Dowden v. Cornerstone Nat'l Ins. Co.

Decision Date30 August 2021
Docket NumberNo. 20-2192,20-2192
Citation11 F.4th 866
Parties James F. DOWDEN, TRUSTEE OF the Bankruptcy ESTATE OF HUGH DANA HUCHINGSON, Plaintiff - Appellant v. CORNERSTONE NATIONAL INSURANCE COMPANY, Defendant - Appellee
CourtU.S. Court of Appeals — Eighth Circuit

David A. Hodges, Sr., LAW OFFICES OF DAVID HODGES, Little Rock, AR, for Plaintiff-Appellant.

David Michael Donovan, Taylor N. Williams, WATTS & DONOVAN, Little Rock, AR, for Defendant-Appellee.

Before SMITH, Chief Judge, WOLLMAN and STRAS, Circuit Judges.

SMITH, Chief Judge.

James F. Dowden ("the Trustee") is the bankruptcy trustee for Hugh Dana Huchingson. Cornerstone National Insurance Company ("Cornerstone"), a liability insurance company, issued an automobile liability insurance policy ("Policy") to Huchingson. The Trustee sued Cornerstone on Huchingson's behalf, alleging that Cornerstone breached its duty to defend Huchingson by failing to timely file an answer to a complaint filed against Huchingson. We affirm the district court's1 grant of summary judgment in favor of Cornerstone on the Trustee's claim because Cornerstone had no duty to defend when Huchingson did not strictly comply with a condition precedent to coverage.

I. Background
A. Underlying Facts

Cornerstone issued a Policy to Huchingson with a limit of $25,000 per person for bodily injury. The Policy states:

PART G – DUTIES AFTER AN ACCIDENT OR LOSS
We have no duty to provide coverage under this policy unless there has been full compliance with the following duties:
A. We must be notified promptly of how, when and where the accident or loss happened. Notice should also include the names and addresses of any injured persons and of any witnesses.
B. A person seeking any coverage must:
1. Cooperate with us in the investigation, settlement or defense of any claim or suit.
2. Promptly send us copies of any notices or legal papers received in connection with the accident or loss.
3. Submit, as often as we reasonably require:
a. To physical exams by physicians we select. ...
b. To examination under oath and subscribe the same.
4. Authorize us to obtain:
a. Medical reports; and
b. Other pertinent records.
5. Submit a proof of loss when required by us.
....
PART H – GENERAL PROVISIONS
....
LEGAL ACTION AGAINST US
A. No legal action may be brought against us until there has been full compliance with all the terms of this policy. ...

Appellant's Add. at 12–13 (bold omitted).

The Policy was in effect on March 31, 2017, when Huchingson's car collided with another vehicle, injuring Belinda Gail Duggan. Huchingson reported the accident to Cornerstone on April 1, 2017. Cornerstone assigned claims adjuster Dina Roberts to Huchingson's claim. Huchingson spoke with Roberts on April 3, 2017.

Duggan filed a lawsuit in state court against Huchingson on April 24, 2017, for personal injuries caused by the accident. Huchingson was served with the summons and complaint on May 15, 2017.

Two days after being served, Huchingson called Cornerstone's toll-free number for reporting claims. Harmon Solutions Group (HSG), a third-party answering service, monitored that number and "would intake new claims and transmit the claim information in memo form to [Cornerstone] via email." Dowden v. Cornerstone Nat'l Ins. Co. , No. 6:18-cv-6123, 2020 WL 2770422, at *1 (W.D. Ark. May 28, 2020). Jessica Parton answered Huchingson's call. Huchingson began by telling Parton, "I need to talk to somebody about an accident I was in on March the 31st." Appellant's Add. at 15. He stated, "[T]hey're trying to sue me." Id. Next, Huchingson told Parton that he had not filed a claim, though he had filed a claim and had also spoken with his assigned claims adjuster. Parton explained that she would file Huchingson's claim and that a representative would be assigned to him.

The district court summarized the rest of their exchange:

Parton asked [Huchingson] if Duggan was injured. [Huchingson] responded that she was and that "they sent me ... a report saying that ... she [is] suing me and saying that she was hurt pretty bad." Parton then ask[ed], "does it say what kind of injury she had?" [Huchingson] replied, "Yeah. Just a second here. Okay now this is her attorney that wrote all this out—you know—it's not on the police report or nothing." [Huchingson] then began reading from a section of the complaint filed by Duggan in state court that described her damages. At no point during the conversation with Parton did [Huchingson] state that he was reading from a complaint or that he had received a summons and complaint. Instead, [Huchingson] referred to a "report" written by Duggan's attorney.
After [Huchingson] finished reading from the "report," Parton stated that "as far as her suing you—I'm gonna make a note of that as well." She then asked [Huchingson] if Duggan was suing him for medical expenses, and [Huchingson] stated, "that and the car maybe." Parton asked if the police report states who is at fault, and [Huchingson] responded that "they're trying to say I failed to yield." After Parton stated that she had all the information required, she asked [Huchingson] if he had anything to add. [Huchingson] asked if "they are gonna get the police report or did he need to send one." Parton responded, "I believe that your representative is gonna go ahead and get it. Their own copy of the police report. But if you are required to send anything in they'll let you know how to do it." The phone call ended shortly thereafter. HSG's memo to Cornerstone states that Duggan "is suing the insured for the accident, including medical expenses, pain and suffering and possibly the vehicle."

Dowden , 2020 WL 2770422, at *1–2 (cleaned up).

Huchingson did not file an answer to the Duggan complaint. The state court entered a default judgment against Huchingson on June 29, 2017, and set a date for a damages trial. On August 31, 2017, before the damages trial, Huchingson sent copies of the complaint, summons, and notice of the damages trial to Cornerstone.

Cornerstone hired an attorney to defend Huchingson at the damages trial. It notified him by letter that it was doing so under "a complete reservation of all of Cornerstone's rights" under the Policy. Separate App. for Appellant, Vol. III, at 989. Following the damages hearing, the court entered a final judgment in favor of Duggan for $2,597,232.50. Cornerstone paid Duggan the $25,000 Policy limit. Huchingson then filed for bankruptcy, and the Trustee filed this lawsuit in state court.

B. Procedural History

The Trustee asserted three causes of action against Cornerstone: breach of contract, bad faith, and negligence. Cornerstone removed the lawsuit to federal court and moved to dismiss it. See Fed. R. Civ. P. 12(b)(6). The court granted the motion to dismiss as to the negligence and bad-faith claims. Both parties then filed cross-motions for summary judgment regarding the breach-of-contract claim.

Applying Arkansas breach-of-contract law, the district court granted Cornerstone's motion for summary judgment. The Trustee made three arguments to the court. First, he argued that the Policy provision, requiring Huchingson to "[p]romptly send [Cornerstone] copies of any notices or legal papers," was a cooperation clause, not a notice provision. Appellant's Add. at 12. Thus, according to the Trustee, any failure by Huchingson to send the complaint to Cornerstone was immaterial. The district court rejected the Trustee's argument and concluded that under Arkansas law the Policy provision was a notice requirement.

Second, the Trustee contended that even if that specific Policy provision was not a cooperation clause, Huchingson complied with the requirement. The court again disagreed, explaining that Huchingson "never informed the representative on the phone call that he had been served with process" and that was "insufficient [notice] to inform [Cornerstone] that a lawsuit had been filed." Dowden , 2020 WL 2770422, at *4. "Moreover, [Huchingson] was required to strictly comply with the notice requirement, which included promptly providing [Cornerstone] with copies of any legal papers connected to an accident or loss." Id. There was "no dispute that he did not promptly send these documents." Id.

Lastly, the Trustee argued that Cornerstone "should be estopped from denying coverage" because Parton told Huchingson that Cornerstone would likely get a copy of the police report but that if Huchingson was "required to send anything in[,] they[d] let [him] know how to do it." Id. The district court noted that Huchingson did not support this argument with any law. It also put Parton's statement in context, explaining that it was in response to Huchingson's question about a police report . Ultimately, it "c[ould not] find that [Cornerstone] should be estopped from denying coverage based on the aforementioned statement when [Cornerstone] had no knowledge of [Huchingson] having been served with a summons and complaint." Id. (citing Ramey v. State Farm Mut. Auto. Ins. , 54 Ark. App. 307, 924 S.W.2d 835, 836–37 (1996) ("As a general rule, there can be no waiver of an insured's noncompliance with such a provision where the insurer does not have knowledge of all the material facts.")).

The district court concluded, Huchingson "failed to comply with a condition precedent to coverage," and Cornerstone "had no duty to defend or indemnify" Huchingson. Id. Accordingly, the court found that summary judgment in favor of Cornerstone was proper and dismissed the case with prejudice.

II. Discussion

On appeal, the Trustee argues that we should reverse the district court's grant of summary judgment in favor of Cornerstone and its denial of his motion for summary judgment.2 We decline to do so and affirm.

We review the grant of summary judgment de novo. Torgerson v. City of Rochester , 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). Summary judgment is appropriate when the movant shows that there is no genuine dispute regarding any material fact and that the movant is entitled...

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