Parker v. Southern Farm Bureau Cas. Ins. Co.

• Decision Date: 23 December 1996
• Docket Number: No. 95-1134,95-1134
• Citation: Parker v. Southern Farm Bureau Cas. Ins. Co., 326 Ark. 1073, 935 S.W.2d 556 (Ark. 1996)
• Parties: Rickey PARKER, Appellant, v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY, Appellee.
• Court: Arkansas Supreme Court

Page 556

935 S.W.2d 556

326 Ark. 1073

Rickey PARKER, Appellant, v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY, Appellee.

No. 95-1134.

Supreme Court of Arkansas.

Dec. 23, 1996.

Thomas S. Streetman, Crossett, for Appellant.

John Richard Byrd, Sr., Hamburg, for Appellee.

ROAF, Justice.

This is an insurance case. Rickey Parker sued Southern Farm Bureau Casualty Insurance Company ("Farm Bureau"), contending that an insurance policy Farm Bureau issued to him covered losses he sustained in an automobile accident. Farm Bureau denied coverage, claiming that the policy issued to Parker had expired due to nonpayment of the premium. The trial court granted summary judgment to Parker on the issue of coverage, and granted summary judgment to Farm Bureau on Parker's bad-faith claim. Parker asserts on appeal that the trial court 1) impermissibly limited the scope of discovery, 2) erroneously dismissed his bad-faith claim, and 3) arbitrarily reduced his request for attorney's fees. On cross-appeal, Farm Bureau argues that the attorney's fees should have been further reduced. We affirm on appeal and on cross-appeal.

The facts which led to this litigation may be summarized as follows. Farm Bureau issued an automobile insurance policy to Parker on June 6, 1993. The policy was for a six-month term, from September 9, 1993, through December 9, 1993, with a total premium of $745.35. Parker elected to pay the premium in quarterly installments, and made the initial payment of $377.77 at issuance of the policy.

Farm Bureau mailed Parker a "Billing Notice" on August 11, 1993, advising him that his quarterly payment was due, that his coverage would expire on September 9, 1993, if the payment was not made, and that he would receive no further renewal notice. Farm Bureau did not receive Parker's payment by September 9, 1993. Although Parker's check register indicated that he wrote a check to Farm Bureau for the premium on September 2, 1993, this check never cleared his bank.

Parker's daughter was involved in a two-vehicle accident while driving one of Parker's insured vehicles. She was at fault in the accident. Parker's vehicle was damaged in the amount of $1,456.21, and the other vehicle sustained damages in the amount of $439.70. Parker reported the accident to his Farm Bureau agent on September 17, 1993, and also filed a claim for his losses.

On September 22, 1993, Farm Bureau mailed Parker a "Cancellation Reminder Notice" informing him that his policy was canceled September 9, 1993, because the quarterly premium had not been paid. The notice invited Parker to reinstate his coverage. Parker took the notice to his Farm Bureau agent on September 27, 1993, and also showed the agent his check register with the notation of a check for the September 2nd premium payment. Parker paid the premium on September 27, and his Farm Bureau agent attempted to reinstate Parker's coverage effective September 9, 1993. However, Farm Bureau's underwriting department refused to allow the retroactive reinstatement and instead reinstated the policy effective October 4, 1993.

Parker's efforts to settle the claim with Farm Bureau were unsuccessful, and he filed suit against the company on July 13, 1994. Parker sued Farm Bureau for failure to comply with the terms of his policy and with Ark.Code Ann. § 23-89-304 (Michie.Repl.1992), which requires ten days' notice of cancellation for nonpayment of insurance premiums. Parker also asserted a claim for the first party tort of bad faith for the failure to pay his claim. He sought recovery for the damages to his vehicle, statutory penalty, attorney's fees, punitive damages, and a declaratory judgment that Farm Bureau was required to pay the damages sustained by the other driver.

The trial court granted Parker summary judgment on the issue of insurance coverage, finding that Farm Bureau failed to comply with the ten-day notice requirement. The trial court granted Farm Bureau summary judgment on the bad-faith claim. Parker was awarded $1,403.73, which included the twelve percent statutory penalty, and attorney's fees in the amount of $10,676. Farm Bureau was also adjudged liable for the other driver's damages of $439.59.

Parker appeals from the dismissal of his bad faith claim and from the trial court's award of less than the requested attorney's fees. Parker also asserts that the trial court erroneously limited the scope of discovery, which he needed to establish his claim of bad faith. Farm Bureau cross-appeals the trial court's award of attorney's fees.

Although Farm Bureau does not appeal the award of summary judgment on the issue of coverage, it is necessary to review the basis of the trial court's ruling on this question in order to address Parker's arguments regarding his bad-faith claim. Parker's policy was for a six-month period, and the declaration sheet issued stated that the policy period was June 9, 1993, through December 9, 1993. The trial court based its award of summary judgment upon Farm Bureau's failure to comply with the notice provision of Parker's policy and with the ten-day notice required by Arkansas statute. This statutory notice requirement is found in the subchapter dealing with cancellation and nonrenewal of automobile liability, physical damage and collision policies, and provides as follows:

No notice of cancellation to any named insured shall be effective unless mailed or delivered at least twenty (20) days prior to the effective date of cancellation, provided that, where cancellation is for nonpayment of premium, at least ten (10) days' notice of cancellation accompanied by the reason therefor shall be given.

Ark.Code Ann. § 23-89-304(a)(2) (emphasis added).

Parker's policy contained a provision entitled "Cancellation," which essentially tracked the statutory notice provision, and provided as follows:

If we cancel your policy, for non payment of premium, we will notify you in writing at least ten (10) days before the date of cancellation. If we cancel your policy for any other reason we will notify you in writing at least twenty (20) days before the date of cancellation.... The policy period will end of the date and time stated in the notice.

(Emphasis added.) The policy contained a further provision concerning renewal premium and policy periods:

Your Declaration or renewal certificate will show the policy period. Unless cancelled, this policy may be renewed at our option if the required premium is paid by you and accepted by us. Failure to pay on time will end coverage. If your policy does expire and you send a later payment of the required premium, we may reinstate at our option, as of the date and time the payment is received. A new policy period is then established.

The only notice Farm Bureau sent to Parker prior to cancellation of his policy was the following "Billing Notice," sent twenty- seven days before his quarterly installment payment was due:

It is time to make your quarterly premium payment on your auto policy. Please accept this notice that your coverage is due to expire 12:01 am, 09-09-93. To keep your coverage in force please mail us your payment before that date. In order to reduce expenses this will be the only renewal notice you will receive....

Farm Bureau insisted to the trial court and continued to assert on appeal that Parker only purchased insurance for three months, and that the statutory notice of cancellation thus did not apply to a policy which expired by its own terms. Farm Bureau also maintained, alternatively, that the billing notice sent to Parker satisfied the statutory notice requirement. The trial court found that Farm Bureau's reliance on the case of Farmers Ins. Co. v. Hall, 263 Ark. 734, 567 S.W.2d 296 (1978) was misplaced because in Hall, this court held that the ten-day cancellation notice was not required where a policy expired on its own terms because the insured failed to pay a renewal premium before the policy expiration date. The holding in Hall was thus not applicable to cancellation for failure to pay an installment payment. Farm Bureau did not appeal the grant of summary judgment on this issue and finally admitted during oral argument before this court that it had failed to comply with the statutory notice requirement. With this background in mind, we turn to the arguments which Parker raises regarding his claim of bad faith.

1. Restriction of discovery.

Parker first argues that the trial court erroneously restricted his efforts to discover certain records maintained by Farm Bureau which were relevant to his claim of bad faith. This argument concerns two discovery requests which must be addressed separately.

A. Farm Bureau's cancellation notices to other insureds.

During the course of discovery, Parker sought to obtain the twenty most recent notices mailed by Farm Bureau to its insureds giving notice of its intent to cancel automobile insurance for nonpayment of premiums. On appeal, Parker argues that the notices might contain evidence of Farm Bureau's bad faith in denying his claim if other insureds similarly situated received the ten-day cancellation notice. Parker had earlier discovered that Farm Bureau maintained a dual-system of billing. Farm Bureau admitted to the dual-system during discovery, provided Parker with copies of the two types of notices sent to its insureds, and its employees explained the system in great detail during depositions. According to Farm Bureau, the type of notice sent to its policyholders depended on whether or not "clean billing" was involved. Farm Bureau defined clean billing as quarterly, semi-annual, or annual billing of renewal and installment premiums, where no change had been made in the policy. The only notice sent in that instance was the "Billing Notice" like the one sent to Parker, approximately thirty days prior to the due date of the renewal or installment premiums. A notice of cancellation was not sent until twelve days after the termination of the coverage.

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