Certain Underwriters at Lloyd's v. Bass

• Citation: 2015 Ark. 178,461 S.W.3d 317
• Decision Date: 23 April 2015
• Docket Number: No. CV–14–788,CV–14–788
• Court: Supreme Court of Arkansas
• Parties: Certain Underwriters at Lloyd's, London, Subscribing to Policy Nos. LLG035083, LLG041386, EQ6564A, EQ6564B, EQ6564C, LCL002222, EQ6366A, EQ6366B, EQ6366C, EQ6366D, EQ6366E, EQA22264, EQA12036, LCP001820, LCL003461, LCP002646, LLG034560, LLG040476, LLG045650, LLG051521, LLG055843, LLG059178, EQA14445, EQA14505, LSP510482, LSP511933, LSP513021, LSP513885, 05SRT20094, 05SRT20640, 05SRT21188, 05SRT21737, 05SRT20794, CP04265, CP04980, CP05809, CP06776, CP06159, CP07113, 058204–004, 058204–005, 068204–003, 058170–027, 068170–012, 068170–013, 078170–009, 078170–010, 088170–010, 088170–011, 098170–003, 098170–004, 19618–08, 19618–09, 19618–10, 19618–11, 19511–08, 19511–09, 19511–10, and 19511–11, Appellants v. David Bass; Donald Hughes; Liston Haseman, Jr.; John Kimbrough; Lewis Jenkins Trucking, Inc. ; Lew Thompson & Son, Inc.; Moore Valley Farms, Inc. ; Jeremy Poe; Franklin D. Pollard D/B/A The Regency Limited ; Bobby and Earnestine Pollins; Robby Summers; Tommie Walker Auction, Inc. ; Advada Ward; Lance Whitaker; and Shirley Williams, Individually and as Plaintiff Class Representatives, Appellees

2015 Ark. 178

461 S.W.3d 317

Certain Underwriters at Lloyd's, London, Subscribing to Policy Nos. LLG035083, LLG041386, EQ6564A, EQ6564B, EQ6564C, LCL002222, EQ6366A, EQ6366B, EQ6366C, EQ6366D, EQ6366E, EQA22264, EQA12036, LCP001820, LCL003461, LCP002646, LLG034560, LLG040476, LLG045650, LLG051521, LLG055843, LLG059178, EQA14445, EQA14505, LSP510482, LSP511933, LSP513021, LSP513885, 05SRT20094, 05SRT20640, 05SRT21188, 05SRT21737, 05SRT20794, CP04265, CP04980, CP05809, CP06776, CP06159, CP07113, 058204–004, 058204–005, 068204–003, 058170–027, 068170–012, 068170–013, 078170–009, 078170–010, 088170–010, 088170–011, 098170–003, 098170–004, 19618–08, 19618–09, 19618–10, 19618–11, 19511–08, 19511–09, 19511–10, and 19511–11, Appellants

v.David Bass; Donald Hughes; Liston Haseman, Jr.; John Kimbrough; Lewis Jenkins Trucking, Inc. ; Lew Thompson & Son, Inc.; Moore Valley Farms, Inc. ; Jeremy Poe; Franklin D. Pollard D/B/A The Regency Limited ; Bobby and Earnestine Pollins; Robby Summers; Tommie Walker Auction, Inc. ; Advada Ward; Lance Whitaker; and Shirley Williams, Individually and as Plaintiff Class Representatives, Appellees

No. CV–14–788

Supreme Court of Arkansas.

Opinion Delivered April 23, 2015

Friday, Eldredge & Clark, LLP, Little Rock, by: David D. Wilson ; Clark S. Brewster, PLLC, by: Clark S. Brewster ; and Fields Howell, by: Paul L. Fields, Jr., and Gregory L. Mast, for appellants.

Ludwig Law Firm, PLC, by: Gene A. Ludwig and Ryan K. Culpepper, for appellees.

Opinion

PAUL E. DANIELSON, Associate Justice

This is an appeal from an order of the Saline County Circuit Court denying a motion by appellants, Certain Underwriters at Lloyd's, London, to intervene in a class-action suit filed by appellees, David Bass; Donald Hughes; Liston Haseman, Jr.; John Kimbrough; Lewis Jenkins Trucking, Inc.; Lew Thompson & Son, Inc.; Moore Valley Farms, Inc.; Jeremy Poe; Franklin D. Pollard d/b/a The Regency Limited; Bobby and Earnestine Pollins; Robby Summers; Tommie Walker Auction, Inc.; Advada Ward; Lance Whitaker; and Shirley Williams, purchasers of surplus-lines insurance. Named as defendants were Michael Ellis Alexander, Terry Lynn Burnett, Dianna Lynn Farish, John Archie Griggs, John Christopher Hildebrand, James Robert Hill, Stephen Frederick Hoffmann, Michael Leon Johnson, Stanley Guy Payne, Frances S. Shaddox, Roy Mack Shaddox, Richard Paul Simon, Russell Ellsworth Short, and Jimmy Sutterfield, Arkansas licensed surplus-lines-insurance brokers.¹ On appeal, appellants argue that the circuit court erred in denying its motion to intervene because (1) they are entitled to intervene as defendants to protect their contractual rights and their financial, business, and legal interests; and (2) appellants are not too amorphous for

intervention. This court has previously recognized a right to appeal from the denial of a motion to intervene as a matter of right under Arkansas Rule of Appellate Procedure–Civil 2(a)(2) (2014). See Fort Smith Sch. Dist. v. Deer/Mt. Judea Sch. Dist., 2014 Ark. 486, 450 S.W.3d 239 ; Duffield v. Benton Cnty. Stone Co., Inc., 369 Ark. 314, 254 S.W.3d 726 (2007). We reverse and remand.

The record reflects the following facts. On May 22, 2013, appellees filed a class-action complaint for declaratory relief on behalf of themselves, individually and as class representatives, against a group of licensed surplus-lines-insurance brokers who contracted with appellants to place surplus-lines insurance.² According to appellees, these defendant brokers improperly placed contracts of insurance with persons who were not insurers approved by the Arkansas Insurance Commissioner (“Commissioner”). Appellees prayed that the circuit court declare that they have a right to treat, as voidable, contracts for placement of surplus-lines insurance placed by defendant brokers between April 8, 2005, and March 18, 2011, with persons who were not approved or qualified as surplus-lines insurers by the Commissioner. Appellees further requested that the circuit court order defendants to account for and return to appellees all monies received by defendants for “the contracts in question.” Finally, appellees requested an award of attorney's fees, prejudgment interest, and costs.

Appellants filed their first motion to intervene and brief in support on June 20, 2013, and asserted that they had subscribed to multiple insurance policies issued to appellees during the applicable time period.³ According to appellants, they had significant, recognized interests in the lawsuit because appellees sought to void multiple insurance contracts to which appellants subscribed as real parties in interest. In addition, appellants alleged in their motion to intervene that

6. The disposition of this lawsuit will impair Underwriters' interests in the subject insurance contracts by determining Underwriters' rights and obligations without affording Underwriters the opportunity to defend their clear contractual interests and leaving them with no independent remedy.

7. Because the Brokers are neither insurers nor parties to the contracts that the Plaintiffs seek to invalidate, Underwriters, as actual parties to those contracts, face separate and distinct obligations that are not adequately represented or protected by the existing parties to this lawsuit.

8. Underwriters are necessary and indispensable parties to the adjudication of this lawsuit because the Plaintiffs clearly seek to challenge the validity of contracts between the Plaintiffs and Underwriters and, in effect, to extinguish Underwriters' substantial interests in those contracts.

Filed simultaneously with the motion to intervene was appellants' “Rule 24(c) Pleading,” wherein they generally denied the allegation of the class-action complaint, including the allegation that the insurance contracts were voidable.

In their brief in support of the motion to intervene, appellants asserted that they were entitled to intervention as a matter of right pursuant to Arkansas Rule of Civil Procedure 24(a)(2) because (1) their motion was timely; (2) they have a recognized interest in the lawsuit; (3) the disposition of the lawsuit would impair appellants' interests; (4) their interests would not be adequately represented by the current parties; and (5) they were necessary parties to the lawsuit.

Following the filing of the initial complaint, appellees filed two amended complaints. In the first amended complaint, appellees alleged that defendants violated the Arkansas Surplus Lines Insurance Act, as well as the Arkansas Deceptive Trade Practices Act, by placing coverage with unapproved insurers. Appellees requested that defendants be ordered to pay restitution and that they be awarded actual damages under Arkansas Code Annotated section 4–88–113(f), punitive damages, prejudgment interest, and costs.

After appellees filed a second amended complaint adding two additional plaintiffs, appellants filed a renewed motion to intervene. Therein, appellants asserted that they remained necessary and indispensable to the lawsuit and continued to have significant recognized interests that would be impaired if they were not allowed to intervene.

Appellees filed a response and opposition to the renewed motion to intervene on January 29, 2014. In it, appellees asserted that the only purpose of the motion was to create diversity needed to support federal jurisdiction. Appellees also stated that their second amended complaint did not implicate any interests of appellants, as appellees were not seeking any relief against appellants nor had they alleged any wrongdoing on the part of appellants,

and the defendant brokers adequately represent any remaining interests of appellants. Appellees also argued that appellants' decision to seek intervention as “Certain Underwriters at Lloyd's, London, Subscribing to [Enumerated Policies]” was an attempt to proceed under a “cloak of anonymity” and demonstrated that the appellants were either “an unincorporated association formed for the purpose of intervening” or “a collection of smaller unincorporated associations.”

On March 19, 2014, appellees filed a third amended complaint for the purpose of consolidating this case with two other overlapping class-action cases. The allegations of the prior complaints were reiterated—primarily that appellants placed surplus-lines insurance with unapproved insurers, and as a result, the defendant surplus-lines brokers were not permitted to place insurance with appellants; thus, the subject policies were “materially nonconforming insurance.”

Appellants again renewed their motion to intervene on April 8, 2014, and a hearing on the motion to intervene was held on May 15, 2014. At that hearing, appellants explained that the underlying action involved multiple insurance policies consisting of thirty-three different syndicate numbers, with those syndicates consisting of thirty or forty thousand individual names. But, appellants stated that it is common practice in the insurance field to use the shorthand “Underwriters at Lloyd's,” and that if you have a policy number, it can be tracked down and the underwriters identified. Appellants argued that they were entitled to intervene as a matter of right but also noted that they had requested that they be allowed to intervene permissively.

Appellees argued that intervention was not warranted, in part, because it is only the brokers, not the insurers, who are charged with, and violated, the statutory requirements for surplus-lines insurance. According to appellees, it was the brokers sued in the underlying complaint that took appellees' money and misused it and, as a result, appellees are entitled to restitution, which is not grounded in contracts, policies, or rescission. Appellees also argued that appellants could not intervene because they were an unincorporated association or artificial designation not capable of suing or being sued in Arkansas. Finally, appellees argued that appellants had failed to present any Rule 24 proof...