MFA Mut. Ins. Co. v. Bradshaw, 5--4640

• Decision Date: 09 September 1968
• Docket Number: No. 5--4640,5--4640
• Citation: 245 Ark. 95,431 S.W.2d 252
• Parties: MFA MUTUAL INS. CO., Appellant, v. Floyd BRADSHAW et ux., Appellees.
• Court: Arkansas Supreme Court

Page 252

431 S.W.2d 252

245 Ark. 95

MFA MUTUAL INS. CO., Appellant, v. Floyd BRADSHAW et ux., Appellees.

No. 5--4640.

Supreme Court of Arkansas.

Sept. 9, 1968.

Wright, Lindsey & Jennings, Little Rock, for appellant.

George J. Cambiano, Morrilton, for appellees.

FOGLEMAN, Justice.

Appellant contends that the trial court erred in overruling its motion to dismiss an amended complaint filed against it by each of the appellees and granting the motions of appellees for a summary judgment.

Appellees, Floyd and Ethel Bradshaw, brought separate suits against appellant MFA Mutual Insurance Company, on March 14, 1967 seeking recovery on judgments each had recovered against one Brenda Howard, an uninsured motorist. These judgments were for damages resulting from an automobile collision between a vehicle owned and operated by Floyd Bradshaw, in which Ethel Bradshaw was a passenger, and a vehicle operated by this uninsured motorist on September 17, 1966. The suits were consolidated for trial. Appellant was appellees' liability insurance carrier. The liability policy provided uninsured motorist coverage. Each appellee was an 'insured' under the policy terms. The coverage was set out as follows:

'* * * The Company will pay all sums which the insured * * * shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle because of bodily injury sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured highway vehicle; * * *.'

Appellees instituted suit against appellant and Brenda Howard on October 11, 1966. Brenda Howard employed counsel and filed an answer and counterclaim. MFA filed a motion asking dismissal of the complaint as to it on the ground that appellees had improperly joined an action in tort against Brenda Howard and an action in contract against MFA. The trial court required appellees to elect which remedy they would pursue. ¹ They took a voluntary nonsuit against MFA and elected to proceed against Howard on February 17, 1967. On February 20, 1967, appellant, by its attorney, wrote a letter to appellees' attorney directing attention to the following language in Insuring Agreement V:

'No judgment against any person or organization alleged to be legally responsible for the bodily injury (sustained by the insured) shall be conclusive, as between the insured and the Company, of the issues of liability of such person or organization or of the amount of damages to which the insured is legally entitled unless such judgment is entered pursuant to an action prosecuted by the insured with the written consent of the Company.'

In this letter appellees' attorney was also advised that MFA Mutual Insurance Company did not consent, in writing or otherwise, to the prosecution of the action against Brenda Howard, and that any judgment obtained against her would not be conclusive as to the liability of Brenda Howard or the amount of damages appellees might be legally entitled to recover from MFA. No reason for the withholding of consent was stated.

On March 14, 1967 the complaint against MFA was dismissed without prejudice persuant to the nonsuit indicated previously. On the following day, when the case against Brenda Howard was called for trial, neither she nor her attorney appeared, and the default judgment sued on here was entered in favor of both Bradshaws on their complaint and against Brenda Howard on her counterclaim. No explanation of the reason for her failure to appear has been given. MFA filed a motion to dismiss the cause now before us based upon the letter mentioned above and the policy clause quoted therein, stating that it was entitled to litigate the issues of liability and damages, and alleging that the default judgments were not binding on it. The trial court treated the motion to dismiss as a demurrer and gave appellees time within which to amend their respective complaints. Both amended to add allegations that MFA had refused to settle with them and refused to defend the suit against Brenda Howard after having had notice of the suit and after having been notified of the trial date, and that the doctrine of res judicata applied. MFA again moved for dismissal, reiterating the statements of its original motions, and alleging that it could not have defended the action against Brenda Howard, that res judicata was inapplicable because of a lack of identity of parties, and that the sole remedy of the Bradshaws was by an action against MFA in which the issues of the liability of Brenda Howard and the amount of damages would be litigated. This motion was denied. The Bradshaws then filed a motion for summary judgment based upon the pleadings and a stipulation of the facts herein above stated. This motion was granted and this appeal taken.

The sole question on this appeal is that of the validity of the paragraph providing that no judgment in an action prosecuted by the insured against an uninsured motorist without the written consent of the insurer shall be conclusive as between the insured and the insurer. The meaning and intent of this provision is clear and unmistakable. It is designed to protect the insurer in cases such as this where, even though there was every reason to believe that the questions of liability and damages would be litigated thoroughly, the uninsured motorist defaulted. As a result, the question of liability has not actually been litigated. We agree with the Supreme Court of Missouri that defaulting defendants are not represented because a trial court cannot and should not act as an attorney for defaulting defendants and produce witnesses who might contradict the testimony of a plaintiff and witnesses produced by him. State ex rel. State Farm Mut. Auto. Ins. Co. v. Craig, 364 S.W.2d 343, 95 A.L.R.2d 1321 (1963). This question can never be litigated unless this policy provision is held valid, or unless we hold that such a judgment cannot be conclusive on the insurer. Such a holding would be contrary to the apparent weight of authority. See, e.g., Boughton v. Farmers Ins. Exchange, 354 P.2d 1085, 79 A.L.R.2d 1245 (Okla.1960); MFA Mutual Ins. Co. v. Lovins, 248 F.Supp. 108 (D.C.Ark.1965), and authorities cited therein.

An insurer may contract with its insured upon conditions expressed in its policy, limited only by statute and public policy. The insured, by acceptance of a policy, is deemed to have approved it with all conditions and limitations expressed therein which are reasonable and not contrary to public policy. Maryland Casualty Co. v. Chew, 92 Ark. 276, 122 S.W. 642.

Certain clauses have been voided as contrary to public policy. Ark.Stat.Ann. § 66--3233 (Repl.1966) declares that a clause compelling an insured to submit any question of fact to arbitration is void. We agree with the United States District Court for the Eastern District of Arkansas that a clause providing forfeiture of insurance coverage by an insured who prosecuted to judgment a suit against an uninsured motorist without written consent of the insurer is against public policy of the state. MFA Mutual Ins. Co. v. Lovins, 248...