Shelter Mut. Ins. Co. v. Smith, 89-200

• Decision Date: 06 November 1989
• Docket Number: No. 89-200,89-200
• Citation: 300 Ark. 348,779 S.W.2d 149
• Parties: SHELTER MUTUAL INSURANCE CO., Appellant, v. Amelee SMITH and Ruth Smith, Husband and Wife, and Kathy Lowell, Appellees.
• Court: Arkansas Supreme Court

Page 149

779 S.W.2d 149

300 Ark. 348

SHELTER MUTUAL INSURANCE CO., Appellant, v. Amelee SMITH and Ruth Smith, Husband and Wife, and Kathy Lowell, Appellees.

No. 89-200.

Supreme Court of Arkansas.

Nov. 6, 1989.

Matthews, Sanders, Liles & Sayles by Marci Talbot Liles, Little Rock, for appellant.

Mashburn & Taylor by W.H. Taylor, Fayetteville and Martin Law Firm, P.A. by Thomas A. Martin, Jasper, for appellees.

HAYS, Justice.

This appeal is taken from a jury verdict finding that horse racing activities by Amelee and Ruth Smith, appellees, was not a "business pursuit" under a farm owners policy of insurance issued by the appellant, Shelter Mutual Insurance Company. The question for review is whether the verdict is supported by substantial evidence.

Amelee and Ruth Smith live on 160 acres of land in southern Missouri where they maintain several thoroughbred race horses. Mrs. Smith is employed; Mr. Smith is retired with disability income. At some time prior to 1983 an agent for Shelter reviewed their circumstances and recommended Shelter's farm owners policy, which they accepted. In 1983 during a racing meet at the Carroll County Fair the Smiths' race horse, "Charger," veered from the track and injured Kathy Lowell. When Ms. Lowell made claim on the Smiths they looked to Shelter to defend under their policy. Shelter filed this declaratory judgment action against the Smiths and Kathy Lowell, alleging that the Smiths' horse racing was a "business pursuit" and as such was excluded from coverage under the policy. Shelter and Lowell entered into a side agreement that if coverage was upheld she would receive $52,500 from Shelter. The case was submitted to the jury under a general verdict form and the jury found for the defendants. The trial court allowed an attorneys fee but refused to allow a twelve percent penalty. Shelter has appealed and the Smiths have cross-appealed.

The contention that the verdict is not supported by substantial evidence is, we think, tantamount to arguing that the horse racing activities of the Smiths were, as a matter of law, a business pursuit as that term is defined in the policy. If that were so, the trial court would have been obliged to grant a motion for a directed verdict at the close of the case. Higgins v. Hines, 289 Ark. 281, 711 S.W.2d 783 (1986); Farm Bureau Mutual Ins. Co. v. Parks, 266 Ark. 454, 585 S.W.2d 936 (1979). However, the evidence was such that reasonable minds might well have differed and, that being so, the issue was one for the jury to decide. Barger v. Farrell, 289 Ark. 252, 711 S.W.2d 773 (1986); Williams v. Curtis, 256 Ark. 237, 506 S.W.2d 563 (1974).

The Smiths testified that the horse racing was not conducted as a business, but as a hobby, simply for their own enjoyment. Of course, those subjective conclusions were not binding on the jury, but where intent is a material consideration, as Shelter tacitly concedes, that may be sufficient to sustain a verdict. We need not rely on that alone, however, because there was objective evidence to support either position The Smiths' income tax returns were consistent with the view that the activity was a business, albeit an unprofitable one; that, too, was the opinion of their present accountant; but there was offsetting proof that H & R Block, which previously prepared their returns, regarded the operation as a nonbusiness venture and refused to prepare returns based on such a business concept. But while the manner by which the Smiths reported their activities for tax purposes is plainly pertinent, it is not conclusive of the issue. Without restating the testimony in detail, there was proof from which the jury could infer that horse racing was for the Smiths a pastime, primarily for their own enjoyment, and not a business pursuit.

There is yet another basis on which we must affirm. The jury was instructed that Shelter had the burden of proving that the injury to Ms. Lowell was excluded in the policy of insurance, that it must consider the language of the policy in its entirety in determining the intent of the parties, must strictly interpret exclusions to insurance coverage and must resolve all reasonable doubts in favor of the Smiths. It follows that the jury may have determined that Shelter did not meet that burden, or concluded that the language of the policy was ambiguous and, in accordance with the instructions, resolved the doubt against the insurer.

The trial court awarded an attorney's fee to the Smiths but refused to impose a penalty of twelve percent. The Smiths have cross-appealed from that refusal. The trial court was correct. The Smiths counterclaimed for the twelve percent penalty under Ark.Code Ann. § 23-79-208 (1987) which states:

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

We have interpreted this statute to require the insured to have suffered a loss, and to have recovered a money judgment. Cato v. Ark. Mun. League Mun. Health Benefit Fund, 285 Ark. 419, 688 S.W.2d 720 (1985); Miller's Mutual Ins. Co. v. Keith Smith Co., 284 Ark. 124, 680 S.W.2d 102 (1984); Fireman's Fund Ins. Co. v. Clark, 253 Ark. 1025, 490 S.W.2d 447 (1973).

Shelter argues that Ark.Code Ann. § 23-79-208 (1987) is inapplicable for declaratory judgments and that the controlling statute is Ark.Code Ann. § 23-79-209 (1987) which states:

(a) In all suits in which the judgment or decree of a court is against a life, fire, health, accident, or liability insurance company ... in a suit for a declaratory judgment under the policy, the company shall also be liable to pay the holder of the policy all reasonable attorneys' fees for the defense or prosecution of the suit, as the case may be.

This statute specifically applies to declaratory judgment actions,...