Farm Bureau Mut. Ins. Co. of Ark. v. Mitchell

• Decision Date: 12 October 1970
• Docket Number: No. 5-5313,5-5313
• Citation: 249 Ark. 127,458 S.W.2d 395
• Parties: FARM BUREAU MUTUAL INSURANCE COMPANY OF ARKANSAS, INC., Appellant, v. Danny Joe MITCHELL, Appellee.
• Court: Arkansas Supreme Court

Page 395

458 S.W.2d 395

249 Ark. 127

FARM BUREAU MUTUAL INSURANCE COMPANY OF ARKANSAS, INC., Appellant, v. Danny Joe MITCHELL, Appellee.

No. 5-5313.

Supreme Court of Arkansas.

Oct. 12, 1970.

Cockrill, Laser, McGehee, Sharp & Boswell, Little Rock, for appellant.

Hall, Tucker & Lovell, Benton, for appellee.

GEORGE ROSE SMITH, Justice.

This action was brought by the appellee, Danny Joe Mitchell, to recover for personal injuries and property damage sustained by him in a collision between his car and that of Sally A. Haley. Mrs. Haley proved to be an uninsured motorist within the coverage of a motor vehicle insurance policy issued by the appellant, Farm Bureau Mutual, to Danny Joe's father. Danny Joe was an insured person under the policy. In his complaint Danny Joe sought $37,500 in tort damages from Mrs. Haley and $8,000 in contract damages from Farm Bureau Mutual, that being the extent of the insurer's remaining liability under the uninsured motorist clause when the suit was filed. The insurance company denied liability and asserted that the collision was caused by Danny Joe's negligence and by that of a third motorist who no longer plays any part in the litigation.

The jury found that Mrs. Haley's negligence was the sole cause of the collision. The verdict in Danny Joe's favor, against Mrs. Haley, was in the amount of $23,000. Farm Bureau Mutual admits its liability for $8,000 of that amount, but the insurer insists that the trial court erred in awarding Danny Joe a judgment for the statutory penalty and attorneys' fee. That insistence presents the only question on appeal.

According to the complaint, Farm Bureau Mutual's policy provided, among other coverages, 'an uninsured motorist coverage, to pay for all sums which the insured * * * shall be legally entitled to recover for damages from the owner or operator of an uninsured highway vehicle because of bodily injuries sustained by the insured, caused by accident and arising out of the ownership, maintenance, or use of such uninsured highway vehicle.' In this court the appellant argues that such uninsured motorist coverage is not within the various types of insurance falling within our penalty and attorneys' fee statute.

We do not find that argument to be sound. In Empire Life & Hosp. Ins. Co. v. Armorel Planting Co., decided January 19, 1970, 449 S.W.2d 200, we looked to the definitions contained elsewhere in our Insurance Code in deciding whether a particular policy came within the purview of the penalty and attorneys' fee section of the Code. Specifically, we held the policy in that case to be casualty insurance within the Code's definition of that term.

So here. The penalty and attorneys' fees are recoverable upon policies of casualty insurance. Ark.Stat.Ann. § 66-3238 (Repl.1966). Casualty insurance includes vehicle insurance, which is defined to include insurance against accidental injury to individuals while in a vehicle, if the insurance is issued as an incidental part of insurance on the vehicle. Section 66-2405(1)(a). To the same effect, coverage against accidental injury as incidental to and part of vehicle insurance is deemed to be vehicle insurance. Section 66-2405(2). Thus under the unmistakable language of the Code the uninsured motorist coverage constitutes casualty insurance.

We are not impressed by the suggestion that Farm Bureau Mutual's responsibility to its insured, Danny Joe Mitchell, was in the nature of a tort liability that did not become fixed or definite until the jury returned its verdict. That notion was rebutted by our holding in MFA Mutual Ins. Co. v. Bradshaw, 245 Ark. 95, 431 S.W.2d 252 (1968), where we said: 'The uninsured motorist provision is not intended to afford coverage to the uninsured motorist, but to provide protection to the insured against the perils of injury by an uninsured motorist.'

In the case at bar Farm Bureau Mutual did not insure Mrs. Haley, the uninsured motorist. Instead, its coverage was in the nature of accident insurance to protect Danny Joe Mitchell against bodily injuries for which the owner or operator of an uninsured highway vehicle was legally liable to Danny Joe. When Danny Joe was injured and asserted a claim against the company, the insurer was of course entitled to a reasonable time in which to make its necessary investigation. Taylor v. Mutual Life Ins. Co. of N.Y., 193 Ark. 251, 98 S.W.2d 944 (1936). But when the insurance company decided that it was not liable and elected to defend the suit brought against it by its own insured, its decision carried with it the risk of having to pay the penalty and attorneys' fee if the insured recovered the full amount of his demand under the contract. That possibility is what proved to be true.

Affirmed, with the appellee to recover an additional $750 for the services of his attorneys in this court.

JONES, J., dissents.

JONES, Justice (dissenting).

I do not agree with the majority opinion in this case. The appellee's right to recover attorney's fees and penalty in this case depends on considerably more, in my opinion, than whether the uninsured motorist coverage under appellee's policy is casualty insurance.

Ark.Stat.Ann. § 66-4003 (Repl.1966) is as follows:

'No automobile liability insurance, covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this State with respect to any motor vehicle registered or principally garaged in this State unless coverage is provided therein or supplemental thereto, in not less than limits described in section 27 of Act 347 of 1953 (§ 75-1427), as amended, under provisions filed with and approved by the Insurance Commissioner, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom; provided, however, that the coverage required under this section shall not be applicable where any insured named in the policy shall reject the coverage.' (My emphasis).

By the plain wording of the statute, uninsured motorist coverage is not for the complete protection of persons insured thereunder against damages, but is only for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles.

Now, the statute that provides for the attorney's fees and penalty against insurance companies is Ark.Stat.Ann. § 66-3238 (Repl.1966), and appears as follows:

'In all cases where loss occurs and the cargo, fire, marine, casualty, fidelity, surety, cyclone, tornado, life, health, accident, medical, hospital, or surgical benefit insurance company and fraternal benefit society or farmers' mutual aid association liable therefor shall fail to pay the same within the time specified in the policy, after demand made therefor, such person, firm, corporation and/or association shall be liable to pay the holder of such policy or his assigns, in addition to the amount of such loss, twelve per cent (12%) damages upon the amount of such loss, together with all reasonable attorneys' fees for the prosecution and collection of said loss; said attorney's fee to be taxed by the court where the same is heard on original action, by appeal or otherwise, and to be taxed up as a part of the costs therein and collected as other costs are, or may be by law collected; and writs of attachment or garnishment filed or issued after proof of loss or death has been received by the company shall not defeat the provisions of this section, provided the company or association, desiring to pay the amount of the claim as shown in the proof of loss or death may pay said amount into the registery of the court, after issuance of writs of attachment and garnishment in which event there shall be no further liability on the part of said company.' (Emphasis added).

It is obvious, that under the plain wording of this statute, an insurance company may avoid the penalty and attorney's fee by paying the amount of the claim as shown in the proof of loss, into the registry of the court even after writs of attachment and garnishment have issued. This statute is penal in nature and is to be construed strictly. State Farm Mutual Automobile Ins. Co. v. Pennington, D.C., 215 F.Supp. 784. It has been held that where the insured sues for an amount less than previously demanded, or when the suit itself constitutes the original demand, and the insurance company confesses liability for the amount sued for, then the insured is not entitled to the allowance of a penalty or to an attorney's fee. Tollett v. Phoenix Assur Co. of New York, D.C., 147 F.Supp. 597.

If an insured demands more than he is entitled to recover, he is not entitled to attorney's fees or penalty. Peacock & Peacock, Inc. v. Stuyvesant Ins. Co., 8 Cir., 332 F.2d 499; State Farm Mutual Automobile Ins. Co. v. Pennington, D.C., 215 F.Supp. 784; Southern Farm Bureau Casualty Ins. Co. v. Brigance, 234 Ark. 172, 351 S.W.2d 417. The main purpose of this penal statute is to reimburse the plaintiff for...