatty nor Kristi Beatty had an insurable interest. This ruling was based solely upon the fact that Douglas Beatty held the title to the automobile, and thus, neither Barbara or Kristi Beatty could have an insurable interest.

Barbara and Kristi Beatty appeal this ruling. Appellants contend that Douglas Beatty's holding title does not preclude another party from also having an insurable interest. Appellants contend that Kristi had an insurable interest in the automobile upon receiving it as a gift from her father, Douglas Beatty. Appellants also contend that Barbara Beatty had an insurable interest in the automobile through her duty as natural guardian of Kristi to protect her minor daughter's property. Additionally, appellants argue that Arkansas statutes imposing liability on Barbara Beatty as the natural guardian of Kristi Beatty by requiring her to assume joint and several liability in order for Kristi to obtain a driver's license creates an insurable interest in the automobile. In addition to the insurable interest issue, appellants also contend that USAA is not authorized to pay a third party who is not designated as a loss payee under the original insurance contract and who is not in privity with the insured.

We agree with appellants that the trial court erroneously ruled on the issue of insurable interest and reverse and remand this case on that basis. The issue of whether USAA was authorized to make a payment to a third party not named as a loss payee and not in privity with the insured was not directly ruled upon by the trial court, so we will not address that issue.

The remedy of summary judgment should only be granted when there exists no genuine issue of material fact, and the party moving for summary judgment is entitled to judgment as a matter of law. Ark. R. Civ. P. 56; Smothers v. Clouette, 326 Ark. 1017, 1020, 934 S.W.2d 923 (1996). The issue is to be viewed in the light most favorable to the party opposing summary judgment, and all inferences and doubts should be resolved against the moving party. Id. If the party moving for summary judgment makes a prima facie showing that no issues of fact exist and the nonmoving party fails to show that such issues do exist, then this court must affirm a trial court's granting of summary judgment. Pyle v. Robertson, 313 Ark. 692, 694, 858 S.W.2d 662 (1993).

In reviewing appellants' argument that Kristi Beatty had an insurable interest in the automobile, we will view all inferences and doubts against USAA. The most important inference in this situation is whether there was a gift of the automobile to Kristi Beatty. This issue was disputed by the parties' briefs, and it is plausible that this issue alone could warrant reversal of the granting of summary judgment as the existence of a genuine issue of material fact; however, the trial court's ruling was not based upon this issue, but upon the determination that two parties cannot have an insurable interest in the same automobile. Therefore, for purposes of this appeal, we will accept that there was a valid gift made to Kristi Beatty upon the receipt of the automobile for her sixteenth birthday. We do note, that upon remand, this issue may be contested, and a factual determination can then be made.

A person must have an "insurable interest" in property in order to have an enforceable insurance contract. Ark.Code Ann. § 23-79-104(a)(Repl.1992). "Insurable interest " is defined in § 23-79-104(b) as "any actual, lawful, and substantive economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage or impairment."

The trial court determined that neither Barbara nor Kristi Beatty had an insurable interest based solely upon the fact that Douglas Beatty retained the title. Title indeed establishes a prima facie case of ownership; however, ultimate ownership is to be established by all evidence regarding property. See Robinson v. Martin, 231 Ark. 43 328 S.W.2d 260 (1959). It is obvious that the trial court did not examine the factors surrounding the ownership of this car; the ruling relies solely upon the holding of the certificate of title by Douglas Beatty.

The trial court erroneously concluded that Douglas Beatty's insurable interest, by virtue of holding title, precluded another party from also having an insurable interest. It is not inconsistent that two parties can have independent insurable interests in one piece of property. See Page v. Scott, 263 Ark. 684, 567 S.W.2d 101 (1978) (both lessor and lessee have an insurable interest in leased property, and either may insure his interest for his own benefit); see also Hale v. Simmons, 200 Ark. 556, 558, 139 S.W.2d 696 (1940); JOHN ALAN APPLEMAN ET AL., 4 INSURANCE LAW & PRACTICE § 2134, at 54. In such a situation, both parties are free to insure their respective interests in the property.

Initially, we will address the facts supporting Kristi Beatty's insurable interest through receiving the automobile as a gift from her father. In the affidavits supporting the motion for summary judgment, Barbara Beatty stated that Douglas Beatty had promised Kristi a car for her sixteenth birthday. Before her birthday, he visited Little Rock from out of state, purchased a car and had it delivered to Kristi on her birthday. The delivery was made to the address where Barbara and Kristi lived. At the time of the delivery of the car and at all times subsequent, Barbara had sole custody of Kristi. None of these facts are disputed by USAA.

According to Irvin v. Jones, 310 Ark. 114, 117, 832 S.W.2d 827 (1992), a valid inter vivos gift is...