MFA Mut. Ins. Co. v. Keller, 81-88

• Decision Date: 16 November 1981
• Docket Number: No. 81-88,81-88
• Citation: 274 Ark. 281,623 S.W.2d 841
• Parties: MFA MUTUAL INSURANCE COMPANY, Appellant, v. R. C. KELLER and Jessie Lynette Keller, His Wife, Appellees.
• Court: Arkansas Supreme Court

Page 841

623 S.W.2d 841

274 Ark. 281

MFA MUTUAL INSURANCE COMPANY, Appellant, v.R. C. KELLER and Jessie Lynette Keller, His Wife, Appellees.

No. 81-88.

Supreme Court of Arkansas.

Nov. 16, 1981.

Barrett, Wheatley, Smith & Deacon, Jonesboro, for appellant.

Harkey, Walmsley, Belew & Blankenship, by John M. Belew, Batesville, for appellee.

DUDLEY, Justice.

AppellantMFA Insurance Company issued a builder's risk insurance policy in the amount of $62,000 on a house owned by appellees, R. C. and Lynette Keller.The house was partially destroyed by fire.Appellees submitted a proof of loss claim for $44,000 but appellant refused to pay that amount because its adjuster's appraisal was only $20,455.Appellant subsequently offered the sum of $22,750 which was the amount of an appraisal by an independent home builder.Appellees filed suit and, after all amendments to the pleading, sought $44,000 under the terms of the policy, 12 percent statutory penalty, interest and attorney's fees as well as compensatory and punitive damages as a result of appellant's bad faith, fraud and deceit.After the trial had commenced appellees took a voluntary nonsuit on that part of their tort claim alleging bad faith.

At trial there was substantial evidence that appellant's adjuster had made two deceitful statements.The first was when he wrote appellees' attorney that he had attempted to obtain bids from local contractors but they would not bid.The second was when he denied that one of his appraisers, Steve Duncan, told him that it would take between $40,000 and $50,000 to repair the house.

The jury reached a verdict in favor of appellees and the court entered judgment for $44,000 on the contract of insurance, $5,280 as 12 percent penalty, $15,000 for attorney's fees, $75,000 for compensatory damages and $124,000 for punitive damages with interest on each of these amounts at the rate of 10 percent per annum until paid.

We affirm, without discussion, the award based on the insurance contract, penalty, interest and attorney's fees.Ark.Stat.Ann. § 66-3238(Repl.1980) applies whenever an insured prevails in a controversy with his insurance Company and actually obtains a money judgment for the amount prayed.Southern Farm Bureau Casualty Insurance Co. v. Gooding, 263 Ark. 435, 565 S.W.2d 421(1978).

We reverse the awards for compensatory damages and punitive damages which were based upon the theory of fraud and deceit.We have held that an insurance company might face tort liability for bad faith in addition to its contractual liabilities.Findley v. Time Insurance Co., 264 Ark. 647, 573 S.W.2d 908(1978).We do not consider the tort of bad faith, for appellees dismissed their claim based on this allegation and obtained this judgment on the tort of fraud and deceit.The action for deceit is of very ancient origin, with one form of the action known to exist as early as 1201.Prosser, Law of Torts, p. 685(4th Ed. 1971).We have long recognized the common law tort of deceit.SeeRay Dodge, Inc. v. Moore, 251 Ark. 1036, 479 S.W.2d 518(1972).We uphold the Court of Appeals' ruling in Sturgeon v. American Family Life Assurance Co., 266 Ark. 1040, 589 S.W.2d 207(Ark.App.1979), that deceit is a recognized cause of action against an insurer.We are not academically concerned with the vagueness of the word "fraud."See Prosser, Id. at 684.In this casewe treat that word as surplusage in an action for deceit.

In Beam v. Monsanto Co., Inc., 259 Ark. 253, at 264, 532 S.W.2d 175(1976), we adopted from Prosser, Id. at 685, a statement of the elements of the tort cause of action in deceit as follows:

1.A false representation made by the defendant.In the ordinary case, this representation must be one of fact.

2.Knowledge or belief on the part of the defendant that the representation is false-or, what is regarded as equivalent, that he has not a sufficient basis of information to make it.This element often is given the technical name of 'scienter.'

3.An intention to induce the plaintiff to act or to refrain from action in reliance upon the misrepresentation.

4.Justifiable reliance upon the representation on the part of the plaintiff, in taking action or refraining from it.

5.Damage to the plaintiff, resulting from such reliance.

See also, Restatement (Second) of Torts, Chapter 22 (1977)and 8 Va.L.Rev. 749(1930).

The case at bar was tried before a jury.To determine the sufficiency of evidence on appeal from a jury trial we review the evidence in the light most favorable to the appellee and affirm if there is any substantial evidence to support the finding of the jury.Thrifty Rent-A-Car v. Jeffrey, 257 Ark. 904, 520 S.W.2d 304(1975).

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