Fireman's Fund Ins. Co. v. Care Mgmt., Inc.

• Decision Date: 04 March 2010
• Docket Number: No. 09–662.,09–662.
• Citation: 361 S.W.3d 800,2010 Ark. 110
• Parties: FIREMAN'S FUND INSURANCE COMPANY and Medical Liability Mutual Insurance Company f/k/a Health Care Underwriters' Mutual Insurance Company, Petitioners, v. CARE MANAGEMENT, INC. d/b/a/ Southwest Nursing Homes, Southwest Nursing Homes, Inc., and Health Care Organizations, Inc., Respondents.
• Court: Arkansas Supreme Court

2010 Ark. 110
361 S.W.3d 800

FIREMAN'S FUND INSURANCE COMPANY and Medical Liability Mutual Insurance Company f/k/a Health Care Underwriters' Mutual Insurance Company, Petitioners,
v.
CARE MANAGEMENT, INC. d/b/a/ Southwest Nursing Homes, Southwest Nursing Homes, Inc., and Health Care Organizations, Inc., Respondents.

No. 09–662.

Supreme Court of Arkansas.

March 4, 2010.

[361 S.W.3d 801]

Allen Law Firm, by H. William Allen and Brooks C. White, Little Rock, for petitioners.

Oglesby Law Firm, P.A., by Edward Oglesby, Little Rock, for respondents.

RONALD L. SHEFFIELD, Justice.

This [2010 Ark. 1] case involves a single question of law certified to this court by the United States District Court for the Eastern District of Arkansas on June 15, 2009, in accordance with Arkansas Supreme Court Rule 6–8 (2009), and accepted by this court on June 25, 2009. See Fireman's Fund Ins. Co. v. Care Mgmt., Inc., 2009 Ark. 381, 326 S.W.3d 426 (per curiam). The question certified is the following:

When an insurance policy requires the insured to give notice of a claim as soon as practicable and the insured fails to give the insurer notice of the claim as soon as [2010 Ark. 2] practicable, must the insurer prove that it was prejudiced by the failure to give timely notice in order to avoid coverage?

To provide the clearest answer to this question, it is necessary, pursuant to our authority as articulated in Arkansas Supreme Court Rule 6–8(c)(1)(C) (2009), for us to reformulate the question thus:

When an insurance policy provides that the giving of notice of a claim as soon as practicable is a condition precedent to recovery, and the insured fails to give the insurer notice of the claim as soon as practicable, must the insurer prove that it was prejudiced by the failure to give timely notice in order to avoid coverage?

We conclude that the answer is no.

According to the district court's certification order, in 2000, Petitioner Fireman's Fund Insurance Company issued a healthcare facility liability insurance policy to Respondent Southwest Nursing Home, Inc., which was in full force and effect from June 30, 2000, until June 30, 2001. Subsequently, an endorsement to the policy was executed changing the named insured under the policy from Southwest Nursing Home, Inc., to Care Management, Inc. d/b/a Southwest Nursing Homes. Fireman's Fund and Healthcare Underwriters Mutual Insurance Company had entered into agreements in July 1999 whereby obligations under the policy were transferred from Fireman's Fund to Healthcare Underwriters Mutual. Around July 19, 2001, Healthcare Underwriters Mutual changed its name to Medical Liability Mutual Insurance Company (MLMIC).

The relevant provisions of this insurance policy provide,

[2010 Ark. 3] B. DUTIES IN THE EVENT OF A CLAIM

Duties in Event of Claim. In the event a claim is made against any insured, or you have knowledge of a potential claim, you must see to it that the following duties are performed:

Immediately record the details of the claim (or potential claim), and the date the claim was received by the insured;

Notify us in writing as soon as practicable at the following address ...;

Immediately send us copies of any demands, notices, summonses, or legal papers received in connection with the claim;

[361 S.W.3d 802]

Provide us with information at our request and cooperate with us in the handling of the claim;

Assist us, at our request, in enforcing every right of recovery against any person or organization which may be liable to the insured; and

Do nothing to prejudice any rights of recovery that may exist.

...

K. LEGAL ACTION AGAINST US

No person or organization has a right under this policy: to join us as a party or otherwise bring us into a suit asking for damages from an insured; or to sue us on this policy unless all of its terms have been fully complied with....

On June 15, 2006, Carol Henson, individually and as special administratrix of the estate of Mamie Denton on behalf of its beneficiaries, commenced a wrongful-death action in Pulaski County Circuit Court against Respondents Care Management, Inc. d/b/a Southwest Nursing Homes, Southwest Nursing Homes, Inc., and Health Care Organizations, Inc. The complaint alleged that Denton sustained multiple injuries, including wrongful death, as a result of medical malpractice, negligence, outrage, violations of the Arkansas Residents' Rights Act, violations of the Arkansas Deceptive Trade Practices Act, and violations of numerous federal regulations and state statutes constituting a “violation of consumer protection laws, and victimizing of the elderly and disabled.” The complaint sought judgment [2010 Ark. 4] against all Respondents, jointly and severally, for all general and special compensatory damages caused by their conduct, punitive damages, costs, attorneys' fees, and all other relief to which the plaintiff was entitled.

On September 26, 2008, the attorney for Respondents, Ed Oglesby, wrote a letter to a claims representative for MLMIC, Ted Celmins, as well as to two other insurance companies, inquiring about the possibility of insurance coverage. He also included a copy of the June 15, 2006 complaint, and informed Celmins that the case was scheduled for a final hearing on October 7, 2008. Though the lawsuit had been filed by the estate of Denton more than two years before, this communication was the first time that Respondents informed Petitioners about this lawsuit or the claim of the Denton estate. On September 26, 2008, Oglesby also informed the circuit court presiding over the case that he had been retained to investigate possible insurance coverage of the estate's claims, that he did not know whether any coverage existed, and that he thought the insurance companies would have an absolute defense to payment based on lack of notice and noncooperation.

On October 1, 2008, Oglesby wrote another letter to Celmins advising him of the existence of the insurance policy at issue and demanding defense and indemnity for the state's claims. Oglesby wrote a third letter on October 15, 2008, to attorneys for Petitioners inquiring about possible insurance coverage for the estate's claims.

On October 29, 2008, Petitioners filed an action for declaratory judgment against Respondents in the United States District Court for the Eastern District of Arkansas. On [2010 Ark. 5] November 18, 2008, Respondents filed a counterclaim....