Flemens v. Harris

• Decision Date: 12 February 1996
• Docket Number: No. 94-245,94-245
• Citation: 323 Ark. 421,915 S.W.2d 685
• Parties: Roger D. FLEMENS and Nancy Flemens, Appellants, v. Glen D. HARRIS, Appellee.
• Court: Arkansas Supreme Court

Page 685

915 S.W.2d 685

323 Ark. 421

Roger D. FLEMENS and Nancy Flemens, Appellants, v. Glen D. HARRIS, Appellee.

No. 94-245.

Supreme Court of Arkansas.

Feb. 12, 1996.

Don P. Chaney, Arkadelphia, for appellants.

Lynn Williams, Philip M. Clay, Hot Springs, for appellee.

ROAF, Justice.

This is the second appeal of this case involving a claim of negligence against an insurance agent; the first appeal was dismissed without prejudice pursuant to Ark.R.Civ.P. 54(b). Flemens v. Harris, 319 Ark. 659, 893 S.W.2d 783 (1995). Appellants Roger and Nancy Flemens appeal from an order granting summary judgment in favor of appellee Glen D. Harris on the basis that the Flemenses' action was barred by the running of the statute of limitations. We affirm.

Facts.

Appellee Glen Harris passed the state examination for insurance agents in June 1988 and opened a Shelter Life Insurance Company office in Dierks, Arkansas. Roger Flemens, a self-employed grocery store and gas station operator, submitted a disability insurance application through appellee's office on August 8, 1988, and was issued a policy by Shelter Life Insurance Company (Shelter). Roger Flemens' wife, appellant Nancy Flemens, was the intended third party beneficiary of the disability insurance policy.

On December 15, 1988, Roger Flemens sustained injuries as a result of a motor vehicle accident. Mr. Flemens made a claim for disability insurance benefits from Shelter and received one payment for the period December 16, 1988, through December 29, 1988. The payment was made on February 7, 1989. On March 21, 1989, Flemens was notified by Shelter that there was "a problem with this matter." Shelter Life Insurance stated that there had been a misrepresentation on the application regarding Flemens' income--the income shown on his tax returns was significantly below that which he claimed on the application form. Subsequently, Roger Flemens' disability benefits were terminated.

Roger and Nancy Flemens filed a complaint against Shelter and Glen Harris on December 13, 1991. The complaint alleged Harris was negligent in handling Roger Flemens' application for disability insurance. The complaint further alleged that the negligence on the part of Harris was imputable to Shelter under the law of agency. In addition the complaint alleged that Flemens substantially complied with the terms of the policy and, despite demand, Shelter failed to pay benefits due under the policy.

Appellee Harris moved for summary judgment asserting that the three-year statute of limitations barred the Flemenses' action. The trial court found that the applicable statute of limitations for negligence of an insurance agent is three years and begins to run at the time the negligent act occurs, not when it is discovered. The trial court further concluded that the negligence, if any, committed by Harris occurred in August 1988 and the action against Harris was filed in December 1991. Accordingly, the trial court granted separate defendant Glen Harris' motion for summary judgment. The record reflects that Shelter entered into a settlement agreement with the Flemenses and the action against Shelter was dismissed with prejudice.

Statute of limitations.

On appeal, both parties agree that the applicable statute of limitations on actions for the negligence of an insurance agent is three years. The appellants, however, submit that the trial court erred in determining when the applicable three-year period began to run. The appellants assert that the statute of limitations did not begin to run until receipt of the March 21, 1989, letter from Shelter which terminated benefits because this letter represented their first loss, i.e. damage, which was necessary for their tort action to mature.

The appellants rely upon Midwest Mutual Ins. Co. v. Ark. Nat'l Co., 260 Ark. 352, 538 S.W.2d 574 (1976), where this Court concluded the running of the statute of limitations did not commence until an insured first learned it had no insurance coverage. The Arkansas National Company, an independent insurance agency, obtained an assigned risk liability insurance policy for Red Top Cab Company through Farm Bureau Mutual Insurance Company. Arkansas National and Red Top had a standing agreement to delete from coverage taxicabs undergoing repair and to reinstate the coverage upon request. Pursuant to that agreement, on August 11, 1970, Red Top requested one of Arkansas National's agents to reinstate a vehicle under the coverage; however, the agent neglected to reinstate the vehicle.

The vehicle was involved in a collision nine days later, and on May 24, 1971, a suit was instituted against Red Top for injuries resulting from the collision. At that time, Red Top made demand on Farm Bureau to provide it with a defense and to pay any judgment that might be entered; however, Farm Bureau refused. After judgment was entered against it on September 11, 1973, Red Top assigned to Midwest Mutual Insurance Company its "chose in action" against Arkansas National for failure to reinstate insurance coverage, and, on March 29, 1974, Midwest filed suit against Arkansas National. Arkansas National answered and asserted the suit was barred by the three-year statute of limitations.

This Court concluded that Red Top's cause of action accrued on or after May 24, 1971, when it was required to assume the cost of its own defense due to the negligence of Arkansas National. We concluded Arkansas National's negligence in failing to reinstate the insurance coverage did not become tortious as to Red Top until at least some element of damage accrued to Red Top because of the negligence. However, the summary judgment in favor of Arkansas National was affirmed because this Court held that Red Top's claim was not assignable.

In accordance with Midwest Mutual, the appellants submit that the statute of limitations in their case did not begin to run until they received the letter dated March 21, 1989, informing them benefits were terminated. The appellants assert that the statute of limitations begins to run when there is a complete and present cause of action. See Courtney v. First Nat'l Bank, 300 Ark. 498, 780 S.W.2d 536 (1989); Corning Bank v. Rice, Adm'r, 278 Ark. 295, 645 S.W.2d 675 (1983).

In response, the appellee cites a legal malpractice case, Chapman v. Alexander, 307 Ark. 87, 817 S.W.2d 425 (1991), where we stated Since 1877, it has been our rule that the statute of limitations applicable to a malpractice action begins to run, in the absence of concealment of the wrong, when the negligence occurs, and not when it is discovered.

We held that the statute of limitations begins to run upon the occurrence of the last element essential to the cause of action. Id.; see also Wright v. Compton, Prewett, Thomas & Hickey, 315 Ark. 213, 866 S.W.2d 387 (1993). Accordingly, we concluded that the statute of limitations began to run at the time Alexander, an attorney, represented Chapman in the sale of a business. Although the Chapman case involved legal malpractice, this Court commented that under our traditional rule:

an abstractor, accountant, architect, attorney, escrow agent, financial advisor, insurance agent, medical doctor, stockbroker, or other such person will not be forced to defend some alleged act of malpractice which occurred many years ago.

(Emphasis supplied.) The appellee also relies upon Ford's Inc. v. Russell Brown & Co., 299 Ark. 426, 773 S.W.2d 90 (1989), where we held that the three-year statute of limitations commenced from the date an accountant provided erroneous tax advice even though the assessment of tax deficiency occurred more than three years later. This Court specifically rejected the appellant's contention that, until they were assessed a tax deficiency, they had not sustained an injury.

The appellants' attempt to rely upon Midwest Mutual is understandable. However, the ultimate decision in Midwest Mutual was based upon the assignability of the action. Although this Court first concluded that the action was not barred by the statute of limitations, it was not necessary to do so in order to determine that the action could not be assigned. Consequently, although the discussion of the limitation issue in Midwest Mutual is extensive, the conclusion reached regarding this issue amounts to dictum. Of equal concern is the rationale employed by the Court in reaching the conclusion that the statute of limitation did not begin to run until the client of the insurance agency had suffered some actual loss or damage. The opinion does not distinguish the work of insurance agents from others who similarly render advice and services, whether they be considered "professional" or not. Nor is there any real discussion of our traditional rule for malpractice actions, as in Chapman, although one medical malpractice case is discussed.

In fact, two cases discussed and cited in the Midwest Mutual opinion as on point, and clearly relied upon by the court in reaching its conclusion regarding the limitation issue, involved damage to adjoining land resulting from the construction of a culvert, Chicago, R.I. & P. Ry. Co. v. Humphreys, 107 Ark. 330, 155 S.W. 127 (1913), and damage to property resulting from construction of a power plant, Brown v. Arkansas Central Power Co., 174 Ark. 177, 294 S.W. 709 (1927). See Midwest Mutual, supra, (quoting Faulkner v. Huie, 205 Ark. 332, 168 S.W.2d 839 (1943)). We thus conclude that the issue raised in the instant case is not controlled by Midwest Mutual, and should not be.

The appellee's reliance upon Chapman, supra, presents a similar problem, because the comment in Chapman that its decision was applicable to insurance agents is also dictum; the running of the statute of limitations for attorney malpractice was the only issue before the court. However, in Chapman, the traditional rule that the statute of limitations applicable to malpractice actions begins to run, absent concealment of the wrong, when the...