Shelter Mut. Ins. Co. v. Bough

• Decision Date: 22 June 1992
• Docket Number: No. 91-278,91-278
• Citation: 310 Ark. 21,834 S.W.2d 637
• Parties: SHELTER MUTUAL INSURANCE COMPANY, Appellant, v. Rick BOUGH, Appellee.
• Court: Arkansas Supreme Court

Page 637

834 S.W.2d 637

310 Ark. 21

SHELTER MUTUAL INSURANCE COMPANY, Appellant, v. Rick BOUGH, Appellee.

No. 91-278.

Supreme Court of Arkansas.

June 22, 1992.

James M. Roy, Jr., Springdale, for appellant.

Don R. Elliott, Jr., Fayetteville, for appellee.

GLAZE, Justice.

This insurance case arose from an automobile accident that occurred on February 22, 1989, and requires interpretation of the Arkansas Underinsured Motorist Act of 1987, Ark.Code Ann. § 23-89-209 (1987). In this respect, we recently considered this Act involving almost identical circumstances in Shelter Mutual Ins. Co. v. Irvin, 309 Ark. 331, 831 S.W.2d 135 (1992).

Rick Bough was driving a vehicle owned by his mother and step-father, Nancy and Robert King, when the vehicle collided with a car owned and operated by Patrick Colf. Bough incurred $38,531.92 in medical expenses as a result of the collision. Colf's insurance carrier, State Farm, paid its policy limits of $25,000 to Bough, and in addition, Bough received $11,960 under the medical pay and wage-loss provisions of his parents' no-fault coverage with Shelter Mutual Insurance Company. Upon receiving the $25,000 amount, Bough released both Colf and his carrier from all liability. He did not use any of the $25,000 to reimburse Shelter for the medical and wage loss benefits he previously received.

Bough subsequently sued Shelter for underinsured benefits, alleging Shelter had failed to make such coverage available to the Kings as named insureds as required by Act 335 of 1987, codified as Ark.Code Ann. § 23-89-209 (1987). Shelter denied liability asserting that it had made underinsured coverage available to the Kings and that it had no duty to provide such coverage to Rick Bough since he was not the named insured. Shelter also defended, stating that, even if it had otherwise been liable to Bough for underinsured benefits, Shelter was relieved from paying such benefits because Bough had violated the cooperation and subrogation terms of Shelter's policy by settling with Colf and State Farm without notice to Shelter. Both parties moved for directed verdicts, and the trial court denied Shelter's request, but granted Bough's, holding that Shelter had failed to make underinsured benefits available as required by Act 335. The court further held that such benefits would be implied as a matter of law. The case then went to the jury on the issue of damages only, and the jury found Bough had sustained a loss in the sum of $85,000.

The trial court found the parties had stipulated and agreed that the $25,000 received from State Farm would be deducted from the $85,000 award, leaving $60,000 in damages still owed. The court then held Shelter was entitled to subrogation and a judgment in the amount of $11,960, which represented the medical and wage losses Shelter previously paid Bough. After Shelter received credit and set off for these amounts, Bough received a judgment of $48,040, which amount was covered as underinsured benefits to be paid by Shelter under the Kings' policy.

On appeal, Shelter argues the same three issues it raised below, and Bough cross-appeals, claiming Shelter was not entitled to the $11,960 reimbursement amount. We affirm on all points.

Shelter first asserts that the trial court erred in finding as a matter of law that Shelter failed to make underinsured benefits coverage available to the Kings and wrongly implied such coverage to Bough. The pertinent facts here for deciding this issue are essentially the same as those examined in the recent case of Shelter Mutual Ins. Co. v. Irvin, 309 Ark. 331, 831 S.W.2d 135. The parties agree there was no provision for underinsured motorist coverage in the King's policy, and Shelter nor its agents or employees gave any oral notice to the Kings that such coverage was available. Shelter never sent any written materials describing or offering the coverage to the Kings. Also, as was the case in Irvin, Shelter's application forms signed by the insureds here contained the term "underinsured motorist" where optional coverages and their limits were listed; but again, no evidence reflects this coverage was ever mentioned to or discussed with the Kings.

In Irvin, we held Act 335 mandated insurers to offer underinsured coverage, and such mandate was not met by an insurer's mere printing of the term "underinsured motorist" on an application without explanation or mention of it to the insured. Our decision in Irvin controls here, and we sustain the trial court's ruling that found Shelter had violated its statutory duty and implied underinsured benefits, covering the $48,040 judgment awarded Bough.

Before leaving Shelter's first point, we note Shelter's attempt to distinguish the present case from Irvin, claiming that it had furnished two applications to the Kings since Act 335 went into effect and that the Kings had rejected underinsured coverage. Although the applications referred to by Shelter were signed by the Kings after Act 335 became effective, those forms differed little from any others previously given the Kings for signature--the term "underinsured motorist" was printed under the list of coverages, the boxes beside the coverage remained blank and there is no evidence Shelter or its agent offered such coverage.

Shelter also argues that, even if underinsured coverage should be implied to the Kings, no such benefits were due Bough because he was not a named insured as that term is used in Act 335. The Kings are the named insureds under their policy, but Bough's operation of the King vehicle on the date of the accident was covered. Under the Kings' policy, an "insured" includes the named insureds (Kings), their relatives (Bough) and any other person using the automobile if its use was within the scope of the name insured's permission. In addition, the policy reflects the named insureds and family members residing in the household are entitled to medical and hospital benefits. Shelter offers no citation of authority or convincing argument regarding why, if underinsured coverage is implied to the Kings, Bough should not receive such benefits under the terms of Kings' policy. ¹

Shelter next argues Bough forfeited entitlement to any underinsured coverage by settling with State Farm and Colf without notice to Shelter, thus violating the subrogation clause in the Kings' policy. Shelter also points out that the policy provides that "No action will lie against [Shelter] under any coverage unless the insured shall have fully complied with all the terms of this policy," and that "A person claiming coverage ... must also cooperate with [Shelter] and assist ... in any manner concerning a claim or suit." By Bough's releasing State Farm and Colf, Shelter claims Bough violated the foregoing policy provisions, making him ineligible for underinsured benefits.

In support of its argument, Shelter cites two Arkansas cases. First, in Southern Farm Bureau Cas. Ins. Co. v. Jackson, 262 Ark. 152, 555 S.W.2d 4 (1977), the insured knowingly and willfully misrepresented that she was the driver of the insured vehicle at the time of the accident. This court held the insured could not enforce the insured's policy against the insurer, because the insured violated the policy's cooperation clause. Of course, the present case involves no material misrepresentation affecting Shelter's ability to defend under its policy.

The second case cited by Shelter, Shipley v. Northwestern Mutual, 244 Ark. 1159, 428 S.W.2d 268 (1968), is also different from the one before us. There, the insureds received payment for their medical claims from the tortfeasor, but later sued their insurance company, Northwestern, for the same medical bills. The Shipley court affirmed the trial court's directed verdict for the insurance company, finding that the insureds had been paid for the medical expenses and the insurance company could not be obligated to pay them. This court further stated that to hold that Northwestern was obligated to pay the insureds would have ignored the well-established rule of subrogation--to prevent the insured from recovering twice for one harm.

Here, Bough did not recover twice for one harm. Instead, he settled for policy limits ($25,000)...