Nationwide Mut. Ins. Co. v. Cumbie

• Decision Date: 12 October 2005
• Docket Number: No. CA 05-353.,CA 05-353.
• Citation: 215 S.W.3d 694
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY, Appellant, v. Roxanne CUMBIE, Appellee.
• Court: Arkansas Court of Appeals

215 S.W.3d 694

NATIONWIDE MUTUAL INSURANCE COMPANY, Appellant, v. Roxanne CUMBIE, Appellee.

No. CA 05-353.

Court of Appeals of Arkansas, Division III.

October 12, 2005.

Laser Law Firm, by: Kevin Staten and Brian A. Brown, Little Rock, for appellant.

Lovell & Nalley, by: John Doyle Nalley, Benton, for appellee.

JOHN MAUZY PITTMAN, Chief Judge.

The appellee, Roxanne Cumbie, was injured in a motor vehicle accident on December 30, 2001. She was not at fault. She settled with the tortfeasor's insurance carrier for his policy limits of $25,000 and then made demand upon appellant Nationwide for the policy limits under her own underinsured motorist policy. Nationwide evaluated the claim and offered to settle the underinsured motorist claim for $10,000. Appellee rejected this offer and filed suit on October 28, 2002, seeking the policy limits of $50,000 plus a statutory twelve percent penalty, prejudgment interest, and attorney's fees. Shortly before the scheduled trial date, Nationwide agreed to tender its policy limits and allow the court to determine its liability for the penalty, prejudgment interest, and attorney's fees. The court found Nationwide liable for all of these, and this appeal followed.

Nationwide first argues that the trial court erred in awarding the statutory twelve percent penalty because a "material change of circumstances" occurred after the lawsuit was filed in that appellee required additional surgery and incurred substantial additional medical bills. Arkansas Code Annotated § 23-79-208(a)(1) (Repl.2004) provides that:

In all cases in which loss occurs and the cargo, property, marine, casualty, fidelity, surety, cyclone, tornado, life, accident and health, medical, hospital, or surgical benefit insurance company and fraternal benefit society or farmers' mutual aid association or company liable therefor shall fail to pay the losses within the time specified in the policy after demand is made, the person, firm, corporation, or association shall be liable to pay the holder of the policy or his or her assigns, in addition to the amount of the loss, twelve percent (12%) damages upon the amount of the loss, together with all reasonable attorney's fees for the prosecution and collection of the loss.

The allowance of the statutory penalty and attorney's fees when an insurer, after demand, fails to pay for an insured loss within the time specified in the policy is punitive in nature and is directed against the unwarranted delaying tactics of insurers. Shepherd v. State Auto Property & Casualty Insurance Co., 312 Ark. 502, 850 S.W.2d 324 (1993). With regard to the reference in § 23-79-208(a) to an insurance company's failure to pay losses "within the time specified in the policy," where an agreement does not specify a time period in which action is to be taken, the losses must be paid within a reasonable time. McHalffey v. Nationwide Mutual Life Insurance Co., 76 Ark.App. 235, 61 S.W.3d 231 (2001).

Attorney's fees and penalty attach if the insured is required to file suit, even though judgment is confessed before trial. Silvey Cos. v. Riley, 318 Ark. 788, 888 S.W.2d 636 (1994). The appellant in Silvey Cos. v. Riley argued that there was an exception to the above-stated rule when it was reasonably necessary for the insurance company to continue to investigate the loss even after payment is due under terms of the policy. This argument was based on Clark v. New York Life Insurance Co., 245 Ark. 763, 434 S.W.2d 611 (1968), where the supreme court held that the statutory language regarding an insurer's failure to pay losses within the time specified in the policy contemplates that the insurer shall have a reasonable time to make necessary investigation in reference to the loss and the circumstances thereof after demand. Although the Silvey Cos. court did not decide the issue because the appellant in that case failed to show a reasonable need for further investigation, and although the holding in Clark was based on the slightly different language of the predecessor to the present twelve percent penalty statute, Ark. Stat. Ann. § 66-3238 (Repl.1966), we think that the language and purpose of the two penalty statutes are so nearly identical that Ark.Code Ann. § 23-79-208(a)(1) likewise contemplates that the insurer shall have a reasonable time to make necessary investigation in reference to the loss and the circumstances thereof after demand.

The question, then, is whether the trial court could reasonably have found that Nationwide had a reasonable opportunity to investigate the loss. We think that it clearly could. The record shows that Nationwide refused to fully examine the medical records made available to it by appellee's authorization because it did not want to go to the expense of paying for copies, insisting instead that appellee provide it with all relevant documents. Howe...