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

• Decision Date: 23 December 1996
• Docket Number: No. 96-122,96-122
• Citation: 934 S.W.2d 527,326 Ark. 1023
• Parties: SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY, Appellant, v. Elisha ALLEN, Appellee.
• Court: Arkansas Supreme Court

Page 527

934 S.W.2d 527

326 Ark. 1023

SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY, Appellant, v. Elisha ALLEN, Appellee.

No. 96-122.

Supreme Court of Arkansas.

Dec. 23, 1996.

Sam Laser, Brian Allen Brown, Little Rock, for appellant.

C.S. "Chuck" Gibson, II, Dermott, for appellee.

CORBIN, Justice.

Appellant, Southern Farm Bureau Casualty Insurance Company, appeals the judgment of the Desha County Circuit Court awarding its insured, Appellee Elisha Allen, $10,000.00 in compensatory damages pursuant to directed verdicts and $75,000.00 in punitive damages pursuant to a jury verdict. Appellant also appeals from a subsequent order awarding prejudgment and postjudgment interest, costs, penalty, and attorney's fees. For reversal, Appellant argues the trial court erred in submitting to the jury the tort claims of first-party bad faith and outrage. This appeal involves questions about the law of torts, and our jurisdiction is pursuant to Ark. Sup.Ct. R. 1-2(a)(15). We find no merit to Appellant's arguments and affirm.

Facts and Procedural History

The complaint alleges the following facts. Appellee is Appellant's insured. Appellee's son, Anthony Dewayne Allen, was living with Appellee when he was killed in a motor vehicle accident on February 29, 1992. Appellee's son, Eddie Allen, visited Appellant's local office and informed the agent that the family had incurred funeral expenses for Anthony Allen's funeral and that Anthony Allen was living at Appellee's home. The local agent, Joe Herron, then informed Eddie Allen that there was no coverage for Anthony Allen. In May 1993, Appellant determined there was coverage available for Anthony Allen and paid Leroy Hill, the driver of the other vehicle involved in the accident on February 29, 1992, $26,000.00 for personal and property damages.

Based on the aforementioned facts, the complaint alleges two causes of action--breach of contract and the tort of first-party bad faith. As to the claim for breach of contract, the complaint states that Appellee's policy included coverage for Anthony Allen's funeral expenses under "COVERAGE C. MEDICAL PAYMENTS" and that Appellant breached its obligation pursuant to Ark.Code Ann. § 23-89-202 (Repl.1992) to provide no-fault death-indemnity benefits. As to the tort claim for first-party bad faith, the complaint alleges among other things, that Appellant's acts of bad faith included failure to pay the funeral expenses under the medical-payments coverage and failure to pay benefits to Appellee after acknowledging coverage and paying benefits to Leroy Hill.

The case was tried to a Desha County jury. At the close of Appellee's case as plaintiff and with agreement from Appellant, the trial court directed a $5,000.00 verdict for Appellee on the medical-payments coverage. Citing section 23-89-202, and Ark.Code Ann. § 23-89-203 (Repl.1992), and American Nat'l Property & Casualty Co. v. Ellis, 315 Ark. 524, 868 S.W.2d 469 (1994), and over Appellant's protest, the trial court also directed a $5,000.00 verdict for Appellee on the death-benefits coverage on the basis that Elisha Allen's rejection of that coverage in 1980 was no longer effective because he had purchased and insured vehicles since the 1980 rejection without signing subsequent rejections. Appellant does not challenge the direction of these verdicts on this appeal.

The trial court denied Appellant's motion for directed verdict on the tort of bad faith and instructed the jury that the issues of medical-payments coverage and death-benefits coverage had already been decided, thus the only issue that would be presented to them was the issue of punitive damages. The jury returned a general verdict for Appellee and fixed punitive damages of $75,000.00. The trial court entered an order consistent with the directed verdicts of $10,000.00 in compensatory damages and the jury verdict of $75,000.00 in punitive damages. This appeal followed.

Claim for Bad Faith

At the close of Appellee's case as plaintiff, Appellant moved for a directed verdict on Appellee's tort claim for bad faith on the basis that Appellee had not presented any evidence of affirmative wrongful acts by Appellant. Appellant admitted breaching its contract with Appellee, but contended the breach was from oversight rather than from hatred, ill will, or dishonesty. The trial court ruled that Herron's testimony presented a jury question as to bad faith and denied Appellant's motion.

Appellant then presented its case, which consisted of a single witness, Appellant's employee Steve Murray, and three exhibits: (1) no-fault endorsements for medical benefits, accidental-death benefits, and income-disability benefits; (2) Appellee's application for insurance dated January 4, 1980, where he rejected uninsured-motorist coverage and no-fault coverage; and (3) Appellee's 1980 declaration sheet. Murray testified that he and Scott St. John, a claims representative for Appellant, determined that Anthony Allen was a resident of Appellee's household and therefore coverage existed. Murray stated that based on that determination, Appellant paid $27,500.00 to Hill and Hill's passenger. Appellant then rested and "renew[ed] its motion for a directed verdict for the reasons stated before." Again, the court denied the motion, ruling there were issues to be decided by the jury.

As its first point for reversal of this ruling, Appellant contends there was no evidence from which a reasonable person could conclude Appellant committed the tort of bad faith, therefore the trial court erred in submitting this issue to the jury. Specifically, Appellant contends there is no substantial evidence of affirmative acts to support a claim of bad faith. Rather, in Appellant's view, there is only evidence that Appellant failed to recognize that Appellee had medical-payments coverage. In essence, Appellant contends its actions were negligent but not malicious and relies heavily on our prior decisions that negligence, gross ignorance, or a complete failure to investigate a claim are not sufficient to establish a claim for the tort of bad faith. First Marine Ins. Co. v. Booth, 317 Ark. 91, 876 S.W.2d 255 (1994); Reynolds v. Shelter Mut. Ins. Co., 313 Ark. 145, 852 S.W.2d 799 (1993).

We recently summarized our law on the tort of bad faith:

The components of the tort of bad faith are affirmative misconduct by an insurer, without a good-faith defense, which is dishonest, malicious, or oppressive in an attempt to avoid liability under a policy. Aetna Casualty and Surety Co. v. Broadway Arms Corp., 281 Ark. 128, 664 S.W.2d 463 (1984).

R.J. Jones Excavating Contractor, Inc.. v. Firemen's Ins. Co., 324 Ark. 282, 289, 920 S.W.2d 483, 487 (1996). This court has also said that a claim for bad faith

cannot be based upon good faith denial, offers to compromise a claim or for other honest errors of judgment by the insurer. Neither can this type claim be based upon negligence or bad judgment so long as the insurer is acting in good faith.... [I]n an action of this type for tort, actual malice is that state of mind under which a person's conduct is characterized by hatred, ill will or a spirit of revenge. Actual malice may be inferred from conduct and surrounding circumstances.

American Health Care Providers, Inc. v. O'Brien, 318 Ark. 438, 441-42, 886 S.W.2d 588, 590 (1994) (quoting Aetna Casualty & Surety Co. v. Broadway Arms Corp., 281 Ark. 128, 664 S.W.2d 463 (1984)).

Our standard of review of the denial of a motion for directed verdict is whether the jury's verdict is supported by substantial evidence, which is evidence that goes beyond suspicion or conjecture and is sufficient to compel a conclusion one way or the other. Barnes, Quinn, Flake & Anderson, Inc. v. Rankins, 312 Ark. 240, 848 S.W.2d 924 (1993). It is not our province to try issues of fact, we simply review the record for substantial evidence to support the jury's verdict. John Cheeseman Trucking, Inc. v. Dougan, 313 Ark. 229, 853 S.W.2d 278 (1993). In determining whether there is substantial evidence, we view the evidence in the light most favorable to the party against whom the verdict is sought and give the evidence its strongest...